Christi Van Rite (00:00:14) -

Hello and welcome back to the Family Office Success Podcast where we talk all things family office. I am your host, Christi Van Rite, and today the topic is the tipping point. You know that moment when everything changes, you reach a point where you realize that there's no turning back. It's a fork in the road, and you have to make a choice that's going to impact your future, for better or for worse. Specifically, I'm referring to the tipping point that professional service firms hit when deciding whether to build new administrative family office services in-house or to partner with an outside provider. My firm is white River consultants. We work with Rias, multifamily, single family offices, law practices and accounting firms on how to scale their business strategically and profitably. We also work directly with families, which means we've made the mistakes we've enjoyed and we've appreciated the wins, and thankfully we've lived to tell the tale. So this particular episode is a few key things that if you were sitting in front of me right now and or if I could have gone back and told myself several years ago how to do and or not do a few things, this is what I would tell you or tell myself.

Christi Van Rite (00:01:32) -

If you service ultra high net worth families, you very likely have gotten the request for services like property management and bill payment and staffing and in coordinating complex projects. It's it's the question, hey, can you which, quite frankly, is exactly how I got into this business. And it's a pretty good chance that it's gotten you to where you are today and why you're asking that question, and why you may be at the tipping point in your firm today, my friends, this is the moment that can make or break your firm. Please let us help you get it right by asking hard questions upfront before you rush in to expand. If you're at the beginning stages or you're considering adding services, this is the episode for you. So let's get started. First, let's cover some key considerations before moving forward with any new service offerings, pull out your 3 to 5 year strategic plan. Plot out if you don't already have it where you expect this business to go, your growth trajectory, your target client profile or your avatar, geographic expansion plans, stuff like that.

Christi Van Rite (00:02:43) -

Anything that's in that 3 to 5 year plan that you've got written down. The question I want you to ask yourself is, will added services advance or hinder progress toward those Northstar goals? And if you don't have Northstar goals before you do anything, sit down with your team. Even if it's a team of two or you're a team of one or a team of 20, this is so important. And the reason it's so important is because adding these extra services can so quickly take you off course. And if you don't know where you're headed, you're going to get somewhere. But it may not be where you really planned on being because you weren't. You just didn't have that in mind when you started. So pull out that 3 to 5 year strategic plan. Really consider if this advances or keeps you from those goals. So for example, if your strategy is to remain lean, specialized, focused, then getting into family office services is likely going to derail you by forcing a broadening scope. On the other hand, if your plans call for aggressively, you know, adding to existing relationships or acquiring whole family accounts and you're okay adding staffing and bandwidth and education, then service expansion could very well accelerate that.

Christi Van Rite (00:04:14) -

But you can see where I'm going here. If you if you listen to some of our other episodes forward and back, then you know, you'll you'll start to understand that it's, it's not just quite as easy as hanging a shingle out that you now do family office services. There's actually a much deeper level that goes into it of education and staffing and processes and procedures. And so just think that through before you, before you continue forward, because it may be that that you want to stay lean and mean and administrative family office services is not going to allow you to do that. So just know where you're at. That's the first thing. Always connecting decisions today with your future vision. It's an evolution, not a revolution. So now I can't emphasize this next point enough. If I didn't emphasize the last one enough that you need to intimately understand profitability per client. I have seen even well intentioned service launches sabotaged healthy firms because they didn't pencil out the numbers you need to know. Calculate each client or client segments profitability based on revenue generated compared to the resources they consume.

Christi Van Rite (00:05:32) -

So let me say that again. You need to know how much revenue is generated compared to the resources that each client consumes and or each activity consumes. So what do I mean by that? The cost of staff time, your hours logged times, your hourly rate that you're paying your staff, any software, data management tools, anything you need to actually create delivery for that service. Insurance covering expanded scope areas, areas. Did you know that your regular insurance that you have that covers your your Ria practice does not is not going to expand to cover these additional services? So you need to get with your broker and talk to them and find out what that means on that side and take that into account. Additional administrative costs. Again I've said it said it once. I'll say it again. This likely is going to take additional bandwidth and capacity, which could very well mean additional staffing to cover that, as well as keeping your staff up to date on an educational basis, you wouldn't think paying people's bills or paying bills would take a lot of education or education and maintenance or upkeep.

Christi Van Rite (00:06:55) -

Surprisingly, things are constantly changing. The cyber security around it is constantly changing. How we move information around is is hopefully being continuously upgraded. You've got to stay in the know about what is happening to a not get left behind but be. Try not to let mistakes happen. So you need to figure in know what your costs are today. If you don't know what these additional costs could be, then make a make a note to talk to someone about that so you have a really good idea of what your cost per client or cost per activity really is going to be. Once you know your costs, compare this all in expense burden to the fees you're collecting you need. What I'm trying to get here is that you need to know a true return on investment per client, because without positive ROI, adding services just play dates or covers up client requests while dragging down margins across your practice. The fact is, is not all revenue dollars actually contribute to the bottom line, and unprofitable activities will choke your firm if left unchecked.

