Why Family Offices Are Turning to Fractional Talent

Fractional talent provides a way for family offices to achieve more with less resources

Author

Mr FamilyOffice
December 13, 2024

NEWSLETTER

Family office insights this week:

  • How family offices can do more with less

  • European family offices are underpaying their CEOs

  • A revolutionary way to influence and persuade

  • What to teach your kids about money

  • Simon Sinek on how great leaders inspire action

Why Family Offices Are Turning to Fractional Talent

Fractional roles in family offices

The case for a single family office is often compelling.

They offer unparalleled control and privacy.

But a fully functioning family office does not come cheap.

The typical cost of running an SFO can range from 0.5% to 1% of AUM. With the average number of family office employees being just 14.4, the question arises: how can family offices deliver effective, comprehensive services without inflating costs?

The functions carried out by a single family office will depend on the family and the complexity of their activities. A fully functioning single family office could involve a wide range of functions:  

While most families don’t require every function defined in the diagram, the reality is that the majority of family offices lack the resources to hire full-time staff for each role.

So how do they square the circle?

Essentially, there are three ways:

  1. Employ all-rounders

  2. Outsource

  3. Employ fractional employees

Employ all-rounders

Family office employees usually need to have various strings to their bow.

Family offices often require generalists—professionals with a broad range of skills who can oversee multifaceted client needs. Being a generalist is often less of a choice and more of a necessity.

Tom McCullough, chairman and CEO of Northwood Family Office, compares the role to that of a general contractor, coordinating everything from financial planning and tax strategy to estate management and family governance.

Generalists bring the versatility to manage diverse, high-stakes challenges, ensuring tailored solutions for ultra-high-net-worth clients.

Outsource

Outsourcing specific tasks allows family offices to focus their internal resources on core functions while leveraging external expertise for specialized needs.

For example, while over 57% of family offices manage family governance internally, legal services are outsourced by the majority (54%) due to the occasional and specialized nature of legal work.

Outsourcing ensures efficiency, cost-effectiveness, and access to specialized knowledge without the commitment of full-time staff. This balance allows family offices to stay efficient while addressing the entire spectrum of their functions.

Hire fractional employees

A third option for family offices is to hire fractional employees.

Fractional employees are professionals who work part-time or on a contract basis, providing specialized expertise without the cost of full-time employment. They are employed by the family office, so act as more than contractors.

This taps into a current trend of growing fractional roles.

Why fractional employees are on the rise

Bureau of Labor Statistics suggest that there has been a 57% rise in the number of fractional employees in the US since 2020.The growing adoption of fractional roles is driven by several factors:

  • Cost Efficiency: Access to top-tier talent without full-time salary commitments.

  • Demand for Flexibility: Ability to scale expertise based on fluctuating workflows.

  • Technological Advancements: Enabling remote and flexible work arrangements.

  • Specialization: Addressing complex tasks like multi-jurisdictional compliance and advanced financial planning.

  • Talent Preferences: Professionals increasingly value work-life balance and project-based work.

Fractional employees are often an excellent fit for family offices due to their ability to bring specialized expertise on an as-needed basis, offering flexibility and cost efficiency.

Family offices often require niche skills—whether in tax strategy, investment analysis, or family governance—but not always at a full-time capacity. Fractional professionals allow family offices to access top-tier talent without the overhead of full-time salaries and benefits.

Additionally, fractional roles are ideal for addressing specific, time-sensitive projects, such as implementing a new technology platform or dealing with complex estate planning. Their specialized knowledge complements the generalist nature of core family office advisors, ensuring tailored, high-quality solutions while keeping the overall structure lean and agile.

Another reason for hiring fractional employees – you can hire the best of the best. If an exceptional CIO commands a 7-figure salary, the family office may benefit more from employing them on a fractional basis than a less experienced or skilled full time CIO.

Family offices often experience "downtime," where workflows slow due to fewer investment opportunities or administrative demands. Fractional roles allow them to bring in top tier experts as needed, maintaining high standards of service while controlling costs.

