The Vault Part 4: The Industry Who Actually Runs the System: Why It Costs $3.2 Million Per Year to Operate a Family Office, How the Big 4 Accounting Firms Audit 100% of the Fortune 500, and Why Chief Investment Officers Now Earn $1 Million Annually to Manage Wealth Nobody Knows About

🔒 THE VAULT SERIES:
Part 1: What They Are | Part 2: Where They Hide | Part 3: How They Invest | Part 4: The Industry (You Are Here) | Part 5: The Dynasty (Coming Soon)

The Vault Part 4: The Industry

Who Actually Runs the System: Why It Costs $3.2 Million Per Year to Operate a Family Office, How the Big 4 Accounting Firms Audit 100% of the Fortune 500, and Why Chief Investment Officers Now Earn $1 Million Annually to Manage Wealth Nobody Knows About

In 2024, wealthy families spent an average of $3.2 million annually to run their family offices. That's not investment management fees—that's just operating costs. Staff salaries alone account for 60-70% of that ($1.9-2.2M). The Chief Investment Officer makes approximately $1 million per year. The CFO makes $500K-800K. Investment analysts make $200K-400K each. And that's before you hire the external specialists: Big 4 accounting firms ($100K-500K/year on retainer), white-shoe law firms ($500/hour partners), tax advisors, estate planners, and appraisers who will value your $100 million art collection at $40 million for estate tax purposes. This isn't wealth management—it's an entire industry built around helping ultra-wealthy families avoid taxes, maintain secrecy, and pass wealth to future generations. And almost everyone involved makes more money than you'll see in a lifetime.

The Operating Costs: Breaking Down $3.2 Million Per Year

The J.P. Morgan Data

According to the J.P. Morgan Private Bank 2024 Global Family Office Report, family offices spend an average of **$3.2 million annually** on operating expenses.

But that number varies wildly based on size:

FAMILY OFFICE OPERATING COSTS BY SIZE:

• Under $500M AUM: $1-2 million/year
• $500M-$1B AUM: $2-4 million/year
• $1B+ AUM: $4.2 million (median), $6.1 million (average)

COST AS % OF AUM:
• Industry average: 39.8 basis points (0.398%)
• Target benchmark: Under 1% of assets
• Smaller offices: Often 1-2% (harder to achieve economies of scale)

Where the Money Goes

According to UBS (2025) and industry research, here's the typical breakdown:

FAMILY OFFICE COST BREAKDOWN:

STAFFING: 60-70% ($1.9-2.2M of $3.2M total)
• Salaries, bonuses, benefits
• Key roles: CEO/CIO, CFO, legal counsel, analysts, admin
• Competitive packages required to attract talent

INVESTMENT-RELATED: 15-20% ($480K-640K)
• External manager fees
• Custodial charges
• Trading costs
• Research subscriptions

TECHNOLOGY: 5-10% ($160K-320K)
• Portfolio management software
• Reporting systems
• Cybersecurity
• Institutional-grade platforms: $50K-200K/year

OPERATIONS: 10-15% ($320K-480K)
• Office space rental
• Insurance
• Legal compliance
• Administrative overhead

EXTERNAL SPECIALISTS: $100K-500K/year
• Big 4 accounting (retainers)
• Law firms (hourly + retainer)
• Tax advisors
• Estate planners

Notice something? Almost 80% of family offices—and 90%+ of smaller offices—use external advisors. Even with a full internal staff, you still need specialists.

The Staffing: Who Actually Works There

Typical Staff Size

According to industry data, most family offices have relatively small staff:

• Small offices ($100M-500M): 3-5 employees
• Mid-size offices ($500M-$1B): 5-10 employees
• Large offices ($1B+): 10-15+ employees

But these aren't regular employees. They're highly specialized, highly compensated professionals poached from Wall Street, private equity, hedge funds, and Big 4 firms.

