Selecting providers with independence

Everyone in the room is selling

The bank pitching custody would also like the mandate. The technology provider has a partnership with both. None of this is improper, it is simply how the industry is arranged, and a family entering it for the first time is at an obvious disadvantage. You are buying something once. They are selling it every week.

Write the requirement before you meet anyone

The most expensive mistake is meeting providers before you know what you want. You will be shown capabilities, and capabilities are persuasive. Then you will build a requirement out of what you have been shown.

We suggest you write your own requirement first. Two pages is enough:

• What is being held, where and in what currencies
• What reporting is needed, by whom and how often
• Which functions you intend to keep in-house
• What must integrate with what
• What you are prepared to pay

Send the same document to everyone. Ask for responses in the same format. It may appear bureaucratic, but in our experience it is the only reliable way to compare answers.

Run it as a process

1. Longlist on paper. Five to eight names. No meetings yet.
2. Shortlist on written answers. Cut to three or four before personal impressions can intervene.
3. Meet the team you will in fact be working with — not the senior partner who appears at the pitch and is never seen again. Ask who your day-to-day contact will be, then meet with that person.
4. Take references from families who have left. The satisfied ones are offered to you. Find the others.
5. Decide against your own written criteria. Not against how the meeting felt.

Questions that produce honest answers

• What do you charge that is not on the fee schedule? Ask specifically about custody spreads, foreign exchange margins, transaction charges and anything billed as an expense.
• Which of these services do you subcontract, and to whom?
• What happens to our fee if our assets fall by half?
• Who owns our data, and what do we receive if we leave?
• What is your notice period, and what does an exit cost us? A provider who cannot explain how you would leave has told you something useful.

Where families get this wrong

They select on the value of the relationship first and are then surprised by hidden fees they never asked about. The relationship matters, but it should not be doing the work of a fee schedule. Negotiate the terms coldly, then enjoy the relationship with confidence.