Davinder Chatha is the Head of Finance at a Single Family Office in London. Having seen an exponential increase in the size of his Family Office during the pandemic, he reflects on what a year in his life looks like including the difficult decisions he makes on a daily basis. Here he talks to Agreus about the benefits of recruiting vs. outsourcing, why industry makes a better springboard into the Family Office than Practice and why remote working has made him a better Family Office Leader. Find out what a year in Davinder’s life looks like here.
Before we explore a year in your life, what does a day in the life of a Family Office Head of Finance look like?
A day in my life typically falls into three categories. The first is planning for a reporting deadline be it on a solo company basis, consolidated investment reporting, governance/board or external statutory/regulatory basis. We keep a tight ship in terms of what is required from us and I have a trusted team and a network of consultants, advisors and service providers who I am in contact with on a daily basis to ensure we are meeting our reporting requirements. This is needed because of the array of reporting requirements we must follow to meet the needs of our internal and external stakeholders.
The second is supporting the Head of the Office and the investments team. It is about tackling tasks to enable the office to deliver what is required by the Family and to ensure the investment assets are well invested and safeguarded. We have moved from becoming relatively placid in terms of our investing activity to trading on a much more frequent basis. As the investment activity has increased, we have implemented new systems, processes and controls to ensure that the reporting is being developed to meets the needs of the office as it has grown.
On top of that, it is about ensuring as a finance department, we are a solid resource for the family, the investment team as well as other organisations that rely on us such as the Family Foundation. Over the last year we have seen a tremendous change and growth in all of these areas with our headcount doubling. In this state of flux the office has needed our support in many different and varied ways so we have had to be adaptable and proactive in the way we work and resolve matters.
How does the culture of your Family Office differ to your previous culture within Practice?
My practice years were over a decade ago. It was out of university and definitely a different working environment, not just because of the culture it offers and its requirements of you but also due to that particular stage in my career. It required a very different approach to being a finance leader in a small business. Whichever stage however, the two are incomparable.
Practice is very team orientated, you are joined as a group, sat exams as a group and learned and developed as a group. When I moved to industry it was very different, more results driven and the onus being on an individual’s ability to deliver. My first Family Office role was drastically different as I moved into a relatively small office having been at much larger global organisations. While some of the larger more institutionalised Family Offices could compare to life in Practice, your typical Single Family Office cannot.
You get a lot more exposure, you are thrust out into the limelight because the buck stops with you and with what you deliver. You have less or no review of your work and are expected to deliver precisely and accurately. Often key decisions are made off the back of your output so there is a lot of responsibility and ownership required for your work. Therefore it is not like a large, big 4 practice or large global firm with many nets to catch you or places to hide. You have to pay a lot more attention to detail, be mindful of the facts and know what your end-user expects of you on a much more personal level.
I bridged the gap however by joining an Asset Manager in Industry between Practice and Family Office. You need to first of all bridge that gap from client side to buy side and in my example it helped, as a Family Office is essentially an asset manager, managing a portfolio of wealth, all be it for different purposes with just one client, the family. That exposure landed me well within the Family Office and what was expected of me, but you need to expect to change and adapt too.
You are working in an environment that is heavily capitalised with one individual who may have a desired course of action and if that changes due to market changes or wishes, that has a big impact. Things can move very rapidly for instance, a specific transaction that is heavily desired by the Family or to take advantage of market conditions and you have to make it happen which means dealing with different service providers, but the end goal is the same – success and completion.
What can an in-house Finance Professional offer that an outsourced Finance Professional cannot?
We have both an in-house finance team and outsourced bookkeepers and partners that we work closely with. This benefits us as we can retain the bespoke and sometimes sensitive and confidential areas of finance but have access to a team and pool who we rely on to perform our cyclical reporting and finance tasks. The outsource vs insource question is one that we have been continually monitoring as we have grown and have recruited internally as well as increasing and adapting our scope with external outsource service providers.
The key benefit of outsourcing is that no matter what, you have a pool of talent that you can tap in to. So if you do go through a period of stress or flux you can ramp up and ramp down really quickly. However in a period of growth the need can arise to recruit in house such as in my current office we have rapidly expanded and need to recruit permanent staff at pace.
As I said earlier, if you have a low requirement, outsourcing might work well but our volume of work has increased, and so one of our recent hires was a Fund Accountant. This Individual is living and breathing what is happening in an office, something an outsourced provider would not be in a position to do. We have increased our investment team from one to four and just the fact that they are in the office helps me and my team do our role better. You can hear conversations and get more of a feel of what is in the pipeline and then being able to bounce off queries and resolve them quicker. This is a benefit of in-sourcing. It is often a preference of the Family Office too, especially from a perspective of confidentiality.