The Compensation War

According to a 2024 CNBC investigation, family offices are now competing directly with Wall Street for talent—and winning by paying more:

FAMILY OFFICE SALARIES (2024):

CHIEF INVESTMENT OFFICER (CIO):
• Under $1B AUM: ~$1 million/year (average)
• $1B+ AUM: $1.5-3 million+ (with bonuses)
• Background: Former hedge fund managers, PE partners

CHIEF FINANCIAL OFFICER (CFO):
• Typical range: $500K-800K
• Responsibilities: Accounting, reporting, entity structures

INVESTMENT ANALYSTS:
• Typical range: $200K-400K
• Background: Former investment bank analysts, PE associates

LEGAL COUNSEL (In-House):
• Typical range: $300K-600K
• Background: Big Law partners taking "in-house" roles

ADMINISTRATIVE STAFF:
• Typical range: $80K-150K
• Roles: Executive assistants, operations managers

According to Trish Botoff of Botoff Consulting, which advises family offices on recruiting:

"We've seen over the last decade, the professionalization and institutionalization of the family office space. They're building out their investments teams, hiring staff from other investment firms and private equity firms, so that has a huge impact on compensation."

Her survey found that:

• 57% of family offices plan to hire more staff in 2024
• Nearly half are planning raises of 5%+ for existing staff
• Overall pay is up 10-20% since 2019 due to demand in 2021-2022

Why Family Offices Pay More Than Wall Street

Family offices can outbid hedge funds and private equity firms because:

1. No external investors: No one to complain about comp ratios
2. Lifestyle benefits: Better work-life balance than hedge funds
3. Job security: Family offices don't fire people during bad years
4. Aligned interests: Serving one family, not hundreds of LPs
5. Prestige: Managing billionaire families' wealth carries status

The Big 4: The Accounting Backbone

Who They Are

The "Big 4" accounting firms are the largest professional services firms globally:

THE BIG 4 (2024):

1. DELOITTE
• Revenue: $67.2 billion (FY 2024)
• Employees: ~460,000
• HQ: London
• Strengths: Consulting, digital transformation

2. PwC (PricewaterhouseCoopers)
• Revenue: $53.1 billion (FY 2024, estimated)
• Employees: ~370,000
• HQ: London
• Strengths: Audit (#1 globally), tax services

3. EY (Ernst & Young)
• Revenue: $51.2 billion (FY 2024)
• Employees: ~400,000
• HQ: London
• Strengths: Tax consulting, ethics/sustainability

4. KPMG
• Revenue: $36.4 billion (FY 2024, estimated)
• Employees: ~275,000
• HQ: Amstelveen, Netherlands
• Strengths: Tech-driven advisory

COMBINED REVENUE: $212 billion

Their Role in Family Offices

The Big 4 provide critical services that family offices can't (or won't) do internally:

1. Tax Planning and Compliance

• Cross-border tax strategies
• Entity structuring (which jurisdictions, which vehicles)
• Transfer pricing (for private companies)
• Tax return preparation (often dozens of entities)
• IRS audit defense

2. Accounting and Auditing

• Consolidated financial statements
• Private company audits (when required)
• Internal controls assessment
• GAAP/IFRS compliance

3. Estate and Succession Planning

• Trust structures
• Gift tax strategies
• Estate valuations
• Multi-generational wealth transfer

4. Transaction Advisory

• M&A due diligence
• Buy-side/sell-side advisory
• Valuation services (the aggressive kind)

The Market Domination

The Big 4 audit 100% of the Fortune 500. That level of concentration means:

• Every major corporation uses Big 4 accounting
• Every billionaire founder has a Big 4 relationship from their IPO
• Every family office either uses Big 4 directly, or their advisors came from Big 4

It's not really a competitive market—it's an oligopoly where all four firms know each other, their partners move between firms, and they all use similar strategies for their ultra-wealthy clients.

