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Family Office – The Make-Or-Buy Dilemma – Broken Down

Although the make-or-buy decission  must be based on the specific setup of the family office, some generalconsiderations can help to determine the optimal solution. Best practices are based on the goal of obtaining the most effective services in an efficient way and avoiding potential operational risk:

Key determinants of the make-or-buy decision

Cost and Budget Escalating costs can pose serious challenge to family offices. Clearly it is unreasonable to in-source the whole range of potential services without considering the economic benefits. Appointing an outside provider can ensure quality and possibly cost savings, as the family office may benefit from economies of scale
Expertise The priority services as defined by the family will most likely be covered in-house in order to ensure independent expert advice to the family. However, the family office may gain from outsourcing certain selected services that require specific expertise.
Regulatory Restrictions A family office should consider all regulations, depending on its distinct legl structure. In the absence of professional management, a family office runs the risk of serious fallout from negative publicity. Legal action could also be costly and harmful to reputations.
Technology and Infrastructure The technology employed by an external provider can serve the family office effectively. Buying in these services has become even more of a priority as financial operations become more complex.
Complexity If the family´s assets are substantial and complex, the family office will have to hire more staff or outsource services. At the same time, in-house decisions on all matters have to be final so that internal staff must maintain the ultimate overview and decision-making process.
Data Confidentiality If confidentiality is a prequisite, then services where this is a priority should be brought in-house. Non-critical systems and infrastructure can be outsourced.
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