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When to Build Your Own Family Office and When to Outsource

We often field questions about when it makes sense to create a Family Office and when these tasks can be outsourced instead.

Who Is Asking?

Many of our clients are retired CEOs who utilized their corporate financial team to help manage their personal finances. When those financial professionals are no longer available, these clients are often left concerned and uncertain about how to manage their personal finances moving forward. They are curious about the pros and cons of building their own family office.

Another common issue we see is when family members don’t agree on strategies related to wealth management and preservation, especially upon the passing of a parent or other family member. Oftentimes this results in friction and fighting, which can be exacerbated in times of stress or sadness.

Our Expert Advice.

Our first recommendation is to have a succession plan in place, so in the event of the retirement of a trusted employee, or the death of a family member, the individual or family has an agreed upon plan.

If this planning has not taken place, and the family is struggling with how to manage their bill pay and accounting needs, rather than jumping straight into building a family office, we suggest dipping their toe in the waters.

By this we mean, work first with an outsourced bill pay and accounting service provider. This will help get everything in order, and perhaps more importantly, will ensure that all bills are paid, accounts are reconciled, and documentation is retained.

Once the dust has settled, if the family still feels they prefer to build and manage their own family office, they can now do so with accurate records and a better understanding of their financial state.

We’ve also pulled together this checklist to help understand the benefits and challenges of building your own family office versus working with an outsourced family office service provider.

When to Build Your Own Family Office

ο  Customization: Building your own Family Office provides an opportunity for more personalization that is tailored to your family’s specific needs.

ο  Complex Family Structure: A diverse or intricate family structure might benefit from a dedicated office that can handle the unique needs and nuances of various family members.

ο  Family Legacy and Education: A family office can double as a hub for family governance and provide financial education for younger generations.

ο  Sufficient Resources: Building a family office requires significant capital to cover the overhead, staff salaries, technology, and infrastructure. If your family has the resources, this option might be suitable.

When to Outsource Family Office Responsibilities

ο  Cost Efficiency: Outsourcing can be cost-effective, especially for families that don’t have the substantial assets to justify the high fixed costs of an in-house office.

ο  Access to Expertise: Multi-family offices and other outsourced service providers often have teams with specialized knowledge across various areas and can provide expert advice without the need to hire a full-time in-house team.

ο  Avoiding Administrative Burden: Operating a family office can be administratively intense. Outsourcing can alleviate the operational complexities, from HR issues to IT infrastructure.

ο  Flexibility: Outsourcing can offer more flexibility, allowing the family to switch providers or adjust services as needs change.

ο  Risk Management: Established multi-family offices or outsourced providers often have more robust risk management systems and protocols in place, which can be expensive and time-consuming for a single-family office to replicate.

ο  Start Small: For families just beginning to explore the world of family offices, outsourcing can serve as a stepping stone. They can test the waters before committing to creating their own.

Plumb delivers financial peace of mind by assisting high-net-worth individuals and family offices know where their money is going, so their trusted advisors can effectively manage it. We work in partnership with their team — including wealth, CPA, and other advisors — to provide the highest quality of data and financial reporting to establish a holistic view of their assets and financial holdings. We’d love to help answer any questions you may have. Feel free to schedule time to speak with Anneke Stender, our EVP, at your convenience.



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