BRIC by BRIC

Author : Jennifer Palmer-Violet

Interviewee : Richard Pease

Date : December 2012

ABOUT THE AUTHOR: Jennifer Palmer-Violet is Features Editor for the STEP Journal

For STEP to grow numerically, it cannot ignore Brazil, Russia, India and China. These developing ‘BRIC’ countries have been on the radar for a while, and when Richard Pease was Chairman (2006–2007) he was often asked when the Society would make the move. Back then he knew two things: that it wouldn’t happen during his chairmanship but when it did, it would probably be India. Now, as head of branch development, he is leading a steering group there.

India’s commonality with the UK was its initial attraction: most professionals there speak excellent English and its legal system is rooted in the colonial rule era. Interestingly, the country does have a trust law, inherited from the time of Queen Victoria, dating back to 1882. But similarities are limited. ‘It gives one a false sense that it’s an extension of the English legal and cultural environment, but it’s not,’ says Pease. ‘There are some very deep, particularly cultural and professional, differences.’ And these present many challenges for STEP as it tries to plough new membership ground.

Unlike previous ventures where practitioners have contacted the Society about membership, STEP is going in cold. Nothing is comparable. ‘There’s no experience we can draw on and that makes it more of a challenge,’ says Pease, who knows STEP needs to be there, as discussions in Mumbai have confirmed.

Finding its place

With an increasing amount of new wealth and older entrepreneurs’ retirement creating generational issues, STEP’s expertise in wealth planning would be well received in India. Significantly, 90 per cent of Indian business is family-oriented, ranging from small manufacturers on the outskirts of big cities to large conglomerates. ‘That’s where there must be knowledge we can help to transmit, such as family governance,’ says Pease.

India’s inheritance tax, which was abolished in 1985, may be reinstated. While there is no pressure at the moment to design structures that mitigate tax in the event of a patriarch’s death, this could change. It’s something the country must prepare for and one reason for setting up a trust in India. Dispute resolution is another key area where STEP can help. ‘The Indian legal process is enormously slow and complicated,’ says Pease. ‘Litigation takes years, if not generations.’ So the Mediation Special Interest Group is an initiative to float, for example.

Significantly, STEP’s educational offering is its unique selling point. There is a strong appetite for gaining qualifications and acquiring knowledge, especially among the younger generation in India. ‘We know that the future of STEP lies in student members,’ says Pease, so STEP, the steering group and Central Law Training are discussing customising the England and Wales diploma to suit the Indian environment.

The message may be clear, but the biggest challenge is spreading the word. ‘They are open to STEP in India but they don’t know very much about it,’ says Pease. ‘Initially we’ve got to sell the concept and then develop it by producing a tailor-made product. We’ve got to be sure we’ve got the numbers.’ And potentially the numbers are enormous, according to Pease. There are about 1 million lawyers in India, so even 1 per cent would be significant. ‘We have to be there,’ he says. ‘It’s better to be early than late.’

Testing the water

STEP took the initiative in 2011, hosting a taster conference in London aimed at UK members. It brought fair success and Mumbai was chosen as the target base (‘The easiest major city to make contact with because we had lots of friends there,’ says Pease) UK members attended an annual tax conference in Mumbai later in the year and heard encouraging noises: 150 business cards were collected. A steering group of leading professionals in accounting and law and some more junior practitioners then came together to form the beginning of a branch – 15 members affiliated with STEP Singapore.

Pease admits there is no three-year strategy, although he believes it should take about that long to get fully established in India. The immediate plan is to encourage the eight-strong steering group to build on the initial database of interest. The next step would be to have a pre-launch event in Mumbai, gaining enough members to build a branch and make it financially viable.

Having local figureheads on board is of great value, especially those held in high esteem. Nishith Desai is hugely regarded as a leader in the international estate tax-planning profession and is probably the most respected senior partner of a leading law firm in Mumbai; Pranav Sayta, one of the senior partners in Ernst and Young, also has a commanding position. ‘They are acknowledged leaders but they are very busy men,’ says Pease.

Meeting demand

‘The establishment of a STEP chapter for India is an exciting development for the private wealth industry – and it could not have come at a more opportune moment. With one of the fastest growing economies in the world, family fortunes in India are increasing rapidly, so there is more demand for sophisticated trusts and estates planning advice.

‘The platform STEP provides for professionals to meet and exchange ideas, and to develop and enhance their knowledge, is very attractive. I believe it will appeal to senior practitioners. The opportunity for younger members to develop skills and obtain a recognised qualification will be equally attractive, I hope.

‘Clients, in turn, will be assured and comforted that their advisors are members of a leading international professional body that is focused on, and committed to, high standards of professional excellence and quality.’

Sunil Kakkad is a Partner at Lawrence Graham, London, and a member of the steering group, along with Bijal Ajinkya, Hanisha Amesur, Ashvini Chopra, Nishith Desai, Adrish Ghosh TEP, Pranav Sayta, and Rishabh Shroff
Steep learning curve

While India still has a lot to learn about STEP, the Society must continue to understand the country as well. India is very family-minded – businesses pass from father to son. Generally, the UK is two or three generations ahead. ‘It’s a patriarchal society and we have to acknowledge that,’ says Pease. Specifically, the Hindu Undivided Family (HUF), peculiar to the Hindu religion, reflects this cultural difference. It allows family assets to be held as a collective fund on the death of the head of the family.

Something else to consider is the non-resident Indian (NRI) overseas community. ‘You’ve only got to look at businesses in Britain, Silicon Valley in California, Singapore or east Africa,’ says Pease. ‘There are vast communities of NRIs and almost all have contacts back in their mother country.’ A typical example would be a family where the elder generation has emigrated to the UK, leaving a son running a tool-export business in India. Then there would be distribution networks for those products in East Africa and Southeast Asia, managed by another son, with the computer programs written by a third member of the family, who lives in Silicon Valley. ‘It sounds rather exaggerated but it’s typical of many Indian families,’ he says.

Such case studies will be used as examples at STEP’s international conference in Dubai in March 2013, which will be an opportunity to stimulate interest. Dubai is a natural connecting centre, like Singapore, with a large Indian community.

“India is seeing the growth of a new middle class, generating fortunes”

‘We hope to attract institutions and professionals who are involved with inward investment into India and Indian people to learn about what STEP can do for them,’ says Pease.

It’s another push, then it’s time to step back. Pease says STEP needs practitioners in India to show they are willing to get involved and organise events themselves. ‘They need to tell their own professionals more about STEP. We will support them with marketing materials and back-up, but we look to them for guidance in our project.’

Right place, right time

With recent, and very encouraging, progess in Latin America it is hoped to inaugurate a chapter of STEP in Sao Paolo in early 2013, so Brazil will be the first of the BRIC countries in which STEP will establish a presence. But India remains a prime target. ‘We have to temper a little bit our hopes and ambitions,’ admits Pease. ‘It’s going to be a long haul. But I am convinced that it is the right place to be if you look at all the reports about the success of India economically.’ Despite this year’s slight downturn, India is seeing the growth of a whole new middle class, generating fortunes through new technologies and services.

Pease believes STEP will double numbers in India by the first quarter of 2013, with the local support he hopes to generate. ‘STEP’s history shows jurisdictions in which we really get positive traction are where one or two local practitioners are convinced of the message of STEP and want to do something for themselves and bring in other colleagues and contacts,’ he says. ‘You need key members who are convinced STEP is something they want to be involved in. That’s really what we’re looking for in India at the moment.’


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