What family office vendor contracts need to explain
Built on Chapter 7 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
The office should be able to read an engagement and identify the work, the responsible firm, and the conditions for changing or ending the arrangement. A billionaire family may have strong relationships with its providers, but the employees administering those relationships still need usable instructions.
Chapter 7 describes the responsibilities that arrive with outside services. This page focuses on the record of the engagement. Have qualified counsel assess the proposed terms and their legal effect. The office's job is to bring counsel the actual service expectations and identify where a proposed document leaves an operating question unanswered.
Richard's point about words in an agreement
In recorded teaching about investment protection, I discuss collateral and tell investors to involve an attorney in documenting the arrangement. I caution that merely stating something in a contract may have little effect if it is not handled properly. That is an investment example, not a legal conclusion about a vendor engagement.
I would apply the same discipline when documenting outside services. Tell counsel what the office expects to happen, then have counsel assess whether the agreement addresses it. A sentence that sounds reassuring should lead to a question about its meaning, not an assumption that the family has the intended protection.
Identify the party doing the work
A proposal may describe a group of affiliated firms while the engagement names only one entity. Ask which entity accepts the responsibility and which people will perform it. Have the provider explain any role played by an affiliate or subcontractor.
Keep the contact list connected to that explanation. When a question arises, the office needs to know where to send it and who can authorize a change. A familiar relationship manager may help with communication without having authority to revise the agreement.
Describe the output and the input
The engagement should make the service understandable to the employee receiving it. Ask what the provider delivers and what information the office must supply. Identify any assumptions about the condition of the records or the timing of requests.
A firm cannot necessarily complete the work while waiting for an essential family instruction. Record the route for that problem. The office should learn about a missing input early enough to obtain it or make an authorized decision about the consequences.
Clarify the handling of additional work
Ask how a new request becomes part of the engagement. Who estimates the effort and who at the family office can approve it? Have the appropriate professionals assess the proposed terms and keep the final process available to the staff.
A conversation with the founder can create uncertainty if the provider interprets it as authorization while the office lead understands it as an exploratory question. Give the provider an agreed route for confirming an instruction. The founder should know how the office intends to distinguish the two.
Bring access questions to the specialists
List the information and systems the provider needs to use. Ask counsel and the relevant technology professional to assess the proposed terms for confidentiality, access, and handling of records. Include any planned use of another firm.
Do not settle a technical question by adding a broad adjective to the engagement. The specialists need to understand the workflow and the information involved. Keep their unresolved questions visible until the authorized person decides how to proceed.
Discuss problems before there is one
Ask the provider how the office raises a service concern and who responds when the normal contact is unavailable. Have counsel assess the contractual process for disputes or other failures relevant to the engagement.
The operating contact should know what information to preserve if a problem occurs. A factual record of the instruction and the resulting work can help the professionals assess the issue. Avoid relying on an informal recollection when the office can retain the actual communication.
Make the ending understandable
Ask what happens to pending work and records when the engagement ends. Identify the format in which information can be provided and the responsibilities during a transfer. Have counsel review the actual conditions and any relevant limitations.
Once the agreement is signed, give the office employee administering it a plain account of the operative responsibilities. Retain the signed version and authorized changes together. The relationship should remain understandable when an employee or provider contact changes and the original negotiators are no longer available to explain what they intended.
What to take from this
- Bring real service expectations to qualified counsel.
- Keep scope changes and authorizations traceable.
- Understand records and pending work at termination.
This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.
Questions and answers
Can office staff decide whether a protection is legally effective? Qualified counsel should assess the agreement and the relevant facts.
What does the administrator need after signature? The operative agreement, authorized changes, and clear responsibility for the ongoing work.