Hi {{first_name}},

Back in February I was reading a J.P. Morgan report on family offices. I was surprised by the numbers. 

J.P. Morgan put a price tag on the family office this year. $900,000 a year. That’s the cost for the cheapest tier which serves families under $250 million. Cross the billion dollar threshold and pay $6.6 million a year.  Those are significant numbers. I had to check what they were actually buying.

Sure enough, 80% of those offices outsource portfolio management. The one job you’d assume the whole thing exists to build. The families who could build anything they want are still buying their actual investing from somebody else, then paying millions a year for the coordination on top.

A family office is basically a family that is so rich they can make more money by allocating their capital (mostly in the private market a la Yale Endowment-influenced method) than actually working a job.

The “FO” structure is built to perform six functions. They have visibility to the full net worth picture in one place, architecting the allocation instead of just picking random “good deal” positions, sourcing the deal flow, re-underwriting deals internally, meeting and partnering alongside a group of peers doing this at the same scale, and pulling advice from practitioners. 

None of those things require a $900k payment. 

I'm a private investor, business buyer, capital raiser, and fund manager. It will be years before I ever need to consider opening a personal family office. But building Build Wealth meant studying these structures and then designing a way for a group of accredited investors to DIY them together. 

You need the six functions, but they can cost a fraction of what you'd think when you learn to build them on your own.

This week I’m breaking each function down so you can build them back up. This issue looks at:

— Walker Deibel
WSJ & USA Today Bestselling Author of Buy Then Build
Founder, Build Wealth

RBC Wealth Management and Campden Wealth's 2024 family office report puts the real floor for building one solo family office around $100 million. Below that, the operating cost, which the same report puts at $1 to $2 million a year in staff and infrastructure, eats the edge it's supposed to produce. 

Even the version of institutions built for smaller fortunes, the multi-family office, pools several families together and still asks for $25 to $50 million to get in the door, per Campden Wealth's research, plus another half point to a point and a half of assets every year for the privilege. There isn't a tier of this industry, private or shared, built for a $1 million to $10 million portfolio.

Strip away the AUM fee and the office lease, and a family office is basically six core functions that orchestrate a holistic allocation approach. They deal with:

Big institutions hire entire teams to manage this infrastructure. Sometimes even one team per question. The edge is real. 

You don’t need to pay that whole team though, you just need the six things a team would produce. The first thing for you is to digest what each one costs to build on your own, and what breaks in the portfolio when any one of those functions is missing.

See the whole board at once. This is one single and accurate picture of everything you own, updated as close to real time as possible, across every entity, account, and structure your capital touches. Family offices build this with dedicated reporting platforms and a controller to maintain them. A serious consolidated reporting platform runs $10,000 to $25,000 a year. (Pssst, we may have something up our sleeve coming soon at 10% of the cost.)

What breaks without it: You rebalance a portfolio while flying blind. Every allocation decision gets made against a partial picture, usually the public market sliver, because that's the only part with a dashboard. The private positions, the real estate, the operating businesses sit in a blind spot until tax season forces a reckoning.

Designing the system. Allocation answers "what should I buy?" While architecture answers "what job does each asset do, and how does it feed the next one." 

A family office CIO builds a structure where the credit position throws off cash that funds the private equity capital call, where the real estate hedges the operating businesses, where the tax structure is designed alongside the allocation instead of bolted on after. This is the one function with a real, scalable market price. An AUM-based RIA relationship, running roughly 1% of assets annually. On a $2 million portfolio, that's $20,000 a year. On $3 million, closer to $30,000. The fee moves with the reader's own number, which is exactly why it's worth sitting with. With tax strategy it’s typically a minimum $35k annually regardless of AUM.

Tax structuring belongs inside this function. To pay a specialist $35,000 a year, flat fee, holding none of the assets, purely for tax strategy: entity structuring, Roth conversion sequencing (timing conversions into low-income years to reduce the tax hit), and deferral planning. That's architecture bought standalone, unbundled from everything else a family office would normally wrap around it. It's proof the model works before you build the other five.

What breaks without it: A pile of good individual decisions that never add up to a system. Every asset behaves like it's the only asset in the portfolio, because nobody designed the relationships between them, tax included.

Re-Underwrite internally. This is the function that costs the most to get wrong, and it's getting its own full treatment later in this issue, because one story makes the stakes concrete in a way a cost table can't. It's also the one function here without a clean subscription price. Diligence scales with the deal, the size, the structure, and the sponsor.

What breaks without it: The money moves before the problems surface. A weak sponsor, a bad capital stack, a downside nobody modeled, all invisible until the deal's already funded and there's nothing left to negotiate.

The pipeline. Family offices are proactive by design. Relationships are cultivated to produce a steady stream of vetted opportunities before they go to a wider list. A standalone version of this exists today as deal flow clubs and syndicate networks that charge in the range of $55,000 a year for access to a curated pipeline (of course, we may have a solution to this… coming soon)

What breaks without it: Your deal flow becomes whatever lands in your inbox, which means you're seeing the deals that were already shopped around and passed on by everyone with better access. Such as adverse selection with a nice PDF attached.

The people solving the same problem as you. There is networking involved, but this function is more centered around calibration. Every allocator develops blind spots in isolation. A risk an investor talked themselves into because no one was ready to push back. A room of peers, working at the same scale can catch that before the market does.

That room takes different shapes depending on the family office's size and style.Groups like Tiger 21 exist because allocators at a given scale need other allocators at that scale, not a wealth manager reciting general advice. Membership runs around $35,000 a year, and the value is more than networking in the social sense. It's pressure-testing a thesis against people who've already made the mistake you're about to make.

