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Malaysian Reserve
23-06-2025
- Business
- Malaysian Reserve
Linda Mack and Brian Adams of Mack International joined a panel on Family Office Compensation and Talent: 2025 Trends and Planning hosted by Katten's New York office on May 6, 2025
Linda Mack and Brian Adams of Mack International joined a panel on Family Office Compensation and Talent: 2025 Trends and Planning exploring compensation strategies and talent management approaches hosted by Katten's New York office on May 6, 2025 WEST PALM BEACH, Fla., June 23, 2025 /PRNewswire/ — Linda Mack, Founder and President of Mack International and Brian Adams, Partner, Mack International participated in Katten's Family Office practice for a panel exploring 2025 Trends and Planning on Compensation and Talent on May 6 in New York. They were joined by Mitchel Pahl, Partner, Katten; Saul Rudo, Partner and Co-Chair for Family Offices, Katten; and Trish Botoff, Managing Principal, Botoff Consulting. The panelists explored current compensation strategies, long-term incentive (LTI) structures, and evolving talent management approaches utilized by family offices to attract and retain good talent. The event was held in Katten's New York City offices with a live audience. A virtual option was made available and recorded. Key topics were as follows: The Increasing Prevalence of LTI Plans A handout was distributed by Trish Botoff to those in attendance featuring data points from the 2024 survey done by Botoff Consulting. The comprehensive data represented 450 firms. Highlights included the prevalence of LTI plans being used. Over the past 10 years there has been a significant increase, from 40% to 54%, in the number of Family Offices using LTIs. Those with an AUM of $2.5B or more, 72%. Family Investment firms' use of LTIs rose to 62% with 86% of firms with AUM over $2.5B reporting use of LTI plans. Deferred incentive compensation, co-investment, and carried interest were the top three LTIs used in the market. Trish noted that for the first time since they began collecting data on use of LTI plans in 2015, co-investment opportunity (57%) surpassed deferred incentive compensation (56%) as most prevalent LTI plan type. Recruitment and Retention Strategies in Response to Current Market Dynamics According to Linda Mack the current market dynamics that have been anticipated for years are on the rise as baby boomers begin transitioning leadership to the next generation. 'Effective succession strategies are critical for both retiring executives as well as new leaders…'. Brian Adams believes the situation is 'acute'. 'There has been real role and responsibility 'creep'. The leader who performed several key roles has left a gap. There is frequently a need to backfill one person with two or three people. The scope and expectations of the executive has increased dramatically, and the family office must consider whether to insource or outsource various services'. The Evolving Responsibilities and Positioning of Family Office Executives Linda commented about key trends and challenges her firm has observed in attracting and retaining key executives. 'Boomer 'transitions' are fueling heightened demand for succession and leadership strategies in the C-Suite and throughout the Family Office. The challenge is finding the individual who not only has the requisite skills for the position but is also the right culture fit. Family Offices are typically seeking a 10-15 year tenure, and the relationship with the family is a very personal one. Aligning with the culture is paramount for success.' Linda explained the key role is an 'Expert Generalist'—the leader who is knowledgeable across the full spectrum of wealth management disciplines and has a profound understanding of the interrelationships between all of them, regardless of whether the service is delivered in-house or via an outsourced provider. 'Since no decisions are made in isolation, it's important that the leader has the peripheral vision to see across the entire spectrum and deep down into each vertical to ensure everything is in sync and coordinated to meet family objectives'. Brian added that hyper specialization makes finding an Expert Generalist a real challenge. 'Rotational programs which led to a broader general knowledge have gone away. As a result there is little exposure to cross training. Once you identify a qualified Expert Generalist, an additional challenge is finding the right Culture fit. That is the 'stickiness' component that helps the new leader in aligning with the tribe and in plugging into the community and the family's values and interests. If relocation is necessary, it can pose its own issues depending on the candidate's family situation'. Trends in Recruiting In light of intense competition for talent, the panel agreed that Family Offices are becoming more professional and strategic in their approach to searching for key executives. It requires a strategic and comprehensive process. Linda and Brian credit their intentional approach, deep network and proprietary 360 assessment process as critical components to a successful search. 'It allows us to acquire a deep understanding of how the family has evolved to where they are today, and their vision, goals and objectives for the future. We are then able to help them gain clarity, consensus and alignment around the definition of the position and ideal candidate that will enable them to be successful. The 'magic' in a search is three-fold: First, there must be clarity, consensus and alignment about the 'bulls' eye' and specifically what the family is looking for. Second, it is critical to have access to the universe of potential candidates, and third, the ability to effectively assess both position and culture fit'. Building a Family Office—Where to Start? 'The approach to building a family office would be analogous to building a house,' said Linda. 