The Retainer Model

Family offices don't hire Big 4 firms on a project basis—they keep them on retainer:

• Small retainer: $100K-200K/year (basic tax prep + advisory)
• Medium retainer: $200K-400K/year (complex structures, multiple jurisdictions)
• Large retainer: $400K-500K+/year (full-service, dedicated team)

This doesn't include hourly work beyond the retainer. A major transaction (selling a company, complex restructuring) can add $500K-1M+ in additional fees.

The Law Firms: White-Shoe and Beyond

Who They Are

"White-shoe" law firms are the elite partnerships that serve ultra-wealthy families and major corporations. The term originally referred to the white buckskin shoes worn by Ivy League students—it now means old money, establishment, discretion.

Examples:

• Cravath, Swaine & Moore (New York)
• Sullivan & Cromwell (New York)
• Davis Polk & Wardwell (New York)
• Wachtell, Lipton, Rosen & Katz (New York)
• Skadden, Arps, Slate, Meagher & Flom (New York)
• Kirkland & Ellis (Chicago/New York)

What They Do for Family Offices

1. Estate Planning

• Draft trusts, wills, foundations
• Structure GRATs, CLATs, dynasty trusts
• Advise on generation-skipping transfer tax
• Coordinate with tax advisors on optimal structures

2. Entity Formation and Maintenance

• Set up holding companies in Cayman, Delaware, etc.
• Draft operating agreements, bylaws
• Handle corporate governance
• Maintain legal compliance across jurisdictions

3. Transaction Work

• M&A deals (when family office buys/sells companies)
• Real estate transactions (especially cross-border)
• Private equity investments (negotiate terms, due diligence)

4. Litigation (When Things Go Wrong)

• Family disputes over trusts
• IRS audits and Tax Court
• Divorce proceedings (protecting family office assets)

The Billing

White-shoe firms bill by the hour, and partners charge $500-1,500/hour depending on seniority and specialty.

A simple trust might cost $50K-100K to set up. A complex multi-jurisdictional structure? $500K-1M+.

And like Big 4 firms, elite law firms often work on retainer for family offices: $200K-500K/year for priority access and ongoing counsel.

The Specialists: Appraisers, Consultants, and Facilitators

The Appraisers: Making $100M Worth $40M

Remember from Part 3: aggressive valuations are key to minimizing estate/gift taxes. That requires appraisers who specialize in discount methodologies.

Top firms for family office work:

• Duff & Phelps (now part of Kroll)
• Houlihan Lokey
• Stout
• RSM

These firms provide:

• Art appraisals: For estate tax, insurance, charitable donations
• Private company valuations: Applying every possible discount
• Real estate valuations: Conservative for tax, aggressive for insurance
• IRS audit defense: Expert testimony in Tax Court

Cost: $10K-50K per appraisal, depending on complexity. For a full family office portfolio valuation (dozens of assets), $100K-300K+.

The Consultants: Family Office Advisors

There's an entire sub-industry of consultants who help families set up and run family offices:

• Botoff Consulting (recruiting/staffing)
• FFI Consulting (family office advisory)
• Continuity Family Business Consulting
• Whittier Trust (multi-family office services)

These firms charge:

• Setup consulting: $50K-200K (one-time, to structure the office)
• Ongoing advisory: $100K-300K/year retainers
• Recruiting fees: 25-30% of first-year salary for placed candidates

The Private Banks: Custody and Execution

Even with a family office, you need a bank to hold assets and execute trades:

• UBS
• Credit Suisse (now part of UBS)
• J.P. Morgan Private Bank
• Goldman Sachs Private Wealth Management
• Northern Trust

Services provided:

• Custody (holding securities)
• Trade execution
• Lending (margin loans, securities-based lines of credit)
• Foreign exchange
• Reporting (consolidated statements across accounts)

Cost: Custody fees (0.10-0.25% of assets), plus transaction fees.