What breaks without it: Every decision gets made in isolation, checked against nothing but your own conviction. Conviction without a peer check is how concentrated bets turn into concentrated losses.

Guidance from people with capital at risk. There's a difference between someone who advises on deals and someone who has capital in the deal alongside you. Family offices hire the second kind. There isn't a clean market price for this function, because the industry's dominant fee model, a percentage of AUM, was built to sell allocation. You can buy proximity to capital-at-risk advice. But you can’t easily buy it off a rate card. That absence is in itself a tell. It's usually the last function an individual investor replicates, and the first one a family office treats as non-negotiable.

What breaks without it: You take advice from someone with nothing riding on the outcome, and mistake their confidence for conviction. There's no way to tell the difference until the deal goes wrong and they're not the one who lost money.

A Total That’s Much Slimmer Than $900K 

Four of the six functions above have real numbers attached. Visibility runs $10,000 to $25,000 a year for a serious consolidated reporting platform. Deal flow runs around $55,000 a year for a curated pipeline. Peer community runs around $35,000 a year for a serious allocator group. And architecture runs roughly 1% of assets, $20,000 to $30,000 on a $2 million to $3 million portfolio, and that's before crediting the fact that a specialist can deliver just the tax piece of it for a flat $35,000 on its own.

Add the three flat figures to a mid-range architecture fee and you land somewhere around $135,000 to $150,000 a year, on a portfolio nowhere near the size a family office requires. Diligence prices per deal rather than per year. While advisory has no clean market price at all, and that absence is exactly what this math is measuring.

None of that changes the conclusion. Even the narrowest reading is still a fraction of $900,000. And definitely nowhere near $6.6 million. Of course, the family office is selling all six bundled into one building, whether or not your portfolio needs all six built to institutional scale. 

If you want to really dig into the details, we looked at the larger performance metrics and operations behind the Family Office in this week’s report. Check it out. 

Four of the six functions that make family offices run, you can build entirely on your own. Connect your accounts, write the policy, join the club, put the call on the calendar. The other two, diligence and advisory, only work once you've brought in one right person. 

So start now with whichever of the six is currently costing you the most. 

Visibility: First move - connect every account you can into one platform. 

The $10,000-to-$25,000 institutional version assumes a dedicated platform and a controller to run it. You don't need either. Connect every account, entity, and private position you can link into a single consolidated platform. What you can't link, log manually once a quarter. One imperfect but centralized view beats twelve accurate but scattered ones. 

Architecture: First move - write a one-page allocation policy before your next decision. 

A one-page written allocation policy, what each asset class is for, what percentage it should hold, what triggers a rebalance, turns architecture from a feeling into a document you can check your next deal against. If you already work with an AUM-based advisor, ask directly whether tax structuring is included or whether you need a separate flat-fee specialist for it. 

Often the AUM relationships stop at allocation. Don't assume the tax piece is covered until you've confirmed it isn't.

Diligence: First move - build your checklist before you need it, not during the deal.

Here you can create a standing checklist with ten to fifteen questions covering sponsor track record, fee structure, capital stack, and downside scenario. 

It takes an afternoon to build and you use it for every deal after that. Then find one person whose judgment you trust and who has capital at risk in deals like the one in front of you. Make reviewing your diligence checklist part of the relationship. The checklist catches what you'd forget to ask. The second set of eyes catches what the checklist doesn't know to ask.

Deal flow: First move - join one club with a real vetting process (think quality over quantity). 

Deal flow rewards reputation, earned before you need it. Say yes to co-investing in a size that gets you noticed, even if it's smaller than you'd prefer. It compounds slowly and then all at once. The fifth deal you see is better than the first because the first three showed the sponsors you were serious.

Peer community: First move - put a standing monthly call on the calendar. 

If a group like Tiger 21 fits your scale and budget, join it. If it doesn't, build the smaller version yourself. Find four or five allocators at a similar stage, organize a standing monthly call, and an agreement to bring real numbers instead of war stories. The standing appointment is what does the work. It forces you to say your thesis out loud before you act on it.

Advisory: First move - name one practitioner and offer them a flat fee per deal. 

Since this function has no clean market rate, set your own. Find someone who's operating in the asset class you're allocating to, and be explicit about what you're buying: their read on whether they'd put their own capital in, not a general endorsement. If they won't answer that directly, they're not the practitioner you're looking for.

Now Score Yourself - Start with this assessment. 

For each of these functions, give yourself a 0 if it doesn't exist, and a 1 if an informal version exists but isn't consistent, and a 2 if it's genuinely built and running. 

Then, add the six scores together. Twelve is the ceiling. 

You're likely already running a third of a family office. The two functions where you scored lowest are where the next ninety days should go, starting with whichever one is currently costing you the most.

"If you want to go fast, go alone. If you want to go far, go together."

An African proverb. It also describes how a redwood stays standing. Its roots run shallow and wide, tangled into the roots of every tree around it, essentially, holding hands holds the whole grove up together.

Eighty percent of billion-dollar family offices outsource their own portfolio management. Families who could build every function in-house are still choosing the tangled root system, six functions wired together across outside specialists.

United we stand.

The wiring is the asset.

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This is not financial advice. Illustrative output of a reasoned thought experiment. Not a backtest, guarantee, or prospectus. Actual results vary based on market conditions, fund selection, timing, fees, taxes, and factors not modeled. Private credit, CRE, and leveraged strategies involve significant risk including loss of principal. Consult a qualified financial advisor.