“Having a fractional HR manager come to the office every week has been transformative for our team. It gives our people a trusted, neutral point of contact for sensitive issues, ensuring everyone feels supported and heard” – CEO, European SFO

Case Study: fractional Chief Learning Officer

A fractional Chief Learning Officer (CLO) can bring significant value to a family office by focusing on the education and development of both the family members and the staff. Their role might involve designing personalized learning programs for younger generations to prepare them for leadership roles, financial literacy, or stewardship responsibilities.

They could also provide targeted training for in-house staff, ensuring they stay updated on industry best practices and regulatory changes. Working on a part-time or project basis, a fractional CLO could help facilitate workshops, create mentorship programs, or implement structured family governance education. By working fractionally, the CLO can address the specific and periodic needs of the family office without the overhead of a full-time role, ensuring the family and team are equipped with the skills and knowledge to achieve their long-term goals.

 

Case Study: fractional PR Officer

A family office may choose to engage a fractional PR officer during periods of heightened visibility or sensitive transitions. For instance, if the family is navigating a high-profile transaction, such as the sale of a significant business asset or a major philanthropic donation, a fractional PR officer can craft and manage the narrative to ensure it aligns with the family’s values and protects their reputation.

Similarly, they can step in to handle crises, such as legal disputes or unwanted media attention, providing expert guidance on managing public perception. A fractional PR officer is also valuable when launching new ventures or enhancing the personal branding of family members, ensuring consistent and strategic communication. By engaging this expertise on a part-time basis, family offices can address specific, high-stakes scenarios without the cost or need for a full-time PR presence.

Challenges of fractional employees

Privacy Concerns: Family offices often handle sensitive financial and personal information. Engaging fractional employees increases the risk of data breaches or unintentional disclosure, especially if the individual works with multiple clients.

Inconsistent Availability: Fractional employees may not always be accessible during critical moments, such as a sudden market event or an urgent investment decision, potentially delaying action.

Limited Context: Without daily involvement, fractional employees might lack a deep understanding of the family office's dynamics, priorities, and nuances, which could affect the quality of their advice or decision-making.

Lack of Continuity: Relying on multiple part-time professionals can lead to fragmented workflows, miscommunication, or gaps in institutional knowledge.

Fractional talent in the future

The increasing complexity of family office operations, including legal structuring, multi-jurisdictional compliance, and advanced financial planning, necessitates access to niche skill sets.

Fractional employees, whether they are legal advisors, tax strategists, or investment analysts, bring the right expertise at the right time, allowing family offices to remain agile and focused on delivering value to ultra-high-net-worth families.

The trend towards fractional employees is set to grow. Both tech and fractional employees are helping democratize family offices, and if you can leverage people and tech, the costs of running an exceptional family office can be controlled. 

𝕏 highlights

Some good comments on this one.

Rupert Murdoch’s bid to change his family trust fails in Nevada.

And a festive one!

 💼 where to work

Discover three new family office jobs, five candidates open to work and insights on how the the Great Wealth Transfer is affecting hiring in our latest Careers mailer that went out on Wednesday.

📚 what to read

By controlling what people focus on, you can significantly enhance the impact of your message. Pre-suasion by Robert Cialdini is packed with fascinating ideas around creating a receptive mindset through priming, timing, and strategic attention shifts. Fans of behavioral economics will love this book!

📻 what to listen to

The Morgan Housel Podcast: The Best Financial Advice I Know (What I Want My Kids To Learn). Morgan Housel wrote letters to his kids on the day they were born. Here’s what he wanted them to know about money.

📺 what to watch

It’s the time of year many of us are thinking about taking action and moving forward. Here’s a classic TED Talk by Simon Sinek on How great leaders inspire action.

And finally…

It’s a busy end to the year here. Travel. Dinners. More travel, more dinners.

I’m looking forward to some downtime over Christmas. But the Mr Family Office content will continue!

Keep an eye out next week for the last Dealflow newsletter of the year.

Otherwise Family Office Buzz will be back on Monday (here’s the last edition if you missed it).

Until next week, see you on 𝕏 or LinkedIn!

X

_

Rate this week's newsletter

Login or Subscribe to participate in polls.