As I sifted through my seemingly endless stream of emails, an article by Paul Westall for Forbes grabbed my attention. I currently collaborate with a few family offices alongside my trusted partners, leveraging our collective expertise to deliver tailored solutions that align with their unique goals.
Here is a section:
In our 2023 Global Family Office Compensation Benchmark, we found that 60% of the surveyed family offices identify risk-adjusted growth as the main purpose of the entity. This means that investment management is the core function for a lot of family offices.
Family offices face a critical decision: should they outsource investment management or manage it themselves? Outsourcing can bring benefits, like access to specialized expertise and potential cost savings, it is important to consider the downsides, such as having less control and potential misalignment of interests.
Most family offices operate on a very small scale, with an average of less than 5 employees, according to our compensation report. Family offices should carefully consider which core functions to internalize and which to outsource. A recent research report by Ocorian showed that 91% of the surveyed family office professionals believe that outsourcing will grow over the next three years.
Outsourcing investment functions can give access to specialized knowledge and investment strategies not easily found in-house, especially for smaller family offices. It can also potentially reduce costs, particularly for those who may not require a full-time in-house investment team.
Additionally, outsourced firms may offer a wider range of resources, including advanced research capabilities, technology platforms and access to extensive networks. Diversifying investment management across multiple providers can help mitigate risk and reduce reliance on in-house staff.
In an RSM survey, it was revealed that although many family offices outsource some functions, these are typically non-core activities such as IT (81%) and bills (64%). Only a small proportion of family offices choose to outsource investment accounting (28%) and wealth management (5%).
This caution may stem from concerns about losing control over investment decisions, which could compromise the family office’s ability to execute its specific investment strategy effectively.