Asset managers ‘not serving family office channel effectively’

There is a “real disconnect” in how asset managers serve family offices and how family offices want to be served, according to a researcher from Cerulli Associates.

Robert Testa, a senior analyst at the US financial research firm, said most of this disconnect relates to business development strategies, as well as ongoing support issues.

Cerulli Associates found that family offices listed a change in investment strategy as the most important factor for ending a relationship with an asset manager, whereas the asset managers questioned placed this far further down the list of key issues.

“This disconnect may be a result of the asset manager not understanding how the family office is constructing their portfolios and that a key variable is how their fund fits in,” the company's report said.

Testa, who was the lead author of the report, said asset managers are beginning to change how they deal with family offices.

“They are beginning to realise that you can’t sell into the channel using wholesale sales. Instead it is about relationship building,” he said.

The US’s wealthiest families are placing up to $1 trillion in the hand of family offices, the research found, yet 50% of asset managers surveyed only began devoting resources to attracting family offices over the last one to three years.

About half of the family offices examined used an outside provider for part of their process for selecting investments. However, the Boston-based research firm warned that with growing demand for their services, commercial family offices are posing a significant threat to wealth managers and other family offices.

The study also found there has been an “explosion” in the number of personal trust companies set up in recent years. Many of these new trust companies have in fact been family offices looking to avoid registered investment adviser requirements or aiming to reduce costs and prevent the disclosure of information to the public, according to the report.