Outsourcing what at the Family Office?
Last week, I attended a breakfast panel discussion about single-family and multi-family office practices. Scale was the major topic discussed. For the breadth and level of services requested, how large did a family’s AUA (assets under advisement) need to be? With caveats and nuances, the panelists settled in at $200 MM. (Like you probably, I did the math on a hypothetical 1% and came to family office expenses at $2 MM.)
For families with AUA less than $200 MM, many family offices were banding together, taking on second families, or outsourcing specific services. The panelists agreed that the Chief Investment Officer is a common function to outsource due to costs.
With those massive asset levels, outsourcing to a well-diversified asset manager would make sense. The family office receives:
- best-in-class money management
- institutional-level service & pricing
- cachet of using a top-tier asset manager
Surprisingly the panelists all mentioned outsourcing to specific individuals or very small firms. Potentially the market is too small for large asset managers to dedicate sales & service teams (I don’t know how the US population of families with 50 – 200 MM in AUA.). An asset manager with strong client-service teams in place could extend sales & investment management into this arena and garner significant (and sticky) assets.