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Family Offices Lightening Costs via Outsourcing

While family offices may wish to retain as much control as possible, balancing costs remains critical and outsourcing has become commonplace in the industry. 

Rapid wealth creation in Asia continues to drive demand for the ultra-rich to establish single family offices (SFO). In Singapore, for example, the local regulator said that the number of SFOs that were rewarded tax incentives reached 1,100 at the end of 2022, up from 700 in 2021. According to data analytics firm Handshakes, another 182 family offices were formed in the city-state from January to April 24 this year.

Despite the allure of operational control over the management of family wealth, the costs of doing so can be quite significant. According to Kevin Teng, WRISE Wealth Management Singapore CEO, SFOs should expect annual expenses equivalent to 1-2 percent of the total assets under management (AUM).

«[This] excludes the cost of third-party professional services such as legal, accounting, tax and investment management fees,» Teng said in a conversation with finews.asia.

Cost Control

Certain costs will have to be shouldered in full, such as CEO salaries which are higher in Asia ($117,000 to $378,000) compared to other regions like the Americas ($198,000 to $264,000) and Europe ($146,000 to $200,000), according to a KPMG report. But in other areas, outsourcing to providers like tech platforms is a viable option.

«A balanced mix of in-house hiring and outsourcing can help an SFO to better manage its expenses, given its business objectives,» Teng added.

MFO Option

While wealthy families can begin considering setting up a SFO with AUM of $100 million or above, those concerned about costs can also opt to combine forces with others via a multi-family office. Nonetheless, there are also non-economic factors that families are increasingly prioritizing such as investment approach, asset class, philanthropy, legacy planning or legal and compliance.

«Currently, we are seeing more interest in single family offices over multi-family offices,» Julius Baer head wealth planning and family office services Singapore Kelvin Tay told finews.asia earlier this year.

Source: Finews