What is the typical family office fee structure?

What is the typical family office fee structure?

by Richard C. Wilson & Family Offices Group Association Team

Question: What is the typical family office fee structure?

To get you an answer straight from the source, we asked one multi-family office executive this question:

What types of fees should the ultra-wealthy be expecting if they are looking to hire a multi-family office?

Family Office Executive Answer: Well, we have seen and we have tried to understand what the fees are that families get charged.  I would kind of break it into two general categories and that’s investment-related fees and non-investment-related fees, so things like tax return preparation, estate planning, trust documentation just kind of the concierge services I talked about earlier.  So it’s really difficult to give you an all in number because it really depends on is the office focused more on the investments, are they more involved with kind of the caretaking of investments, etc.

So for example, I have looked at compensation surveys for family office executives, this might be a good kind of window into the question you were just asking about fees, and that is the more investment related the activities are, the higher the fees and that doesn’t surprise anybody I am sure. And the more perfunctory, the more accounting related, the lower the fees and the lower the cost to the family.  And so depending on the needs of the family office, that’s going to have a large impact on the outcome, as far as what kind of fees we are talking about.

But in general, I have seen fees in 1% of all assets and I have seen it down in the 10s or 20 basis points and kind of everything in between.  But again, I think most of the time, if there is a high level of involvement regarding investments, you are going to see a higher number for fees, but I would say it’s somewhere in the ½% to maybe 1% per year in that category, and again that doesn’t include things like tax return preparation, tax planning, heavy duty estate planning and things of that nature.  Lot of family offices outsource all of that and a lot of other offices have brought it all in-house and I have also seen, over the years, where they brought it in-house and they feel oh this was a mistake and they outsource everything now and vice versa.  I know of a pretty large family office who has just outsourced everything and now virtually there is no family office; it’s all done kind of with outside providers.  So, it really depends on the family.

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