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How Reporting Platforms Price - A cheat sheet for family offices.


I don’t like surprises. Especially if I recommend a solution that fits the criteria only to have that supplier come back with a totally different fee quote. One of my value propositions is to understand when I match a family office against a potential supplier, the price range fits into their “fee budget” for operational infrastructure. A lot of what comprises Hall Road benchmarks is previous requests for pricing.


Keeping that in mind, I reached out to several global platforms and had them explain how they come up with their pricing. I have aggregated their answers, breaking them down by cost consideration – this can be used by anyone looking to frame their total fee.


As always, do your own research and engage with other offices on their services and costs.


Flat Fee vs FUM Fee

Most platforms charge a flat license fee for single family offices, but with some caveats. Like a traditional services firm, some use asset size as one of the major considerations. The higher the asset size, the higher the total fee. Why? Because there is assumed higher complexity at $1bn than $500M and the cost to service that needs to be baked in. This is not true for all suppliers, however, with some taking more of a bottom-up approach to pricing.


There is some flexibility here, but it requires articulation. For example, if there is a significant amount of cash at the beginning of the relationship, they may have a lower fee that is reviewed after a period. If there is a single holding that makes up a significant portion of the $1bn+ AUM, then they may take this into consideration. There can also be “carve out” assets that are not required to be managed but can be shown in reporting.


To be clear, some platforms specifically say that FUA is not a component of their pricing and that they base it on range of “complexity” factors and therefore a flat fee is appropriate.


Why does complexity matter?


If my family office is facing off against the software and managing the day-to-day reporting, data management and aggregation, why will the platform charge me more if the assets reporting on are more complex? Why isn’t it like other software where they provide the tech, and my effort affects the output?


The reason is because there is no such thing as a truly independent client. Each will require service levels higher (or lower) and this must be taken into consideration.


What happens if the assets grow?

Some clients have established reporting for a specific carve out portfolio of the portfolio or expect to see an increase in assets when a liquidity event occurs. If they go from $300M to $1bn+, what will happen to the pricing. Check the agreements for any mention of re-pricing after the initial contract period.


Some Other factors that determine price


Managed service levels – if you speak to platforms, there are elements that can be “managed” by the firm, each with different levels of heavy lifting and pricing. Some use outsourced firms, others have their own internal staff, and some make the point that their technology does most of the heavy lifting so there is no need for extra human resources.


Platforms can charge an hourly rate for managed services or include a time allocation within the total price.


Some platforms charge a “client success fee” for a defined period such as the first two-year contract. This allows for a certain level of support from their onboarding and client service team above the usual tickets or help desk.


Data add on – some platforms are owned by data providers and come with the added ability to include data sets from the wider company. Some have also acquired other firms that include risk analytics, rebalancing tools, private market exchanges, forecasting and modelling software…the list goes on and can add up if you want all the bells and whistles. One of the befits of this is to be able to increase the models/solutions as the office requires them rather than buying those that aren’t needed.


Onboarding

  • Onboarding or “client success” fees. Can typically range between 10% to 100% of the yearly fee. Ie. If the initial fee is $50,000 per annum, onboarding can be up to another $50,000 one off fee. This is affected by the amount of “backfill” required (historical data) and the type of investments. If you want 10 years of public market data backfill, this can be quite expensive. The reason? Because data doesn’t magically appear, and it requires employees of these firms to manage this upload and the platforms need to make a calculation and price it accordingly.

  • Resourcing – all the platforms agreed that having an internal resource (or two) or using an external firm to assist with this onboarding can reduce the fees paid. Most are willing to be thoughtful when pricing this, you must articulate how much of the heavy lifting you will be doing yourself. Ask if there are firms that they work with regularly.

  • Time series data – this backfill cost is why I always recommend clients start with the accurate and accessible time series data when establishing their investment office. Because when you up the sophistication level of your reporting from excel you can save time and money on the upload if it’s accurate and consistent.


Family Office vs Wealth Manager/Institutional clients


  • Family Offices are nearly always priced at the lower end, especially if there is a large proportion of assets concentrated in one or two investments eg. Large single business or stock holdings.

  • Flat fee structure or basis points – if they have both, Family Office is usually done at flat fee.


Contracts:

· From rolling monthly invoices to two-to-three-year initial contracts. They are priced with a certain amount of recoverable costs over a period longer than one year. Considering that onboarding can take up to 12 months to reach a “steady state” the firm wants to have at least a full year of low touch management of the client portfolio.


Out Of Scope

· Be mindful of extra fees for any out-of-scope work.

· If you can, be pro-active on the statement of work and include aspects such as turnaround time for queries etc.


Hall Road has workshop for those that are looking to improve their investment reporting and navigate this complexity you can find out more here.



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