In our 10th episode of the Family Office Vlog Series, Asena CEO Peter Harper comments on the relevancy of fee structures in both single-family and multi-family offices.
Peter Harper: Hey guys. Peter Harper, Managing Director and CEO of the Asena family office. For those of you who are not familiar with business, we advise foreign family offices and private clients on U.S. direct investments and mergers and acquisitions.
Peter Harper: So, today is the next video in our Family Office Series, and we wanted to touch on family office fee structures. But, before we do that, I think it’s, you know, useful to kind of recap on, you know, what a family office is and why there is such a massive uptick in family offices being created today.
Peter Harper: So, family offices are an, you know, organizational structure established by families of significant wealth to support, you know, their economic and private endeavors, right? So, you know, think about when, you know, families had a massive liquidity event or huge inheritance event, extraordinary amounts of capital, and there is a need to stand up some form of organizational infrastructure to manage the capital and manage non-income producing assets. So, that means that might mean establishing a C-Suite so the CEO, chief investment officer (COO), and CFO to manage investments and non-investment costs. So, private assets like houses, cars, boats, planes, and then all of the, you know, infrastructure and employee issues that are associated with that. A multi-family office is that on a fractional basis. So, either a family doesn’t have the means – doesn’t have the wealth to justify a single family office, or they just don’t want the complexity – they don’t want the operational complexity of having to manage, you know, a team at the level that you have to run your own family office.
Peter Harper: So, you know, the fee structure we’re going to talk about is largely, probably more relevant, to a multi-family office setting because in a single-family office, a lot of this stuff might be done in-house by people that, you know, employees that are on, you know, real P&L costs, right? Just to put it into context, you know, for a single-family office normally to run, you know, in-house overhead, you’re looking at sort of 7 to 10 million per annum to run that for most minimum, for most family offices.
Peter Harper: So, you know, the fractional support is the right way to go for most of the market, right, and how does that charge? The most customary is, effectively, a fee based on assets under management. So, a percentage of the funds under management or assets under management looked after by the multi-family office that will be sufficient to cover all services within the business. So, tax accounting, wealth management, estate planning, and any other ancillary services that might be relevant to the particular client’s needs.
Peter Harper: Some family offices of scale might still prefer, rather than having a fund model, to have some sort of fixed fee arrangement or hourly-based arrangement like that you would in any other sort of professional services model, but that’s not as customary because the biggest thing that you want is when you think about the multi-family experience, you want to feel – even though these people are external to you – you want to feel like they really are part of your internal team, right, and in order to do that you need to make sure that you’ve got the sort of, you’ve got less variability around your overhead and fixed costs to make sure the multi-family office can support capable people to support your needs. Thank you.
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