Choosing a consultant or a multi-family office
Built on Chapter 7 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
A billionaire family should choose between a consultant and a multi-family office by the responsibility it wants to delegate. A consultant may help design the arrangement or advise on a particular decision. A multi-family office may provide continuing services. The labels alone do not tell the family who will do tomorrow's work.
Chapter 7 describes families hiring outside investment help where their own expertise is limited. The useful question is which gap the provider will fill. A family that knows its operating businesses well may still need assistance with liquid investments, reporting, or administration.
Write the assignment before choosing the model
Describe the work in ordinary terms. The family may need a coordinated assessment of its current arrangements, or it may need a team that maintains the records each month. Those assignments can require different organizations and different engagement terms.
List the responsibilities that will stay with the family. If no one inside the household or office will coordinate the providers, determine whether the proposed engagement actually includes that role. Advice about whom to hire does not automatically include managing the people after they are hired.
Richard's concern about the service label
In my recorded teaching, I describe confusion created when the family-office label is used without the coordinated work a client expects. I mention promised tax planning that does not occur and departments that do not communicate. That recorded point supports examining the service behind the name.
I would ask either kind of provider to walk through an actual issue involving counsel and an accountant. Who calls the meeting, who records the decision, and who follows up? A useful answer identifies people and responsibilities. It does not depend on whether the firm calls itself a consultant, private office, or multi-family office.
Ask what authority is being delegated
Determine whether the provider is supplying recommendations or making decisions under an agreed mandate. Have qualified counsel assess the proposed authority and its limits. The founder should understand which actions can occur without another family instruction.
Set a process for changing that arrangement. A family may begin with advice and later want more delegation. Another may bring work in house after hiring an executive. Record how responsibilities transfer and what information the outgoing provider must supply.
Find the work outside the proposal
An engagement may cover investments while leaving personal administration and entity records to others. Another may coordinate those functions but exclude specialist legal or tax work. Neither scope is automatically wrong. The family needs to identify what remains unassigned.
Ask how the provider works with the family's existing advisors. Some relationships can continue; others may need a different allocation of duties. Confirm any proposed change with the relevant professionals before assuming a familiar provider is no longer responsible.
Compare the incentives and billing
Ask how the firm is paid and whether it receives compensation related to products, referrals, or other services. Have the firm explain relevant conflicts and how they are handled. Keep those disclosures with the engagement record.
Compare total responsibility alongside total expected cost. An apparently smaller fee may leave the founder performing coordination that another proposal includes. A larger proposal may include services the family does not need. Decide which tasks the family is willing and able to retain.
Try a bounded assignment when it fits
Where appropriate, define an initial piece of work with a clear output. An assessment of current provider responsibilities can show how the firm asks questions and documents open items. The family can evaluate the work before assigning broader responsibility.
The initial assignment should still have proper terms and confidentiality protections. Avoid giving a prospective provider unrestricted access merely because the project is described as preliminary. Share the information necessary for the agreed purpose and assess the result against that purpose.
Plan how the relationship can end
Ask how the family obtains its records and transfers the work if it changes direction. Identify which systems and files belong to the provider and what the office can retain or export. Have the appropriate professionals review the terms.
Then choose the arrangement whose responsibilities the family understands. The decision record should name the work delegated, the person checking delivery, and the work the family still owns. That record is useful when the first service question arrives after the introductory meetings are over.
What to take from this
- Choose around the work and authority being delegated.
- Identify the responsibilities outside each proposal.
- Understand incentives and transfer terms before engagement.
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 consultant always provide ongoing operations? Only if the engagement includes those responsibilities.
Does a multi-family-office label guarantee coordination? Confirm the actual people, scope, and handoffs behind the label.