Cerulli Associates has delivered a huge estimate of the size of the family-office market, along with a call for asset managers to treat it as a standalone distribution channel.
The Boston-based research firm estimates the market size may approach $1 trillion. Firms that want to provide asset management and other services to those wealthy clients must “put the resources in place, the business development people and the proper compensation,” said Robert Testa, Cerulli senior analyst and lead author of the report.
Solid estimates of the size of the family office market are few and far between. Cerulli’s study used numbers from firms throughout the different segments of the market, and Testa calls it “one of the first really in-depth studies” of its kind.
A dedicated focus on family offices is a relatively new development among asset managers. A big chunk of them -- nearly half -- have only started devoting resources to the family office channel within the past one to three years, according to Cerulli.
Family offices see much room for improvement in how asset managers reach out to them, according to Cerulli’s research. Two of the greatest sources of frustration are cold calls and e-mail blasts, Testa said.
If asset managers haven’t yet figured out how best to pursue family-office mandates, it may be because many of them stumbled into the business. Some family-office business may have come in through the retail side, or some may have come through the institutional side.
“A lot of them dipped their toe in the water and got family-office business kind of by happenstance,” Testa said.
Nearly 40% of asset managers position their business development efforts within their institutional teams, while 27% put family offices within their retail teams.
In fact, family office requires its own distribution arm, one that combines institutional approaches, says Testa. More firms are coming around to that view, Testa said. “They’re reevaluating the best way to set up their own business development, marketing and ongoing support for family offices."
"This proves they see a lot of opportunity to garner long-term flows from family office," he added.
Meanwhile, family offices told Cerulli researchers that the most important factors in evaluating asset managers included personal character and attitudes consistent with their firm’s culture. Advanced degrees such as CFAs or MBAs are helpful.
What family offices don’t want is a hard sell. It takes an average of nearly 11 months for a mandate to be awarded, Testa notes. “Family offices don’t want a candidate that seems too 'salesy,'” he said. “It’s a much softer sale in nature.”