Outsourcing for family offices
27 August 2020
Hybrid family offices: hire the best, outsource the rest.
For established families with a complex balance sheet and entrepreneurs on their wealth trajectory, setting up a family office only makes sense if they can benefit from the best advisors and staff. That said, balancing the cost of an exceptional workforce is significant – even for UHNWI’s. Given that it’s estimated that extensive single-family offices are only viable from a cost perspective when a family’s wealth reaches the $250 million mark, it remains a high bar for many.
While cost is a factor, wealthy families still want to benefit from single-family office services, especially as they generate significant wealth which requires active management. The result is that ‘hybrid’ family offices – hiring a few key staff and outsourcing the rest of the work to service providers – are becoming increasingly popular.
‘Our clients come to us because they need sophisticated services that complement the expertise they already have in-house. We work with smaller family offices who have just a couple of key staff to manage a family’s wealth. Other functions they very successfully outsource to providers like ZEDRA. It’s cost-efficient, and it also means you can tap into expertise whenever you need it without having to make one or more hires,’ says Charlotte Murtagh, ZEDRA’s Head of Private Office.
To keep costs lean, families will often make a few very strategic and selective ‘key hires.’ These are typically roles such as a CIO, COO or CFO depending on the family office strategy. Service providers who can support the family with comparable expertise and skill are then drafted in to cover any of the additional services the family requires on an ongoing but ad hoc basis.
‘Any family office requires exceptional professional expertise. Here at ZEDRA, we structure corporate, trust and fund vehicles for families, as well as provide ongoing administration. We also manage things like yacht and jet ownership and acquisition, crewing, escrow for luxury purchases and so on. Our clients come to us because they are looking for an external provider that is willing to support the kind of care and attention to detail a family has within their family office. Only the best service and the best staff will do – even for outsourced functions,’ says Charlotte.
Why not join a multi-family office?
Multi-family office setups remain appealing: families can benefit from an excellent workforce, a regulated environment, and, of course, the burden of managing wealth is lifted without incurring high costs. On the flip side, however, multi-family offices offer less autonomy, less control over staff hires and less privacy, all of which can be issues of contention for a wealthy family.
‘One of the things we see regularly is that clients like privacy and autonomy. Cost is undoubtedly a factor, but with an outsourced model, price becomes less of an issue. Interestingly, a family’s wish for autonomy is sometimes interpreted as leading to wayward governance, but we’d say the opposite is the case. Operations will be lean, but the important functions such as taxation, structuring, compliance, risk and governance, for example, are handled by some of the world’s most reputable firms,’ says Charlotte.
ZEDRA’s family office solutions
We assist clients in setting up structures such as trusts, foundations, funds and corporate vehicles. We provide consolidated reporting as required. Our Fiduciary Services can provide asset allocation and independent bench marking for single and multi banked scenarios
ZEDRA can provide any type of back-office services which a family might require, including record keeping and day-to-day bookkeeping, plus asset cataloguing and insurance support. We can also support philanthropic planning and co-investment strategies.
We also provide corporate, secretarial and administration services, fund administration, holding structures for the acquisition of yachts and aircraft, administration of these assets, arranging for the crewing and the management of craft.
Additionally, we can support our clients with lifestyle management, family governance advice and other bespoke services which further enhance the family strategy and wealth strategy.
For more information, please contact Charlotte Murtagh, ZEDRA’s Head of Private Office.