The family office operating budget, line by line
Built on Chapter 3 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
Every family office needs a budget for itself. Without one, costs creep up quietly, and the family loses sight of what the office really costs compared to the value it adds. I avoid quoting dollar ranges here, because costs vary widely by city and model. What matters is knowing every line and who owns it.
The case for a written budget
A family office is a business that serves one client. Like any business, it should know its costs, plan for them, and review them against results. A clear budget also helps the family decide whether to keep work in house or outsource it, and whether the office model still fits.
The main lines
People. Salaries, bonuses, long-term incentives and benefits for office staff. This is usually the largest line by far.
Outside advisors. Fees for attorneys and accountants, plus investment consultants. Budget for routine work and set aside a reserve for unexpected legal matters.
Investment costs. Fees paid to managers and custodians, along with deal costs for direct investments such as legal and diligence fees. Many offices track these separately from operating costs.
Technology. Reporting software, document vaults, bill pay systems and cybersecurity tools, plus IT support.
Office space. Rent and utilities, or a share of space inside the family business.
Insurance. Directors and officers cover for the office and its leaders, plus cyber and liability policies.
Travel and events. Visits to managers and deals, along with family meetings and industry events.
Education. Training for staff and programs for the next generation.
Compliance. Regulatory filings and legal opinions, plus any outside compliance support.
Separating office costs from family costs
The office budget should cover running the office. Household costs and personal spending belong in separate family budgets, even if the office pays them. Mixing the two hides the true cost of the office and makes fair comparisons impossible.
Charging branches fairly
In multi-branch families, costs can be shared equally, by wealth, or by use of services. Agree on a method in writing. Review it when the family changes.
How to build the first budget
Start with services. List every service the office provides, then estimate the people and tools each requires.
Get quotes. Price outside advisors and systems before committing.
Add a reserve. Unexpected legal or tax work is common in the early years.
Get family approval. The family, or its board, should sign off on the budget each year.
Reviewing the budget
Compare actual spending to budget every quarter. Once a year, look at the bigger question: is the office delivering value for what it costs? Value includes better returns and saved fees, plus avoided mistakes and the family's peace of mind.
Planning for growth
Budgets should look ahead. If the family plans to start direct investing, add a deal team or bring the next generation into the office, those costs belong in a three-year plan, not a surprise mid-year request. A simple forward view helps the family see how the office will grow and when a new hire or system will be needed. It also makes it easier to judge whether a lean office should become a full one.
Common mistakes
- Underpaying the lead executive to save money.
- Forgetting deal costs when planning direct investing.
- Leaving technology and security underfunded.
- Letting family spending blur into office costs.
- Never revisiting the budget after the first year.
What to take from this
- Know every line of the office budget and who owns it.
- Keep office costs separate from family spending.
- Agree in writing how branches share costs.
- Review quarterly and judge value yearly.
This page is general information, not legal, tax, or accounting advice. Speak with a qualified accountant about budgeting for your family office.
Questions and answers
What is the largest cost in a family office? Usually people, meaning pay and benefits.
Should household costs be in the office budget? No. Keep them in separate family budgets.
How should branches share costs? Equally, by wealth, or by use, as long as the rule is written and agreed.
How often should the budget be reviewed? Quarterly against actuals, and yearly for overall value.