A vendor due diligence checklist for family offices
Built on Chapter 7 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
A vendor can have a polished proposal and still be the wrong firm to hold the family's information or perform a critical task. Before engagement, establish what the provider actually does, who does it, and what evidence supports its claims. Match the depth of checking to the responsibility being assigned.
Chapter 7 describes the outside firms a family may use. The selection decision should also account for the access each firm receives. A provider with no investment authority can still create a serious operational problem if it controls the only usable copy of important records.
Richard's warning about the evidence package
To explain why underlying evidence needs checking, I warn that a diligence room can contain false material and explain why people should visit assets and meet counterparties in person where appropriate. That is my recorded point about testing the underlying reality.
For a service provider, I would apply it by checking beyond the presentation. Meet the people responsible for delivery. Ask for evidence of the claimed capability and verify important facts through appropriate independent sources. An orderly folder of documents can help the examination, but the appearance of the folder does not establish that the claims are true.
Confirm who the provider is
Identify the legal entity entering the engagement and the people authorized to speak for it. Have the office's qualified team assess any registration, credential, or professional standing relevant to the assignment. Record where the confirmation came from.
Be careful when a proposal refers to an affiliated firm's experience. Ask which organization performed the work and whether the people involved will be available to this family. A group name does not explain the resources committed to the actual engagement.
Examine the proposed team
Meet the person who will handle the routine work and the person who supervises it. Ask how they manage workload and what happens when a key employee leaves. The family should know whether a claimed capability sits with an established team or one individual.
Use an actual task from the proposed scope to discuss the workflow. Ask what information the provider needs, what it produces, and how it handles a missing input. A clear explanation of ordinary work often reveals more than a broad account of exceptional clients.
Check references for the assigned function
With appropriate permission, speak to references who can discuss the kind of work the family is buying. Ask about communication and follow-through. Give the reference a chance to distinguish what they personally observed from what they heard about the firm.
Respect confidentiality. A provider should not reveal another family's private affairs to impress a prospect. Evaluate whether it can explain its process without exposing information it would be expected to protect for this family.
Understand access and subcontracting
List the records and systems the provider needs. Ask which people can access them and whether another firm performs any part of the work. Have the relevant technology and legal professionals assess the proposed protections and terms.
An outside provider's answer should be specific enough to support a decision. If it cannot explain who receives the data, keep the question open. A friendly relationship with the lead partner does not identify everyone involved in processing the family's records.
Ask about service interruption
Have the provider describe how it continues essential work if the ordinary contact or system is unavailable. Ask what the office must do to use that arrangement. Keep the relevant instructions where the backup employee can find them.
Consider what the family would need to move the work elsewhere. Ask which files are available, in what form, and how access is transferred. Those questions help assess dependency before the office commits to a relationship it cannot readily replace.
Record the unresolved points
A diligence file should show the evidence considered and the questions still unanswered. Identify who is authorized to accept a remaining limitation. Avoid treating an unchecked box as a quiet approval simply because a desired start date is approaching.
The final selection record should connect the provider's verified capabilities to the assigned work. Keep supporting information available for the first service review. The office can then check delivery against what it actually assessed, instead of trying to reconstruct the sales discussion from memory.
What to take from this
- Verify the provider and the people delivering the work.
- Look beyond the presentation and document package.
- Assess access, continuity, and the ability to transfer records.
This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.
Questions and answers
Does a complete diligence folder prove a vendor is suitable? The office must verify the relevant claims and assess them against the assigned responsibility.
Should every provider receive the same depth of checks? Use checks suited to the function, access, and consequences of failure.