Calculating whether a family office fee saving is real

Built on Chapter 3 of Centimillionaire Strategies by Richard C. Wilson.

A claimed fee saving should survive a comparison of the old and new arrangements. A lower invoice may reflect less service, a smaller asset base, or work moved into the family office. The owners need the net effect before treating the change as a contribution to the office budget.

Chapter 3 suggests examining fees as part of the value a family receives from organizing its wealth. I would calculate savings from the actual engagements and records. Historical estimates from the book should not be used as a forecast for a particular family.

Establish the previous basis

Identify what the family paid and what that payment covered. Use the approved engagement and relevant invoices. If the old fee depended on assets or performance, explain the calculation so the comparison can separate price changes from changes in the underlying inputs.

Avoid using an unusually high charge as the normal baseline without explanation. The old arrangement may have included a one-time project. The family should understand whether the comparison concerns recurring cost or a specific event.

Describe what changed

State the new service and pricing arrangement. Identify any work removed or added. A comparison becomes useful when the office can explain how the responsibilities differ and why the new arrangement serves the family's needs.

Have the relevant professionals confirm material changes in duties or scope. The office should not infer that two engagements provide equivalent protection simply because their service descriptions sound similar. The actual terms may differ.

Include replacement work

My comments on coordination warn against assuming a family-office label means the underlying work is being done. I would apply that caution to a saving. Confirm who now performs the tasks that disappeared from the external invoice.

Include additional employee time or outside support required by the change. The family may deliberately prefer that allocation of work, but it should understand the cost. A charge moved elsewhere is different from a task performed more economically.

Count transition costs

Identify the work required to change providers or systems. That can include transferring records and maintaining continuity of an obligation during the change. Have the responsible professionals assess any material legal or financial consequences.

Separate one-time costs from ongoing costs. The family needs both to understand the decision. A recurring saving can be valuable while still requiring an initial investment, and the office should explain when it expects the economic benefit to appear.

Isolate the negotiated improvement

If the asset base declined, calculate how much of the lower charge would have occurred under the old terms. If the service scope changed, explain the effect separately. That helps the family see what the office actually achieved through negotiation or redesign.

Use appropriate estimates where exact allocation is unavailable, with the uncertainty stated. A careful estimate can support a decision. A precise total built from unexplained assumptions can create a misleading impression of certainty.

Examine service after the change

Ask whether the new arrangement delivers the work the family expected. A saving that leaves a recurring obligation unassigned may create a different cost later. The responsible employee should identify missing work early and bring it to the authorized decision maker.

Include the provider's perspective where clarification is needed. The engagement may be performing exactly as agreed while the family's expectations exceed the scope. Resolve that distinction before describing the relationship as a service failure.

Report the result plainly

Show the old basis, the new basis, transition costs, and additional recurring work. Distinguish confirmed savings from expected future savings. Keep the supporting records available to the people responsible for checking the claim.

The family can then decide how much of the result to rely on in its budget. The calculation should remain understandable to a successor who did not negotiate the change. That is a stronger contribution than a large claimed saving the office cannot reproduce.

Questions and answers

Can the office count all lower invoices as savings? Explain why the invoices declined and whether the work changed. The family needs the net effect attributable to the new arrangement.

Should internal staff time be included? Include material replacement work in the assessment. The family should understand the resources required to maintain the service after the change.

This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.