In the registered investment advisor world, multi-family offices are showing the strongest growth trends among high-net-worth investors, research released by Cerulli Associates shows. But it’s still a tough business, senior analyst Robert Testa says.
MFOs’ assets under management rose by 18.2 percent in 2010 over 2009, the fastest of any segment, compared to wirehouse asset growth of just 2.3 percent, Cerulli says. The four-year compound annual growth rate of 9.4 percent for RIA multi-family practices through 2014 also takes first place, ahead of the wirehouse growth of 3.9 percent for the period.
Wirehouses are still the big gorillas in the market, though, with a 45.2 percent share of the HNW market (defined as more than $5 million) at the end of 2010, compared to a 7.8 percent share by the RIA multi-family offices.
The fiduciary focus on the RIA side attracts clients, along with the firms’ ability to position themselves as boutique service providers, Testa says. But it comes at a price.
“It’s a really tough segment to operate in. The margins are extremely thin. The clients are extremely demanding. It’s tough sometimes to make a profit in this,” he says.