Founder and CEO
Taurus Wealth Advisors
Q. Tell us about Taurus Wealth Advisors
We are a multi-family office (MFO) founded in Singapore in 2008, and we set up a Dubai office in 2017.
In the Singapore office, we have an investment team of five and 10 relationship managers (RMs). Across both jurisdictions, we have over 30 people.
When we first started, many expected assets under advisory for MFOs to grow and we have indeed seen growth. However, the penetration rate of the independent asset management (IAM)/MFO space in the private wealth industry hasn’t increased. Ten years back, it was 3% and it’s still the case today.
Q. What’s holding back the penetration rate?
Firstly, the money is still with the patriarchs. Many firms have flocked to India to service the new wealthy. However, the new wealthy are not likely to delegate the control of their wealth. It’s usually the second or third generation that are likely to write a cheque out for services.
Secondly, it’s difficult to attract talent because salaries in banks are very high. If you compare salaries of private bankers in Singapore versus London, there is a huge disparity. They are paid much more here.
Thirdly, there’s a shortage of capital. People who set up MFOs are senior bankers who feel that they can do it themselves and service clients outside the brand of the bank. But these are bankers who have limited layers of capital to grow the business into a big company. To grow a brick and mortar business into something substantial, you need to hire and build a lot of scale. The acquisition of a private bank, for instance, ranges from hundreds of millions to billions of dollars and that is the kind of capital required to build scale.
The industry will grow if people start to recognise that there is a lot of growth opportunity and then start to pump in serious amounts of capital.
Q. Do you see that happening? Who do you think will provide the capital?
It will happen in a matter of time and capital can be provided by fund management companies or private equity (PE) firms. There is no PE in this space yet.
Right now, the capital is maybe getting crowded out by quick returns and technology but moderation is expected. While many tech firms have viable financial models that generate cashflow, at 30 times the valuation, no amount of cashflow is justified.
When that happens, PE firms are going to say, ‘We are not going to make that much money if we put it all into technology.’ So they will start looking at other businesses.
For MFOs to be getting capital from investors, we need one or two entrants in this business to scale up on their own.
People want to see other people succeed and then follow through – they don’t want to be the first one.
Q. What’s your growth strategy?
Increase the number of client advisers. We are also open to acquisitions but we’ve not come across any firms we want to acquire.
Q. Are you looking at further geographical expansion?
That would be the goal but right now, we already have a lot of bandwidth from our licences in Singapore and Dubai.
Q. How are you charging clients?
We charge an advisory fee and performance fees for certain clients. We don’t take in retrocessions and this is the case for most of our peers in Singapore. Some might live off retrocessions at the start but most don’t retain them.
The industry will grow if people start to recognise that there is a lot of growth opportunity and then start to pump in serious amounts of capitalMandeep Nalwa
Q. Where are your clients from?
About 65-67% of our clients are Indians. The rest are from other nationalities. We have clients from 19 countries with different ethnicities.
Q. Do you have in-house funds?
We have a few globally diversified funds but they are not a main contributor to our revenue or AUM. Our own products have less than 2-3% of our AUM from our clients.
We see the purpose of having our own products as a solution to offer a diversified portfolio to smaller clients. Let’s say the client has $2 million and buys 10 bonds. There is too much concentration risk so it would be safer if we have a product that invests part of that $2 million. We offer our products to clients when it makes sense, but there is no product pushing.
Q. What is the split between advisory and discretionary?
It’s about 60-40 in favour of advisory. Our business model is to keep engaged with the client and work with them as a partner. While we have discretion, we don’t consider it as carte blanche authority to do what we feel like with the money.
Q. How are you advising clients who are interested in cryptocurrency and blockchain technologies?
The house view is that cryptocurrencies are a reverse enquiry trade though we have an in-house expert who caught on to the crypto wave quite early on. Cryptos are suitable for certain clients and we look at the risk profile before giving advice.
In the long term, there’s definitely value to look at but it needs to be a very small part of our portfolio.
Q. What are the concerns around having money coming out or going into India?
We only deal with Indians who send money overseas under the authorised rule, which is the Liberalised Remittance Scheme (LRS). Though the LRS limits remittance of $250,000 per year per person, we would rather have that than deal with someone sending $3 million through third-party channels.
Typically, Indians moving money out under the LRS rule already tick all the boxes in all these banks, so that’s actually one of the easiest things to cross-check when conducting due diligence.
Q. Have you seen any changes in the business models of IAMs over time?
No, but I think that they have expanded their suite of product offerings. There are more products focused on late stage pre-IPO offerings, direct venture capital and private equity investments. Instead of investing through funds, the IAMs identify companies and co-investment opportunities to build up club deals and referrals for their clients
Q. What was the most unusual request that you have ever received from your clients?
To check on a prospective son-in-law.