Selecting an outsourced CIO for a billionaire family office
Built on Chapter 17 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
Select an outsourced CIO by testing the people and process proposed for the family's actual assignment. A provider can have an excellent reputation and still lack experience with the exposures that dominate a billionaire family's balance sheet. Begin with the required work and ask for evidence of competence.
Chapter 17 recommends checking relevant experience and references before a long-term engagement. It also warns against assuming general investment experience equals an understanding of wealthy families. The selection process should examine that distinction directly.
Give candidates the same assignment
Prepare an appropriately protected outline of the assets, entities, and questions the family needs addressed. Explain which investments stay with internal teams. Ask candidates what they would cover and what additional information they require.
Use the same outline for each candidate. Otherwise, a broad proposal can appear more capable simply because its author assumed a different assignment. Record differences in interpretation and resolve them before comparing fees.
Ask for a proposed service calendar and sample outputs. The family needs to understand how the promise becomes recurring work. Demonstrations should use suitably protected or illustrative material, with no expectation that another client's private records will be shared.
Meet the people who will do the work
Identify the lead professional and supporting staff. Ask who prepares recommendations, attends meetings, and handles an exception. Distinguish permanent assignments from access to a specialist who may be shared across many clients.
Discuss workload and absence coverage. The office should know how the provider maintains continuity and how it replaces a departing professional. Ask what information is kept in shared records so that service does not depend entirely on one person's memory.
When evaluating prospective partners, I encourage people to examine character with more than a favorable first impression. I discuss consistency, commitment, and the ability to listen as conduct that deserves examination. A confident presentation is one piece of evidence.
For CIO selection, I would test listening by changing an assumption in the case discussion. Does the candidate revise its recommendation, ask for the missing fact, or continue presenting the original answer? The family learns something about the proposed working relationship from that response.
Ask references about delivery
With appropriate permissions, speak with references whose experience is relevant to the assignment. Ask what the provider actually delivered and where the client needed additional help. Respect confidentiality and keep the questions about conduct and service.
A useful reference discussion includes how the firm handled an error or a change in personnel. Ask whether communication stayed clear and whether unresolved matters received a named owner. General praise will not answer those questions.
Check the candidate's claims through the relevant professional diligence process. The family should not assume that a personal introduction has completed the verification required for the engagement. Record what was checked and what remains unresolved.
Examine retained asset coordination
Ask how the provider incorporates operating companies, property, and other holdings outside its mandate. It may not be responsible for managing them, but their cash needs and exposures can affect its recommendations.
Request an explanation of the information it needs from the internal team. Identify how it handles stale valuations or missing records. The family should know when a report reflects incomplete inputs and what action is required to improve it.
Give the candidate a change to consider, such as a delayed private distribution. Compare the questions candidates ask before offering a response. A fast answer based on invented certainty is less useful than a clear account of what must be established.
Make selection conditional on the engagement terms
A preferred candidate still needs an agreed scope and appropriate documents. Have the relevant professionals review authority, compensation, information handling, and continuity arrangements. Resolve material gaps before allowing the relationship to expand through informal instructions.
Name an internal owner for implementation. That person should maintain the decision record and make sure promised setup tasks are completed. The founder should not have to reconstruct the selection discussion when the first disagreement arrives.
Retain the reasons for choosing the firm. Those reasons become the starting point for the service review and help the family assess whether the original expectations remain appropriate.
Questions and answers
Should every firm receive unrestricted records during selection? No. Provide the information appropriate to the evaluation through a process agreed with the responsible specialists.
What is the strongest reference question? Ask about specific work relevant to the proposed mandate and how the provider handled a problem.
Related
This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.