Christi Van Rite (00:08:09) -

You've got to know these numbers and you've got to pay close attention to them. Plus, when you're starting, you need benchmarks on where profitability currently stands to track important and impact and the impact of any moves down the line. So have all of that up front. So, you know, always know where you're at. And if you don't track hours, which I know a lot of practices don't do unless unless you're our attorney friends, in which case you're laughing right now because you track hours religiously. For the rest of us, that's not necessarily a built in function that we are excited about doing. Let me tell you, it's time. If you're going to do these additional services, you need to track hours, even if it's just the hours that your team spends on the family office services, if you don't know where your staff's time is going, it's probably not going where you want it to go. So do the math. Run the models. Prove the economics out. Too many firms get tunnel vision on making clients happy, and they lose sight of a healthy operations.

Christi Van Rite (00:09:16) -

You aren't helping clients if you can't keep your doors open and the firm staffed, or if your staff is overworked and don't feel like they can ever get ahead. So you also need honest clarity on the existing team bandwidth and capabilities before stretching them further. So audit the strengths and gaps across these three areas. The first is available time. Assess workloads and remaining capacity. Have conversations. Whatever you need to do to get a feel for where people are at. And don't take just a I have time I can handle and or I'm at capacity and I can't do anything else. Dig in. To what those are. And frankly, you might find that there are way other things you can do to make that staff members time better for you and for them. The second is relevant expertise. Who has the right knowledge and skill set, or the aptitude to acquire the right knowledge and skill set for these additional services. The third is openness to change. You got to gauge the willingness of your staff to adopt new models, because the way that you run other functions of your business may be more stringent than what these additional services are going to require, or they may not.

Christi Van Rite (00:10:44) -

And so to run an effective family office services model, it is there can't be any room left for questions or missing things. I mean, it is a it is a step by step process and it just has to be followed. That's not to say it can't can't be edited or updated, but for the most part, it's going to likely be a new level of work that your staff may or may not be open or interested in. So the available time, the relevant expertise, who has it and who's willing to to change and adopt new ideas and models. So again, I've seen service launches stumble when there wasn't enough qualified staff to assign the work to, or there was just a something in the culture that operating differently, adding new things, just it just wasn't accepted in a way that it needed to be for the launch to go well. So again, these are two pretty tough questions on a big scale. But you're better to know these headwinds before the walls come down. It's just it can't be a let's test it out and see how it goes type service.

Christi Van Rite (00:12:07) -

So it will at some point come down to either recovering a relationship or losing it all together when something important slips through the cracks. And that's best case scenario. Worst case scenario, you're looking into that insurance policy that you have your fingers crossed that you hope it's going to cover the losses because the ball was dropped, and now you have a compliance issue to be disclosed to every client moving forward. You can see where I'm going with this. So ask the tough questions. When someone shows you what they're made of and who they are, believe them. The last thing that we always recommend is asking your clients what they want. Don't assume that what they said something offhand is actually what they need. It's so tempting to infer wishes from offhand comments that suggest service gaps, but you need to explicitly explore what's driving those perceptions and what's offering what offerings would enhance their experience. More often than not, it's just small tweaks to your core delivery that could satisfy, you know, satisfy them rather than entirely new platforms.

Christi Van Rite (00:13:19) -

Or it's a need that can be handled by another provider who's already in the client's life. And you don't even have to add anybody else. So that covers the key, you know, evaluative groundwork. Of course, the path of least resistance feels like it's handling all the emerging needs in-house. But easier isn't always better in the long term, especially when it comes to making sure that your business remains profitable and, uh, can stick around. So consider configurations like specialized partnerships or outsourcing to niche experts having a building, referral networks, things like that. The reality is that supremely aligned, mutually beneficial arrangements can can create more value for everyone involved than just the internal build outs. So, you know, right sizing partnerships allows you to laser focus on excelling your core discipline. Tapping into specialized providers modifies the model for speed, efficiency, and versatility. It's just a best of breed assembly. Will will almost always be a closed ecosystem any day of the week. So what does this look like in your practice? Here's an example.

Christi Van Rite (00:14:39) -

We have an Ria client that exclusively handles investments and wealth planning for multi-generational families. They maintain doing what they are very good at for ancillary services. They forged partnerships on property management, private aviation, staffing, you know, for the housekeepers, the chefs, the personal assistants. Coordinating the major family events. And this isn't just governance. Even I outsource governance because the reality is, is a whole lot of things can happen, good and not great in those family governance meetings. And having, you know, having the family speak into things like that and having someone who really knows how to handle, uh, what could potentially happen is really important. So, you know, they forged partnerships on these things that are outside of their financial planning and investments, and they realize that they can actually coordinate quite nicely, but making make sure that the family got the highest level of service that they knew they couldn't provide in-house. You know, rather than inflating headcount, they, they prefer the to, to outsource. So this also lets them stay intensely focused on what they're doing without the distraction of building these peripheral support functions.

Christi Van Rite (00:16:06) -

So it's a win win for the Ria and the client in their in their eyes. So in the end, only you can weigh in, uh, on all the practical and strategic factors to make the right call for your firm's next chapter. Just be sure you take the time for thoughtful analysis rather than engaging in reactive decisions, because the client happened to mention that they might want another service. So if you're interested in walking the path or having a community around your team who's providing these services, we invite you to visit our mastermind community and see if it's a good fit for you. And tell us about your Tipping Point moment. Share your story or ask questions in the comment section. We'd love to hear from you. So that's all for this episode. Thank you for listening. Be kind and stay curious.