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Growing pains? How to scale up smartly at the family office

Expanding a practice can be expensive. Consider the costs and benefits, but do some soul-searching, too

In what could be a problem or an opportunity, sometimes a family office needs to scale up operations.

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Perhaps the needs of the family have increased, and it’s difficult to deliver personalized service 24/7. For multi-family offices, perhaps the number of clients has surged. Or the office has moved toward a new area of specialization, necessitating more staff.

Knowing when to grow a practice comes down to being attuned to the needs of clients, says Thane Stenner, senior portfolio manager and senior wealth advisor, Stenner Wealth Partners+ of CG Wealth Management in Vancouver.

He suggests conducting regular client reviews in which families discuss what’s working and what isn’t. “Are they happy with the services that they’re getting?” he says. “Or is there anything else they’d like to see that should be added to the service platform? It really comes down to that.”

A family office also has to weigh whether adding services should involve hiring somebody new or outsourcing tasks to specialists for a fraction of the cost, says Stenner.

Finally, a family office has to look at the budget and decide whether adding new services and personnel will yield more business, or just cost more, says Chris Gandhu, partner and family office leader in KPMG Canada’s Calgary office.

“There needs to be a needs/cost-benefit analysis,” he says. “Before you go down that road, I think you do need to spend a bit of time fully fleshing out your needs and the various ways that that need can be fulfilled.”

Scaling up can be an expensive process, says Gandhu. “There’s the whole HR process of finding the right talent, onboarding them, training them. And then, of course, there’s the compensation,” he says. There may also be a need to access technology, licences and premises.

In addition to costs, scaling up can bring growing pains with staff and clients, says Gandhu.

“With a small team, you have trust and a certain dynamic in play,” he says. But changing and growing and scaling too rapidly can impact that dynamic. Disruption to office culture can profoundly affect how clients are served, he says, and “that’s something to be aware of.”

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As a result, family offices need to conduct a careful analysis and do some soul searching before expanding operations, Gandhu says.  

Here are some signs a family office might need to scale up.

Increasing administrative issues

In cases where balls are being dropped and clients’ needs aren’t being met in a timely way, it might be time to add staff or augment a technological platform, such as an AI-driven administration system.

“I’d say if they’re having repeated pain points—some type of a bottleneck—they should ask: ‘Should we look internally and see if we need to scale up and add additional resources?’” says Gandhu.

Or perhaps the family office is handling compliance in-house, “taking the various investment statements and reconciling them, doing the bookkeeping and coordinating all the moving pieces, working with internal and external teams, says Gandhu. “That seems to be a major pain point.”

Specialization needed

As families grow older, needs can change, requiring different areas of expertise from the family office.

Or a family office may be expanding its compliance, risk management, legal, tax and estate planning or IT and cybersecurity areas, says Patricia Saputo, co-founder, executive chairperson of the board and strategic advisor with Crysalia in Montreal. An expansion of this kind might require specialized resources.

Expectations are increasing

Clients’ expectations might be rising and the margin of error is lower, says Stenner. “They expect more proactivity and way more sophistication.” Family office advisors have to evolve their practices accordingly, improving accuracy, crafting better reports and being extra attentive.

Gandhu agrees, saying family offices need to always know “the 20 things that clients have articulated” to ensure they’re meeting their needs holistically. If the current advisor team can’t achieve this, the practice might require a larger staff.

The end result of scaling up should be increased operational efficiency, says Saputo.

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More clients equals more work

But multi-family offices also need to troubleshoot, especially if they plan to scale up quickly, says Stenner. “If you try to onboard more than eight large key clients a year, you’re going to have onboarding issues.”

Offices who grow too quickly might experience congestion, lower response times and reduced productivity, he says.

As for knowing when you’ve expanded too much, Stenner says it comes down to carefully watching client behaviours. “If the demand for services is not there, and if you’re losing clients or not gaining new clients, those are indicators you’re not doing a good enough job.”

He says such a situation necessitates taking a closer look at processes and staff to ensure their sophistication matches the levels of the clients. And if clients are falling off, it might be time to cut staff, reposition them and, ultimately, scale back.

“We’re in a competitive business; you’re either adding value or you’re losing it,” says Stenner.

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