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Determining Servicing Priorities: The Make-Or-Buy Dilemma

Even the biggest family office in terms of assets under management will need to assess whether or not to outsource services. Outsourcing certain services can be beneficial from a cost-efficiency and know-how perspective, offering advantages to fmily offices that include:

  • Reduced costs and overheads, and improved staff productivity.
  • Economies of scale, particularly for high-value professional services, thus enabling lower prices for related services.
  • The benefits of objective advice from experienced professionals who possess specialized skills.
  • Help with defending the family office´s regulatory independence when outsourcing investment management, by allowing investment decisions to be made by external providers.
  • Due dilligence and continuous monitoring can be carried out by the directors of the family office to ensure performance and security against risk.

On the other hand, a number of key services are usually kept in-house. The advantages of this are mostly related to confidentiality and the independence of the family office, and include:

  • Higher level of confidentiality and privacy.
  • Assurance of independent and trusted advice.
  • Consolidated management of family wealth.
  • Development of skills specifically tailored to the family´s needs.
  • Greater and more direct family control over its wealth.
  • Keeping investment knowledge within the family.
  • Assurance of optimal goal agreement, along with the avoidance of conflicts of interest with external providers.

Given these considerations, it is crucial to obtain te right balance and to identify those services best suited for management in-house. Many factors involved in the make-or-buy decision are specific to the setup chosen for the family office, in particular:

  • The size of the family and how many family members want to use the family office.
  • The net worth and complexity of the family wealth.
  • The family´s geographical spread.
  • The variety of assets, both liquid and illiquid, under management.
  • The existence of a family business and the link between this and private wealth management.
  • The skills and qualifications of family members.
  • The importance of confidentiality and privacy.
  • The consideration of wether the family office should be a cost or a profit center.

This variety of factors highlights how vitally important it is for the family to clearly determine its expectations and address key questions prior to creating the business plan for the family office. These include priorities setting and scope definition for the services to be offered from the family office:

  • Who should be the beneficiaries of the family office and what is the overall strategy of the family to secure and expand its wealth over generations?
  • Is the family´s priority traditional asset management of liquid funds, with or without a portfolio of direct entrepeneurial investments? And where does philanthrophy fit into the mix, if at all?
  • Should the family office act as the asset manager for all family members, or should it just be an adviser for some specific services to selected family members?
  • Is the family office´s core task that of a financial adviser, or more that of an educational facilitator for the next generation of family members?

If you have further questions don´t hesitate to ask us directly.


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