Designing fees for a billionaire family multi-family office business
Built on Chapter 16 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
A fee should match work the office can describe and deliver. Before choosing how to charge outside families, the owners need to understand the service cost and the responsibilities the engagement creates. An attractive price cannot rescue a scope that remains unclear.
Chapter 16 discusses core services and additional assignments. I would preserve that distinction while setting aside the book's historical fee figures. A billionaire family's proposed business should price its own offering using its actual people and expected delivery costs.
Explain the reason for the fee
In my discussions of investment terms, I explain that investors consider the full context of a relationship, including trust and process. A return figure on paper does not answer those questions. The surrounding arrangement affects whether someone wants to participate.
I would apply that observation to service pricing. A prospective client needs to understand what the office takes responsibility for and how the relationship will operate. A low quoted rate is difficult to evaluate when the actual service remains undefined.
Begin with the recurring assignment
List the work performed in an ordinary service cycle. Include the collection of information and the handling of questions after a report reaches the client. Employees often remember the report itself and overlook the effort required to make its inputs usable.
Describe what the client must supply. Late or incomplete information can increase service effort substantially. An engagement should explain how the office handles that situation and how changes in scope are agreed. Staff should be able to raise the issue without inventing a new commercial arrangement during an urgent request.
Then identify work that occurs irregularly. An acquisition or a major reorganization can demand a different team from the one delivering routine service. Decide whether such assignments are included or separately agreed, with appropriate professional input into the terms.
Compare methods using the same scope
A fixed fee makes the price easy to see, but the office still needs to define the assumptions behind it. An asset-related fee needs a clear description of the assets included and the valuation method used. Either approach can create questions if the office's work and the charging basis move apart.
Time-based work needs its own controls. A client should understand who can authorize a larger assignment and how progress will be communicated. Owners also need to know whether the team is spending expensive specialist time on tasks another employee could perform.
Use a representative household to compare the methods. Keep the promised service constant so the comparison concerns pricing. If one option quietly removes half the work, the apparent difference tells the family little about which approach is suitable.
Disclose other economic interests
Ask management to identify compensation connected to the relationship beyond the quoted office fee. Have appropriate professionals examine how those interests should be handled and disclosed. Owners need to see the complete economic arrangement before approving it.
The same applies to services delivered through related businesses. A shared owner does not make the total cost obvious to the client. Explain which entity performs each assignment and who pays it. Clear disclosure also helps employees avoid describing an affiliated service as if it were independent.
Do not assume that a client who knows the founder understands these arrangements. Friendship can make commercial questions feel awkward. Written terms give both parties a way to discuss the economics without relying on assumptions about what the other person already knows.
Measure delivery after onboarding
Compare actual effort with the assumptions used to set the fee. Identify which services consume the most senior time and whether the client receives the promised result. Review exceptions while employees can still explain why the work expanded.
If pricing proves inadequate, follow the engagement's process for discussing changes. A surprise charge after the work is complete can damage a relationship even when the underlying effort was real. Management should identify the problem early enough for the client to make an informed choice.
I would have the owners approve both the charging method and the authority to make exceptions. Otherwise, a series of friendly discounts can change the business model without a deliberate decision. The service company needs prices it can explain and commitments it can sustain.
Questions and answers
Is an asset-related fee always appropriate? No charging method fits every scope. Examine the relationship between the price and the work, with clear valuation and engagement terms.
Should extra work always receive a separate charge? The answer should follow the agreed scope and approval process. Make the distinction clear before accepting the assignment.
This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.