Family offices operating costs are on the rise globally, approaching the 1 percent mark as offices expand staff, according to a new report.
The report, produced by Campden Wealth Research in partnership with UBS, looked at 224 family offices in 37 different countries with average assets under management of $806 million.
It concluded that the costs of running family offices has increased from about .92 percent of AUM to .99 percent, and that costs remain on an upward trend.
Investment activities accounted for the largest chunk of costs, with about 20 percent of operating costs representing performance fees paid to outside money managers, according to the report.
“The higher costs are both an opportunity and a threat for advisors and suppliers to family offices,” Stuart Rutherford, director of research at Campden Wealth, said in a prepared statement. “To mitigate the threat of losing existing business, advisors need to concentrate on delivering real value as well as demonstrating the value delivered.”
The study found that staff additions and restructurings were the top reason for the increase in costs, leading to a administrative costs alone going from 15 basis points to 24.
Of the $8 million spent annually by the average family office studied, about $1.5 million is spent on legal and tax services, most of it outsourced. Investment activities account for $3.3 million of the costs and family professional services, particularly family governance and succession planning services, make up $1.2 million of the total, according to the report.
