Virtual family offices emerge as a lower-cost path to family office benefits

Running a single family office is expensive: UBS’s Global Family Office Report 2023 estimates the pure cost of operating a family office at about 38 basis points (bps) of assets under management — with smaller family offices ($100 million to $250 million) spending 46.6 bps of AUM. And increased competition for staff is pushing costs up.

The cost can lead families to look for alternatives — one of which is a virtual family office, or VFO. A VFO gathers expert advisors on an as-needed basis for virtual meetings, rather than using the physical office as a base. This can be more cost effective, especially for families whose assets are not enough to support a single family office. Experts say a virtual family office can make sense for a family with from $10 million or $20 million to about $250 million in assets.

How can a family determine whether a virtual family office is the right choice? Experts offer a range of advice, including a Wealthtender article that compares a virtual family office to a traditional financial advisor. A Forbes article lays out the basics: What Is A Virtual Family Office? And The Sharp Financial Group lists six vital areas for a virtual family office to address: investment management, tax advisory services, insurance management, succession planning, planned giving, and real estate management.

There are downsides to virtual family offices. Anyone looking to set up a VFO needs to assess how the assembled experts will handle confidentiality and cyber security, for example. A VFO needs a coordinator who can make sure the service providers are a good fit. And since the model is less centralized than other family office setups, it’s important to define roles clearly and have a way to coordinate the various experts’ work.

About the Author

Margaret Steen

Margaret Steen is the editor of FO Pro, The Family Office Professional. Based in Silicon Valley, she has written for Family Business Magazine for more than 15 years.


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