Hugo King-Oakley is head of private markets and community for GPFO(Global Partnership Family Offices), which regularly asks its members what issues are top of mind for them. One of the current hot topics is how family offices can become more cost-efficient.
Which family offices are focused on cost efficiencies?
For some people, cost efficiency is always important. But for a certain subset of our members, it’s particularly important: those whose total returns have been depleted over the last couple of years versus what had been relatively booming years previously. When total returns edge towards single digits or zero, the family office suddenly becomes, proportionally, a much bigger cost if it’s not generating returns on the assets.
What are the options for those who want to cut costs?
There is increasingly a good debate around insourcing versus outsourcing: What should be done in-house within the family office versus what should be outsourced to external providers? Then, within that are some of the complexities or pitfalls that could happen when you insource and or outsource.
From a market perspective, there are increasingly more specialized service providers from whom you can access specific services on an a la carte basis, and a number of them are increasingly specialized around family offices. So for some services, where there previously was not an option to outsource, there is an increasingly good market — whether that’s different parts of the asset management spectrum or different parts of the operational stack.
How do family offices approach these decisions?
It’s an interesting conversation. From a debate standpoint, there are two schools of thought that are prominent: those who think your single-family office should never be more than three people, and anything larger is a complete waste; and those who think you have much more control, have more privacy and can deliver a better service by managing everything in-house.
