Complexity is the single biggest driver of costs for single family offices, according to a new study by Family Office Exchange.

“The scope of services offered and the size of the family both contribute to complexity, but it is the number of entities supported by a family office – including individuals, households, trusts, and partnerships – that is the best predictor of office costs," said Lisa Ottum, senior research analyst for FOX and lead author of the study.

“Each of these entities generates additional service needs and transactions that must be fulfilled by office staff, stretching the capacity of existing employees and ultimately increasing office expenses through additional hiring,” she added.

Although certain types of complexity are necessary, the study found that there are many unnecessary complexities that can be eliminated. These include legacy complexity, complexity due to skill or technology gaps, under-utilized entities, and advisor redundancies.

The study, The Cost of Complexity: Understanding Family Office Costs, was co-sponsored by Pitcairn.

Cutting costs by reducing unnecessary complexity can be achieved without compromising a family’s goals, FOX found.

Reducing family office complexity and meeting a family’s goals are not competing priorities, according to Leslie Voth, president and chief operating officer of Pitcairn.

“The key is to learn to distinguish between necessary and unnecessary complexity in order to maintain service quality while eliminating inefficiency,” she said.