The annual family office vendor review
Built on Chapter 7 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
Review a vendor against the work the family currently needs and the service actually delivered. An engagement can continue long after the reason for hiring the firm has changed. A billionaire family should know which relationships remain useful and which have accumulated duties no one formally assigned.
Chapter 7 recommends reevaluating outside relationships. I would make that a practical review of scope, delivery, and open work. The review should end with a decision about the engagement or an assignment to resolve a specific question. A cordial conversation alone does not supply either.
Richard's reason to check again
In recorded event remarks, I remind investors to conduct their own diligence even when a person has spoken on stage or says they have known us for a long time. I add that things change. The point is that familiarity does not eliminate the need to assess the present facts.
I would apply that reasoning to a long-standing provider. Confirm who now does the work, whether the scope still fits, and what has changed since the family selected the firm. This is an operating application of my recorded point, not an allegation about the provider or its employees.
Start with the engagement record
Bring the current scope and fee terms to the review. Ask the office employee managing the relationship to list the outputs received and unresolved items. Compare those facts with what the provider agreed to do.
Where the family has requested work outside the original engagement, identify how it was authorized and billed. Some expanded assignments may deserve a revised agreement. Others may be temporary projects. Make the distinction visible so the next review has a reliable description of the relationship.
Ask the people using the work
The founder may value the relationship while the accounting employee struggles to obtain consistent data. An investment executive may receive good advice but leave administrative follow-up to someone else. Collect the experience of the people affected by the provider's output.
Keep their observations specific. An unanswered request or a report requiring correction is useful evidence. General frustration is a reason to investigate, but the provider needs a clear issue to address. Let it explain the circumstances and identify any information it has been waiting for from the office.
Review what the family has changed
A new entity or a different investment activity can create work the original engagement did not contemplate. Ask qualified professionals to assess the resulting requirements. The vendor review should identify the changed facts and assign the assessment, rather than attempt to settle specialist questions in passing.
If a provider is no longer suited to the function, consider whether a narrower scope or another specialist would address the gap. The family does not have to replace a useful firm merely because it needs additional expertise somewhere else.
Look at cost with the scope beside it
Review invoices against agreed terms and authorized additional work. Ask about material changes in effort. An increase may reflect expanded responsibilities or unresolved record problems. The family should understand the cause before negotiating the next arrangement.
Identify duplicated work across providers. Confirm whether it is a deliberate independent check or an accidental overlap. If responsibilities change, tell both firms and update the office's vendor map. A private agreement with one provider will not automatically change the other firm's process.
Confirm access and continuity
Ask who at the firm can see the family's information and whether the delivery team or subcontracting arrangement has changed. Have the appropriate specialists assess changes affecting data or authority. Review the contact and backup procedures used for an urgent problem.
Check that the office can obtain its own records in a usable form. An export that worked at the start of the engagement may not cover a new service or system. Identify the gap before a provider change becomes necessary.
End with a specific instruction
The review may confirm the existing scope, require a service correction, or lead to a transfer plan. Record the decision and who is authorized to implement it. Give each unresolved item an owner and a condition for closure.
At the next ordinary service meeting, begin with those assignments. The annual review becomes useful when it changes an unclear responsibility or resolves a recurring problem, and the office can point to the completed action.
What to take from this
- Compare actual delivery with the current engagement.
- Check changes in family needs and provider staff.
- Assign each service correction and update the vendor map.
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 long relationship remove the need for review? The family and provider can change; verify that the current arrangement still fits.
Must every problem lead to replacement? A scope change or defined correction may address the issue, depending on the facts.