The family office market is more complicated than most advisors think, but it is also a larger segment of the overall financial planning market and is growing rapidly. These circumstances present many opportunities for asset managers, says a new study compiled from the Cerulli database of clients.

Because of the size of the potential market, asset managers should treat family offices as a separate, stand-alone part of their business rather than lumping them in with other types of investors, says Robert Testa, lead author of the Cerulli Report, Family Offices and Distribution:  Opportunities for Asset Managers.

The study shows the total family and multi-family office investable assets available could be as high as $1 trillion, higher than most experts anticipated, says Testa, and this provides new business opportunities for asset managers looking for growth in assets.

A family office provides financial and non-financial services for one or more families, usually with a minimum of $10 million in investable assets, on a customized and independent basis for each client, according to Cerulli's definition. These family offices may include single-family offices, multi-family offices and commercial family offices.

Advisors and asset managers who want to become part of this side of the financial business need to understand the complex nature of the investments. Almost any product or service imaginable can be part of the mix, from annuities to hedge funds to commodities, says Testa.

"Just 10 years ago there was only a smattering of multi-family offices, but today the model is pervasive and new ones are continuously being created," the report says. In 40% of the firms, the family offices are handled by the institutional team, while in 27% the retail (those handling individual investors) handle the family offices. The rest developed other methods, such as having the investment counsel division handle the family office business. Managers are assigned by geography, by asset classes and other methods.

"It would be better to have a stand-alone team handle the family offices using a combination of institutional and retail models," says Testa.  Asset managers also need to be ready to handle pooled investments among the family offices and foundations that are controlled by the families.

The biggest competition for asset managers and advisors in attaining new family office business are commercial family offices handled by banks, which can offer credit and other services that an asset manager cannot offer.

One thing independent asset managers should adopt from banks is a more structured fee schedule that they stick to. The study found asset managers lacked discipline in their pricing and fees offered to family offices.

Family offices are attractive businesses for asset managers because the families are sophisticated clients, the report shows, and because higher mandated minimums can be imposed. A successful method of reaching new family office clients is through networking at conferences and industry events.

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