How to Start a Family Office, step 4 of 12

Choose Which Family Office Work to Outsource

In short. This step involves deciding which family office functions your team can handle well and which need outside expertise. Assess your strengths and privacy needs, then consider the workload and costs. Choose providers for specific gaps, set clear oversight, and review each relationship regularly.

By Richard C. Wilson, from chapter 4 of How to Start a Family Office

Choose outside partners to fill gaps in your family office. Keep work in-house when it is a real strength or too sensitive to delegate. In my experience, a lean office can outsource many functions, but each outside relationship adds cost and coordination work.

Identify what the family office needs to do, what your team does well, and where it lacks time or expertise. The right arrangement depends on the family's priorities and the complexity of its investments and structures. A single family office can use a virtual model, outsource selected services, or build more capabilities in-house. Let the work guide the choice, not a preference for an organizational label.

Match Providers to Specific Gaps

Investment consulting firms and outsourced chief investment officers can help when the family has expertise in some areas but needs support in others. A family may be comfortable with real estate or bonds and less confident in other asset classes. An investment consultant can address that gap while the family retains its direct investment strengths.

Fund-of-funds and alternative investment advisory firms can provide access to outside managers and advisory support when the office lacks staff to select and monitor many managers internally. The tradeoff is the cost of an intermediary. Understand what work the provider performs, how the arrangement is structured, and whether the service matches your family's needs.

Accounting and reporting work may fit an existing CFO, CEO, or analyst who can handle several responsibilities. If the core team cannot cover it, outsourcing can be a practical alternative to hiring a full-time person solely for reporting. Fund administration is a separate need when the family has complex trust or fund structures. An outside administrator can help with valuation and reporting, along with administration, while giving the internal team more time for other duties.

For direct investments, co-investing, or acquisitions, you might use an investment banker or sourcing specialist for a defined mandate. A family office can also contract IT support when it has specific technology needs but not enough ongoing work for a full-time hire. Security and legal specialists may be useful, as may compliance, public relations, or marketing support, depending on the family's activities and exposure. Legal and regulatory specifics vary, so talk with your attorney or CPA about your situation.

Decide What Stays In-House

Consider your areas of competitive edge and the information or activity the family considers too proprietary to entrust to an outside party. Those answers help set the boundary between internal and external work. If the family has deep expertise in direct investments, for instance, it may retain that work and seek help with liquid investments or other areas where the team has less experience.

Look at the workload as well. A function requiring specialist skill only from time to time may be better handled by a provider than by a permanent employee. A virtual family office takes this approach across most functions, with a leader coordinating outside professionals. That model still requires active oversight. Someone needs to set priorities, share information appropriately, check the work, and hold providers accountable to the family.

As you form the operating model, consider what a single family office is and how it differs from other arrangements. If you are weighing outside support against building an office, compare it with the virtual family office model and the multi-family office model. Your structure should reflect the service level and the control and privacy the family wants.

Set Expectations and Oversight

Before engaging a provider, define the scope of work, the information they will receive, who inside the office owns the relationship, and how you will evaluate the service. Legal counsel can review contracts and help identify exposure. For compliance questions tied to businesses, investments, or outside capital, ask a qualified professional about the applicable rules.

Good oversight matters even when a specialist has strong credentials. Keep a clear record of the provider's responsibilities, what the family retains, and how concerns get escalated. For sensitive work such as security or technology, be deliberate about access to family information and systems. The provider should understand the family's requirements and the limits of their role.

Each relationship also creates coordination work. A provider may need information from your accounting team, investment staff, attorney, or family members. Account for that time when assessing whether outsourcing is helping. A useful partner should free the team to focus on higher-priority work, without creating unmanaged handoffs.

Review Costs and Relationships

Do not assume every service is worth outsourcing or that every task requires a dedicated employee. Compare the provider's cost with the internal time and expertise required, as well as the oversight involved. Review technology needs with care, since a system built for a large office may be unnecessary for a smaller one. Ask providers to explain the service and fees in terms you can compare.

Review outside relationships at least once a year. Check whether the service is still necessary, whether the work is being done well, and whether the contract still suits the family. Revisit the arrangement when the office's needs, capabilities, or priorities change. This helps prevent small outside commitments from accumulating into substantial overhead.

For a broader operating plan, see what a family office business plan should include. For questions about the first phase of implementation, review what a family office should do in its first 90 days.

Any new vendor or service provider brings along new responsibilities for coordinating between parties and, of course, new costs that will ultimately show up in the bottom line.