My previous Family Office was very confidential and discreet and we only employed in house staff over an outsourced service providers. This was understandable given the risks associated with the family. My current Family Office is more open and transparent and widely publicised but they too see the importance of a combined and balanced in-house and outsourced solution for resourcing.
2021 was a year of change. How did it impact your life as a finance professional?
Culture
We were only able to truly establish our culture in the second half of the year when people returned to the office for part of the week. We had four new joiners and until this point, they were not able to build any working relationship with one another or the wider team. They were given a laptop and were communicated with virtually for the best part of a year. We hosted regular meetings via Zoom, sent our team cocktail kits at Christmas and did what everyone could to create an engaged and social working environment.
Talent
It has been incredibly difficult to recruit talent during the pandemic. We stuck to our guns and went through a thorough process to really ensure we were hiring the right professionals. This meant working a little harder and also, asking our candidates to. We introduced testing as part of our recruitment process as well as various meetings.
Service Providers
We found a similar struggle with our service providers as we did with internal talent. We tried to meet with as many people as possible and engaged consultants to sift through the marketplace for us. We carried out thorough due diligence, contacting other Family Offices who were displayed on testimonials and learning about their own experience with the provider. We could not do a lot of these meetings face-to-face and so had to place a lot of faith in other procedures along the way.
Strategic Transactions
For me personally, I am very used to working across jurisdictions in my career and so when it came to strategic transactions during the pandemic, I treated each as though they were international – even if they might have been perhaps based around the corner. This international experience really helped us in our restructuring during the pandemic.
Cost Cutting
Cost cutting has been tremendously difficult in the last year mostly because a lot of people have said their costs had increased during the pandemic also the insurance side, risk has been putting premiums up for when you are engaging with consultants on the personal indemnity side. On top of this you have the inflationary pressure, and we are seeing that mostly now as it is the time of year people tend to put their prices up.
Nevertheless, as a finance function in a Family Office we strive to cut costs and continue to do so mostly though automation. We rely heavily on technology to make our lives easier. While this might be an initial increase in cost, over the long term, it will save costs as well as time and resource.
The biggest technology change I am following is Robotic Process Automation. I think RPA will change the Family Office space on a whole but particularly for us, with many remote sites and global locations. We have a number of locations in the UK and another Family Office in Australia which again has different locations. If you are looking at residential properties, commercial properties, yachts or other assets, all of these are information generators, and this will in some way impact finance records. It is all about capturing information on the back of those transactions and automating their entry directly into financial records.
While the last 12 months certainly provided its challenges, what did you achieve as a finance function?
We started the year in lockdown. As an office we managed to recruit and onboard three people, one of which was a finance hire. Onboarding those and making them gel was a key achievement as is the fact they are still here.
Throughout that first few months we were going through a heavy scoping and beauty-parading project phase of identifying a few cornerstone service providers because we launched two funds and for those funds we needed administrators, custodians, banks, lawyers and an implementation of a trading system. We worked with a trusted consultant who held our hand and did a lot of the heavy lifting but it took a lot of work for us too. Alongside that we went through a regulatory application process and we managed to complete it within nine months. That was a big achievement for us and being able to successfully launch our funds which were then seeded with immediate capital was incredible. The tail-end of the year was about embedding that process and going about creating a successful outfit and dealing with day-to-day requirements.
It was a year of expansion, growth, migration and implementation. It is remarkable when you look back and see what the Family Office has achieved. We are now seeing the fruits of our labour.
How does your home life prepare you for your professional life?
The pandemic provided its challenges but it also offered the flexibility and the ability for me to spend time with my young son and my wife and this made me a better leader. Before the pandemic, I would be leaving for work as he was waking up and coming home after his bedtime whereas now, I can make him breakfast and take him to nursery on days that I work from home and that work-life balance really propels me to work that bit harder. I think it is the same for everyone.
Remote working really was not in existence at Family Offices before. We always knew it could work but it offered the confidence that it can work well in the Family Office world and nothing has or will go horribly wrong. It is certainly here to stay, and its benefits are not exclusive to families either. Even the ability to exercise during the day is something that makes for better leadership and on every level, better decision-making. It is something I picked up during the pandemic and its benefits are monumental.
What is the key to success in a Family Office?
The key is trust and to gain this trust you have to act with integrity, honesty and demonstrate the ability to deliver accurately and on-time.
If you have the trust of a family and your colleagues, you have everything you need to succeed.