New Family Offices Can Teach Old Ones a Data Trick

Offices established in recent years are outsourcing more positions and technology, according to RSM.


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New family offices can learn a lot from older ones that have been around for decades. But the new offices also have at least one lesson of their own to share: start outsourcing more.

In a survey of 100 single family offices by accounting and consulting firm RSM, 97 percent said they relied on some kind of external service provider during the past 12 months. The overwhelming majority is not a surprising result. Family offices have an average of only 14.4 employees so most lack the resources and personnel to create all the systems and software they desire on their own. In the same RSM survey, 62 percent of single family offices said that having best-in-class technology is a challenge to develop and maintain in-house.

To address the wants and needs of their employers, new single family offices are outsourcing more of their functions than older ones. Seventy percent of offices established since 2015 said outsourcing parts or all of certain responsibilities would help focus the team and make it more valuable compared to 33 percent established before 1990. As a result, newer family offices spend slightly more of their budgets on outsourced services — an average of 44 percent compared to 32 percent at offices established between 1990 and 2014.

One explanation could be that newer family offices tend to be smaller. Outsourcing certain functions of a family office is becoming more common but the smaller the office, the more likely it is to do it. RSM segmented its survey respondents into three sizes: small offices with $150 million to $1 billion in assets, midsize offices with $1 billion to $4.9 billion, and large offices with $5 billion or more. Most of the small offices (58 percent) said outsourcing was a way to deliver more value while 43 percent of midsize and 28 percent of large offices said the same.

The majority of small family offices (80 percent) also believe outsourcing is important to mitigate the risks of estate, legal, and tax issues. Only 62 percent of midsize offices and 32 percent of large ones said the same.


“Data is an increasingly critical area because you don’t want data breaches, but you also want to own your data as a family office. And that way you’re not dependent on any provider to feed you data. You would be your own repository of data,” Tony Wood, principal and Family Office leader at RSM, told Institutional Investor.

Family offices are also having an especially tough time recruiting IT professionals. The RSM survey revealed that 70 percent of midsize offices were having trouble attracting IT talent, which is problematic given how concerned they are about related issues.

Family offices are especially worried about cybersecurity and data breaches. Eighty-three percent of respondents said those were their biggest operational risk. One family office told RSM that “data theft is the biggest challenge of our time.” But they aren’t spending much of their operating budgets to prevent those things from happening.

The bigger the family office, the more they are concerned about cybersecurity. Survey results show that the larger the FO, the greater the concern. While 65 percent of smaller offices said it was their greatest risk, 83 percent of midsize offices and 89 percent of large ones said the same.

RSM surveyed family offices in the U.S. and Canada and they varied across size, generations, and operating business sector, as well as years in operation and expenses. The firm works with more than 600 family offices in the U.S. and Canada and more than 1,000 globally.