Morgan Stanley’s efforts to tap into the $5.5 trillion family office market are showing signs of paying off, as the bank’s suite of products dedicated to the fast-growing wealth management firms have brought in $25 billion in assets since January.
After four years of developing offerings for the privately held entities that handle investments for families with more than $100 million in available assets, Morgan Stanley says it has crafted products to suit the size and complexity of family offices, its Chief Operating Officer Jed Finn told CNBC.
Family offices, which have grown exponentially in the past decade, are too large for banks’ standard wealth management services and too small for their institutional coverage, according to Finn. They can perform a variety of functions, including investing in startups as venture capital firms would and making wagers as hedge funds typically do.
In 2018, seeking to grow its assets under management, Morgan Stanley began asking family offices about their specific needs, finding that their systems for keeping track of holdings had become outdated. “How do you build a general ledger for a family where they can understand at any given point what their total exposure is and allow different people, different entitlements to see it?” Finn told CNBC. “That was the challenge.”
The bank adapted its fund services platform for hedge funds, developing a clear interface that shows both holdings and performance.
The developments come while the bank has set a $10 trillion goal for client assets, which is 50% more than today’s level. It added a record $438 billion in net new assets in 2021.
Ultra-high-net-worth individuals and families with at least $250 million to invest have gravitated to the family office, which is lightly regulated and allows for the direct control of finances. The offices are not required to register as advisors with the Securities Exchange Commission, so exact figures on numbers of offices and amounts of assets are unclear. The accounting firm EY estimates that 10,000 family offices exist globally.