The Ecosystem: How It All Fits Together

The Typical Service Provider Network

A sophisticated family office with $1B in assets might have:

TYPICAL $1B FAMILY OFFICE SERVICE PROVIDERS:

INTERNAL STAFF (10-15 people):
• CEO/CIO: $1.5M
• CFO: $600K
• Investment Analysts (3): $1M total
• Legal Counsel: $400K
• Admin Staff (5): $500K
TOTAL INTERNAL: $4M/year

EXTERNAL ADVISORS:
• Big 4 Accounting: $300K/year retainer
• White-Shoe Law Firm: $400K/year retainer
• Private Bank (custody): $1M/year (0.10% of $1B)
• Appraisers: $150K/year (periodic valuations)
• Consultants: $200K/year
TOTAL EXTERNAL: $2.05M/year

GRAND TOTAL: $6.05 million/year
As % of AUM: 0.605% (well under 1% benchmark)

This is why family offices only make sense at $100M+ in assets. Below that threshold, the 1% cost benchmark means you can only afford $1M/year—barely enough for a small staff, let alone external advisors.

The Revolving Door

Here's how the industry perpetuates itself:

1. Investment bank analyst works 2-3 years at Goldman Sachs
2. Moves to private equity (Blackstone, KKR, Carlyle) for 3-5 years
3. Gets recruited by family office at 2x salary for better lifestyle
4. Brings relationships from banking/PE world
5. Hires former colleagues as external advisors

Or:

1. Big 4 tax partner works 15-20 years at PwC
2. Leaves to become family office CFO at lower stress, similar pay
3. Keeps PwC as external advisor (now pays his old firm $300K/year retainers)
4. Hires former PwC colleagues for specialized work

It's a closed ecosystem where everyone knows everyone, everyone came from the same places (Ivy League → Wall Street/Big Law/Big 4 → Family Office), and everyone profits from the same families' wealth.

The family office industry is a $3.2 million per year (average) machine designed to help 10,720 families manage $9.5 trillion while paying as little tax as possible. It employs hundreds of thousands of people—from CIOs making $1M+ to Big 4 partners billing $1,000/hour to appraisers who will value your Picasso at whatever number minimizes your estate tax. And the entire system is invisible to the 99.9% who will never have $100 million. The people who run family offices make more in a year than most people make in a lifetime. The Big 4 make $212 billion in combined revenue. The white-shoe law firms bill millions per client. And every single person involved has a financial incentive to keep the system exactly as opaque, complex, and tax-advantaged as it currently is. Because the more complex it is, the more you need experts. And the more you need experts, the more the industry grows.

NEXT IN THE SERIES: Part 5 (the finale) examines how wealth actually passes down through generations—the trusts, foundations, and dynasty structures that let billionaire families avoid estate taxes for 100+ years. We'll document the "1,000-year plan" that some families use, show how the Rockefellers and Waltons structured generational transfers, and prove that once wealth enters the vault, it never comes out. The final part will tie everything together: from the Hong Kong Model's opium traders to the 10,720 modern family offices managing $9.5 trillion—showing that institutional money laundering isn't a bug in the system, it IS the system.

Sources & Further Reading

1. Social Life Magazine: Family Office Costs (2024)
2. Aleta: Family Office Costs and Fees Explained (2025)
3. Mr. Family Office: The Real Cost of Running a Family Office (2025)
4. CNBC: Talent War Between Family Offices and Wall Street Drives Up Salaries (2024)
5. IE University: The Big 4 Companies - Who They Are and What They Do (2025)
6. Management Consulted: Big 4 Audit Clients List (2025)
7. Big 4 Accounting Firms: The Complete Guide
8. Asseta: Decoding the Real Cost of Running a Modern Family Office (2025)

Disclaimer: This blog post presents research and analysis based on publicly available sources. All factual claims are cited and linked to their sources. Interpretations and conclusions are my own. This is educational content, not financial or legal advice.