After stints as a trader at Citadel, managing a family office, and then running her own OCIO consulting practice, Stephanie Bruckner joined F.L. Putnam last year to be its director of investment consulting. When she first meets them, most of the wealthy individuals and families she works with say they are seeking things that traditional wealth management firms can’t provide. So the families hired a few people to work for them and they created a family office. But even executives who have successfully run big corporations, and their personal employees, suddenly find themselves frustrated. “What I, honestly, usually get is literally a stack of statements and someone saying, ‘help me organize what this is, please I am lost,’” Bruckner said.

The good news is that there is a growing list of service providers to help family offices deal with the complexity and mundane mountains of paperwork of multiple businesses and residences.

What Bruckner really helps clients decide is whether they should hire their own in-house investment staff. Most family offices are in a nebulous range in terms of their wealth. So-called “family office services” described above are an affordable no-brainer. But even the wealthiest families have to stop and consider the costs and benefits of hiring in-house investment professionals.

“There are no hard and fast rules here, obviously. I think that this conversation could be relevant really to anybody in the $50 million to $1.5 billion range,” Bruckner said.

Luke Proskine, a managing partner at Makena, an OCIO that was seeded by Microsoft co-founder Paul Allen, the co-founder of Microsoft, and today manages various parts of portfolios for multiple single-family offices, says some simple math can help clients answer the question of whether to hire investment staff. For example, say a family office managing $1 billion in assets outsources all of their investment management and is charged 50 basis points — that’s $5 million. What if that same family decided — for any reason — it wanted to hire investment professionals and do that themselves? Proskine previously worked for the Stanford Management Company and is familiar with what a small, competitive investment team would cost.

“Think about the cost of hiring a high-quality team, MDs in the endowment world or running major asset classes, well over a million dollars per head, if not more. And if you want to attract and retain those people, you need to give them upside and runway and all of that,” Proskine said.

Then there’s the travel, legal expenses, an office, custody and other unavoidable service fees.

“It adds up really quickly to where it's pretty hard to do it for a sum less than that for 5 million. And that doesn't include the headache, the management, the oversight, the governance, all of that,” he added.

The adage “if you’ve seen one family office, you’ve seen one family office” is repeated to a nauseating level and Bobby Stover, Jr., the Americas family enterprise and family office leader at EY, doesn’t like to repeat it. “I don't prescribe to that,” he said. After working with family offices for more than 25 years, plenty of them are facing similar challenges.

But Stover is quick to acknowledge that number crunching alone won’t tell a family if they should hire a private equity executive. In-house investors come with considerable costs, especially for families that have investment portfolios worth $1 billion and not billions of dollars in assets.

“It's not always just going to be dollars and cents. But there's the non-monetary layer of that which is how customized do you want your advice, how hands-on do you want to be? What type of interaction do you want to have with these professionals who are working exclusively for you or not?” Bruckner said.

After all, if an investment savvy billionaire wants to spend a few million more dollars per year on an investment staff, why not? If you asked one of that person’s advisors what they would rather their clients spend money on, hiring staff or a big boat the answer might simply be: what is going to make them happier?

News

• Today, Officium's sister newsletter Essential Allocator reported that Chad Myhre is moving on from his role at the Heinz Family Office, where he spent four years, to join the DuPont Trust as managing director of public markets. He will be part of a 10-person investment team in overseeing some $10 billion in assets and work under Travis Angevine, who was promoted to CIO after longtime investment chief David Gonino announced his retirement in December.
   
• Yesterday in II: Can Family Offices Skirt the CTA? Lawyers Say Don’t Wait to Find Out.
   
• In April: I’m planning to publish a long feature about a Goldman Sachs employee and their special relationship to family offices. Want to guess who the subject is? Reply to this email and place your zero-stakes bet.

Jobs

• ICONIQ, the multifamily office known for its tech titan clientele, is hiring more than a dozen employees in San Francisco and NYC.
   
• Morgan Stanley Investment Management is looking for an associate to support its family office sales and services group in Seattle.
   
• A family in NYC is looking for a property manager to oversee the day-to-day operations of their “large” residence and they are willing to pay handsomely: $150,000 - $175,000 plus excellent benefits.
   
• Are you a family office trying to fill a position? Email me about sharing details in Officium.