'You would never build it room by room without an overall plan or blueprint.' Linda emphasized three key decision that need to be made up front: Determining for whom you are you building the office Defining the scope of clients to be served by the office Deciding what scope of services will be offered to the Family Office's clients and which will be provided directly by the office versus those to be outsourced Brian added that approximately 25% of Mack International's searches are for Principals/Families establishing a Family Office for the first time. Typically the first hire is an Expert Generalist—the classic leader of a family office. The audience asked about 'virtual family offices.' Brian commented. 'There is a lot of interest and curiosity about Family Offices with first generation entrepreneurs particularly the idea of a 'virtual' Family Office. 'There is a notion that virtual platforms an provide the same scope of services of more traditional Family Office, however this means that the Expert Generalist must bring a much higher level of expertise to manage and run processes and be totally accountable. That candidate is difficult to find.' Family Offices Building Investment Teams There is a talent migration from institutional firms to the Family Offices and their private investment firms. Brian described the Family Office as being 'an asset class of its own'. 'Family offices are recognized as increasingly attractive to institutional talent. Reasons include the fact that they have long term patient capital and in many cases are much more flexible than traditional private equity, venture capital, or asset manager firms'. The audience, both live and virtual, was interactive, offering great questions and comments. All appreciated the insights gained from comprehensive industry survey data presented and actionable perspectives provided tailored to family offices of varying sizes and investment focuses. For the full recording click here to view and listen. About Mack International LLC Mack International is the premier boutique firm that specializes in providing retained C-suite executive search and strategic human capital consulting solutions to family office, investment firm and enterprise clients on a national and international basis. Clients range from first generation business enterprise owning wealth creators to multi-generational families of six or more generations. Headquartered in West Palm Beach, Florida, clients also include multi-client family offices and select investment and wealth management firms that serve family offices and ultra-high net worth clients. In addition to its executive search services, Mack International provides customized strategic human capital/talent management consulting solutions. The scope of consulting services includes succession planning, governance, next generation engagement, compensation practices, and performance metrics. Founder and President, Linda C. Mack has established proprietary methodologies such as the Mack 360© and is credited for having coined the term 'expert generalist' in the industry.
The Wire
24-05-2025
- Business
- The Wire
Is RBI's New Plan for Bad Loans Just Another Quick Fix?
In a country like India, where millions hover between poverty and fragile middle-class dreams, every bad loan is more than a financial misstep – it's a broken promise. The Reserve Bank of India's (RBI's) latest fix for India's non-performing assets (NPA) crisis, securitisation of stressed assets, may sound bold but it risks papering over deeper cracks. By pushing banks to bundle and sell bad loans as securities, it sidesteps the root problem: how these loans piled up in the first place. Bad loans don't just distort balance sheets – they block credit flow, deepen inequality and erode public trust in the financial system. We need solutions, not another shortcut. Globally, India stands out as an outlier in bad loans, with an average NPA ratio of 6.1% from 2010 to 2022, peaking at nearly 10% in 2017 – among the highest in the world, according to World Bank data. In contrast, China maintained 1%, Japan kept levels consistently low, while the US, the UK, Brazil and South Africa saw far more stable trends. This underscores the severity of India's banking crisis and the urgent need for lasting reforms. RBI's recent move seeks to repurpose bad loans into tradable securities, offering a market-led solution. But will this new approach lead to a long-term sustained measure or will just provide short-term relief? A Brief History of India's Bad Loan Problem India's NPA crisis took root post-liberalisation. Following the Narasimham Committee Report (1991) and the introduction of prudential norms in 1992-93, public sector banks (PSBs) disclosed gross NPAs at 25% of gross advances by 1994. Between 2005-2013, NPAs stayed low due to high growth and credit expansion. However, the RBI's 2015 asset quality review revealed deep stress, pushing the PSB NPA ratios to 14.6% by 2017-18. Despite write-offs, insolvency and bankruptcy code (IBC) resolutions, and recapitalisation, the problem persists. As of March 2024, banks hold Rs 4.8 lakh crore in gross NPAs – 71% (Rs 3.39 lakh crore) alone from PSBs. Source: Trends and Progress of Banking in India, Reserve Bank of India; and Database on the Indian Economy, Reserve Bank of India The birth of bad debt: NPA sources The nature and sources of India's bad loans have shifted significantly over time. In 1994-95, priority sector loans accounted for 50% of PSBs' NPAs, while non-priority sectors made up 47%. By 2014-19 – when NPAs peaked – this reversed: priority sector NPAs fell to 26%, while non-priority sector NPAs surged to 74%. This shift coincided with the RBI's asset quality review, which revealed deep stress in infrastructure lending, especially in the power sector (60% of total infra credit). Borrower-related issues like poor appraisal, over-leveraging, evergreening, fund diversion and weak management worsened the crisis. Delays in infra projects, monsoon-reliant agriculture, and growing Non-Banking Financial Company (NBFC) exposure (2% in 2005 to 9% in 2024) have added fragility. The IL&FS collapse showed how NBFC risks can spill