Family offices are moving to an office model that's more virtual in a push to reduce costs and tap into a dwindling talent base.

Over the past few years, there has been a significant increase in the number of family offices as many baby boomers reach retirement age and want to manage their accumulated wealth. Family offices allow them to do that beyond the eyes of regulators and those who may wish to do them harm.

But while the number of offices has been dramatically increasing, the talent pool to work in them hasn't. That's sparked competition among family offices to nab the best talent, and that, in turn, has driven up costs. 

“Family offices are looking to beef up their team and to ensure that they are ready when they come in,” said Lucia Perchard, head of family office product at Bermuda-based Apex Group. “And the prices [for those individuals] is starting to spike across the staff.”

John Elmes, head of single-family offices at Los Angeles-based Pathstone, is seeing similar problems at the family offices he works with. While costs are rising, it's difficult to find more qualified people, including many of the higher echelon positions such as chief executive officers, chief financial officers, chief investment officers and lawyers. 

Family offices have looked for ways to reduce costs while maintaining access to a high level of service. They will often consider two major models. 

The first is a single-family office, which gives families significant control over their wealth and helps them maintain a level of privacy. The problem with this model is that it can limit their investment selections. 

The second is a multi-family office model where two or more families can pool their collective assets, get access to a greater number of investments and resources and share costs. The drawback is that it can trigger registration requirements with the SEC when offices include other families and give them investment advice. In addition, the main clients can lose a sense of privacy by involving other families.

One solution to the problem of expenses has been gaining popularity in recent years: to outsource and reduce the number of in-house personnel. 

“The trend has been recently to try to scale [those costs] back and outsource,” Elmes said.

By outsourcing with specific providers, family offices can access various services for a reduction of the cost.

“If you find an outside provider that has a suite of services that support a family office infrastructure and administration, you can get the expertise you need essentially immediately,” said Darrell King, director of private wealth for the Americas at Luxembourg-based IQ-EQ.

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