Costs of Family Office Services
The cost of operating a single-family office can easily add up to a million US dollars or more per year. In order to minimise costs, a good number of wealthy families nowadays work with a multi-family office. Below you can find more information about how a multi-family office can charge for services.
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- Costs of a multi-family office
- Fee models:
- Financial benefit
- Our advisory services
Costs of a multi-family office
As the costs of family office services are relatively high, the majority of families nowadays work with a multi-family office. Due to the fact that fixed costs are shared by a considerable number of families, a multi-family office is simply more cost-efficient than operating a single-family office.
Moreover, you are offered immediate access to experienced staff. The family can benefit directly from the expertise the staff have gained while supporting other families. But, unlike with a single-family office, the family does not control the employees and service delivery is not exclusive.
A multi-family office may use different models to charge fees for its services. The three main fee models are: an hourly rate, a fixed fee for the actual services delivered, or a fee as a percentage of the assets under management. A combination of these three cost models is also possible.
Costs of a family office - hourly rate
In the case of hourly rates, the family office work performed is charged per hour worked. The standard hourly rate charged depends on the seniority and qualifications of the employee(s) conducting the work. The advantage to this model is that the actual costs are very transparent – you only pay for the work actually performed on your behalf.
Costs of a family office - fixed fee
If a fixed fee model is used, a fixed amount is charged annually. Initially this amount is based on the estimated time spent on all necessary services related to your family's assets and needs.
In due course, the annual workload can be estimated more accurately and the fee can be adjusted, on agreement, to a more precise fixed amount. Also in later years this fixed fee is generally checked from time to time, to see if it is realistic, still mutually acceptable or in need of adjustment. Unforeseen matters and special projects, not calculated for in the fixed fee, are charged separately on an hourly basis or at an additional one-off rate.
A number of multi-family offices also apply a fixed minimum charge per family, regardless of the work performed.
Costs of a family office - percentage
Family office fees can also be charged as a percentage of the amount of assets under management or value of assets under administration. This model is quite common. Normally, the more substantial the amount of assets, the lower the percentage applied.
Often a minimum fee is charged, according to a commonly applied model, regardless of the percentage used to compensate the family office for its services.
In all three models, charges for external expertise are added to the costs for services provided by the multi-family office. When selecting a family office in Switzerland you should, therefore, determine whether services such as wealth planning, family governance, tax advice and philanthropy are offered in-house and if they are included in the fee, or whether a network of external specialists is used. If external specialists are used regularly, costs can increase considerably.
Because a multi-family office has, in most cases, close relations with a large number of private banks – they book the assets of several clients with the same bank – they are in a far better position to negotiate lower banking fees in comparison to your current banking arrangements. So, using the services of a multi-family office may turn out to be considerably less expensive than expected.
However, you should also be aware that it generally does not make sense - from a financial point of view - to use a multi-family office if your overall global wealth is under twenty million US dollars. As with wine, multi-family offices fall within a wide range in terms of price, size, taste and quality. Some are reasonably priced and of excellent quality while others are overpriced and do not deliver according to expectations.
Although the decision as to which family office to use should not be based merely on fees charged, it is definitely an important aspect to take into account. But ultimately it is most important that you can put your mind at rest in the knowledge that competent and trustworthy professionals are managing your wealth.
Our advisory services
FOSS Family Office Advisory is one of an exclusive group of independent advisors with a deep inside knowledge of the international single- and multi-family office environment. Please do not hesitate to contact us to discuss the costs of multi-family office services. We look forward to helping you find the ideal multi-family office in Switzerland, or abroad, with the financial model that matches your needs and expectations.
Should you have any other questions regarding the costs of wealth management in Switzerland, we are more than happy to discuss them with you.