over. Another red flag was when PSBs' exposure to sensitive sectors like capital markets and real estate rose 24-fold since 2005 to Rs 20.98 lakh crore. As of March 2024, 22.1% of PSB and 34.7% of private bank loans are tied to these volatile sectors. The Human Cost of NPAs Bad loans don't just weaken banks – they hurt the entire economy. As banks set aside large provisions from their profits to cover future losses, their ability to lend shrinks, especially to farmers, small businesses and the middle class. This leads to stalled, labour-intensive projects, job losses and restricted social mobility. Government bailouts to recapitalise banks widens the fiscal deficit, which in turn is used to justify subsidy cuts or tax hikes – fuelling inflation and deepening inequality. Every rupee spent rescuing banks is a rupee diverted from healthcare, education and jobs. Worse, when large corporate defaulters walk free while small borrowers are penalised, it erodes public trust in the banking system and in the rule of law. Debt recovery or debt evasion? India's bad loan recovery record reveals deep systemic flaws. Recovery peaked at 50.1% in 2007-08 but plunged to 10.3% in 2015-16, and only modestly improved to 16.5% by 2023-24. Under the IBC, banks recover just 23% of claims, with resolution taking an average of 679 days – far beyond the mandated 330 days. The NCLT is overburdened, debt recovery tribunals are understaffed, and SARFAESI remains inconsistently enforced. Haircuts as high as 85% raise moral hazard concerns. Of 7,567 CIRP ( Corporate Insolvency Resolution Process) cases, 72.3% ended in liquidation, while only 27.7% saw resolution. Financial creditors recovered just 34.36% & operational creditors just 10.7%. The amount forgone – write-offs or loans that banks failed to recover – rose from Rs 11,600 crore in 2005–06 to Rs 4.87 lakh crore in 2023–24. In the last decade alone, banks wrote off Rs 16.35 lakh crore, recovering only a fraction. Reduced NPA levels now reflect write-offs, not real recoveries, while those responsible for reckless lending face no consequences. Source: Trends and Progress of Banking in India, Reserve Bank of India; and Database on the Indian Economy, Reserve Bank of India Source: Trends and Progress of Banking in India, Reserve Bank of India; and Database on the Indian Economy, Reserve Bank of India Calculation: Amount Forgone = NPA Amount Involved – Amount Recovered India's banking sector faces deep-rooted issues worsening the NPA crisis. Despite a low credit-to-GDP ratio (56%), India has one of the highest NPA ratios, reflecting weak credit assessment. But the issue runs deeper. Ever-greening of loans, skewed credit flows to large corporates, and high PSB provisioning further erode transparency, capital strength, and inclusive lending. 'Credit by banks is always a calculated risk which bankers take and there are chances of NPAs. But it is important to determine what kind of NPAs we are dealing with. For instance, even if many small loans go bad, the banks' balance sheets are not affected. But when one large credit goes bad, when one big corporate defaults, the balance sheets are affected', says Thomas Franco, the former general secretary of the All India Bank Officers' Confederation (AIBOC). 'So, the focus of credit needs to change,' he says, adding, 'RBI should implement its own decision of restricting credit to one corporation to Rs 10,000 crore by all banks. They should be asked to mobilise funds from the market.' Source: RBI, Statistical Tables Relating to Banks of India RBI's new move: Securitisation of stressed assets The RBI's recent draft guidelines on NPAs, titled 'Securitisation of Stressed Assets', propose that banks bundle stressed loans into marketable securities and sell them to investors. This aims to ease balance sheet pressure and unlock market-driven solutions for bad loan recovery, complementing existing mechanisms like ARCs, IBC and NCLT. The RBI intent sounds good, allowing greater participation from resolution experts and ensuring transparency through disclosures, independent valuations and pricing norms. However, concerns persist. A key issue is the overreliance on credit rating agencies (CRAs). Ratings will influence capital requirements for banks but past failures like IL&FS and DHFL show how CRAs can overstate recovery potential. Incorrect ratings could result in banks holding insufficient capital, risking systemic instability. Another problem is that banks may not be required to retain a share in the stressed loans they sell, potentially leading to careless asset transfers with no incentive for recovery. Additionally, important categories such as fraud, wilful defaults, farm and student loans are excluded, limiting the framework's reach. Operational complexity is another challenge. With multiple players involved – banks, special purpose entities, servicers, and resolution managers (ReMs) – coordination sometimes may become messy. Allowing originator banks to act as ReMs creates a potential conflict of interest: Will they prioritise recovery or simply clean their books? If investor demand is weak, this could become more of a balance-sheet trick than a true resolution mechanism. The RBI's move marks a shift from state-led bailouts to market-based resolutions. But given the past experience with Asset Reconstruction Companies and NCLTs, there is still no certainty that recovery will be prioritised and it simply won't be a balance sheet exercise. Success thereby will depend on regulatory clarity, enforcement and public trust. Strengthening credit appraisal norms, risk-based sectoral exposure limits, time-bound out-of-court restructuring and granting PSBs operational autonomy could be the real reforms that can effectively deal with NPAs. After all, cleaning up bad loans isn't just about financial housekeeping – it's vital for restoring the public's faith in the banking system. Pranay Raj works as a Data Analyst at the CFA, New Delhi. This article is written in collaboration with the All India Bank Officers' Confederation.
