How Should I Surround My Single Family Office With Advisors?
Most SFOs draw on the expertise of a variety of outside advisors, including lawyers, accountants, bankers, insurance providers, investment advisors, philanthropic consultants, and information technology specialists, among others. Seeking advice when needed, contracting for services, and coordinating the efforts of these specialists is a major responsibility of the SFO.
A well-run SFO will have a clear process for selecting and vetting advisors. While many members of the SFO team will have experience working with various service providers, it is important for the team to have clear procedures for selecting advisors to avoid conflicts of interest or playing favorites. Many SFOs establish budgets for advisor-related expenditures on an annual or more frequent basis, thereby prioritizing needs and giving SFO staff clear parameters for defining the scope of each project with advisory team members. Performance of existing advisors should be reviewed frequently to ensure the services they provide are of high quality and appropriate to the problems the SFO faces. Important questions to ask on a regular basis include:
1.Is family privacy and confidentiality respected?
2. Are fees appropriate to the work accomplished?
3. Are the advisor’s services relevant, comprehensive, and delivered on a timely basis?
4. Does the advisor alert SFO staff to newly arising or unexpected issues or opportunities?
5. Does the advisor coordinate with other service providers working on the same issues?
While many SFOs seek to develop in-house expertise in certain areas, many SFO activities can be outsourced, which may offer the family greater access to expertise at lower cost. An extreme example of this trend is the virtual SFO, an entity without an office or even dedicated staff of its own; rather, SFO services are provided by a group of advisors on a contract basis, quarterbacked by one of those advisors.
The advantages of having an in-house, dedicated team to manage the SFO are clear:
1. The team's focus will be undivided; its skills will be matched to the needs and requirements of the family, and the SFO’s specific assets rather than those of each team member's own general client base.
2. The family's privacy and confidentiality will be maintained, and the expertise will be on-call and available whenever needed. Highly confidential and mission-critical services should be the first priority when determining which activities will be handled in-house.
3. Generally speaking, in-house professionals will tend to be more focused on and responsive to the family’s needs, and their work will be under the sole control of the family.
Having said that, the advantages of outsourcing SFO services are also significant:
1. Lower cost, exposure to a broader range of advice and the perspective and experience gained from serving multiple similarly situated families.
2. Economies of scale and access to higher-level expertise, particularly in areas where the SFO’s investments or needs don't justify the expense of a full-time individual or bespoke service.
3. Highly complex services requiring substantial capital investment and delivered in rapidly changing environments and circumstances should be the first priority when determining which activities will be outsourced.
4. Generally speaking, outsourced service providers tend to have better access to a wider range of information and are subject to the discipline and best practices of the wider marketplace.
If you would like to comment on this whitepaper please visit the following link and let us know what you think: How Should I Surround My Single Family Office With Advisors?
P.S. please check your spam folder to be sure my personal email marc@tfoa.me on your safe senders list. I suspect you might find a few past emails from me there. Cheers!
About TFOA
The Family Office Association (TFOA) is a global peer network that serves as the world’s leading single family office community. Our group is for education, networking, selective co-investment, and a resource for single family offices to share ideas, deal flow and best practices. Members are not actively marketing products or services to other members and no contact information or email lists will ever be shared. Since our founding in 2007, TFOA has led the global single family office community by delivering world-class educational content, unique networking opportunities, and exceptional thought leadership to our highly curated network of the world’s largest and wealthiest families. If you'd like to stay in touch on a more frequent basis, please follow us on LinkedIn and X. In the meantime, please check out our free library of family office content. Thank you!
About The Author
Marc J. Sharpe’s investing career spans more than 30 years. He has held positions in investment management for Goldman Sachs, investment banking for Wasserstein Perella, and is the founder and chairman of The Family Office Association (TFOA), a peer network of single family offices founded in 2007. In addition, he founded a venture capital incubator in the UK, built a global EB-5 investment business, and worked on strategic initiatives for Dell Inc. Mr. Sharpe is currently an Operating Partner with Satori Capital, a multi-strategy investment firm founded upon the principles of conscious capitalism, a business approach that emphasizes extraordinary long-term outcomes for all stakeholders. He also teaches an MBA class on “The Entrepreneurial Family Office” as an Adjunct Professor at Rice University and Southern Methodist University. Mr. Sharpe holds an M.A. from Cambridge University, a M.Phil. from Oxford University, and an MBA from Harvard Business School. He is active in the community and has served on the Board of the Holocaust Museum Houston, the HBS Angels, and on the Investment Committee for two Texas-based foundations.
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