With the burgeoning growth in the number of single-family offices and the astounding financial assets they control, investment professionals—financial advisors, wealth managers, hedge funds, private equity funds and investment bankers—have all made considerable efforts to win their business.
“Family offices tend to have longer time horizons than most institutional or retail and even most high-net-worth investors," said Angelo Robles, founder and CEO of the Family Office Association and author of "Effective Family Office." "They also tend to make very significant allocations to investment professionals they consider exceptional. That’s why we’re seeing family offices becoming a critical high-value client for many talented money managers.”
Aside from being able to deliver alpha, investment professionals face some hurdles in winning over family offices. The first and probably the biggest hurdle is being able to access them on a preferential basis. Connecting with family offices interested in what advisors can provide can be difficult. The best way is to be referred to the senior executives at the family office by leading experts who are currently working with them. There are some very effective ways to make this happen, such as street-smart networking.
After being introduced, investment professionals need to successfully tell their stories. Too many money managers fail to communicate effectively with the investment officers at family offices. There are a number of ways to make messaging resonate with each family office, and these efforts often prove to be critical to getting an allocation. Additionally, it is very useful for an investment professional to provide solutions that differentiate them from other money managers approaching the same family offices. One of these solutions is private placement life insurance, which is getting a lot of attention from family offices.
“The ability to potentially eliminate many if not all investment related taxes is proving to be extremely attractive to high-net-worth investors and especially more sophisticated family offices. [This is] possible with private placement life insurance,” said Peter Sasaki, managing partner of SDS Family Office. “What’s important is not only being able to provide a customized private placement life insurance solution, but to be able to effectively explain it’s advantages. For example, being able to explain how to make private credit investments tax efficient is just about as important as knowing how to include private credit in a private placement life insurance policy.”
Once an investment professional has won investment business from a family office, there are usually very solid opportunities to win more. A family office controlling billions of investable dollars is only going to give a relatively small slice to any new money manager. So money mangers with good performance who have shown themselves to deliver an exceptional experience will be given larger allocations. Therefore, investment professionals should use proven processes to systematically expand the relationship.
Russ Alan Prince, president of R.A. Prince & Associates, is a consultant to family offices, the ultra-wealthy and select professionals.
