The Family Office Sherpa Family Office Operations - Understanding & Managing Your Total Costs
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May 26, 2025 Uncover the hidden costs of running a family office, with insights on average annual expenses hitting $3.2 million. Explore the balance between insourcing and outsourcing to manage rising costs while leveraging technology like AI for efficiency. Discover smart strategies for cost management, focusing on fee benchmarks and vendor relationships. This engaging discussion emphasizes the importance of assessing expenses against the value delivered, offering valuable guidance for optimized financial decision-making.
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Family Office Cost Benchmarks
- The average yearly cost to run a family office managing $250M is about $3.2 million or 1.3% of assets under management.
- Larger offices pay less percentage-wise, and costs vary significantly with complexity and services.
Complexity Drives Costs and Returns
- A family office's investment portfolio complexity drives costs upward through oversight, reporting, and transaction fees.
- Complex portfolios usually bring higher expected returns but require more time and advanced systems, increasing expenses.
More Members, More Complexity
- Serving more family members increases reporting complexity, communication overhead, and staff needs nonlinearly.
- Larger families often require additional education and engagement efforts, escalating operational expenses.