Precautions to Take When Working with Third-Party Service Providers

Image via pexels.com

Based on a recent report by Ocorian, Family Offices (FOs) are increasingly reliant on third-party service providers, and only plan to increase outsourcing. Although this trend improves efficiency, it certainly exposes family businesses to more potential risks.

And as a financial advisor or investor, your primary responsibility is to protect the family’s wealth. So, precautions working with any type of third-party is a top priority.

But these days, we hold information so high we can forget (as discussed last week) that information can also be a source of great risk.

Collaborating with third-party service providers demands caution and utmost attention to detail.

According to the report, 91 percent of over 130 FO professionals anticipate an increase in outsourcing would increase over the next three years, with 28 percent expecting a significant rise. Only 3 percent foresee a decrease in third-party involvement.

First, you want to research their reputation. Dig into their financial stability, consider their compliance with regulations, and evaluate their track record. Assess their suitability for your FO’s specific needs.

Lay out clearly defined contracts. This is crucial. Specify services, performance metrics, timelines, and dispute resolution procedures. Ensure confidentiality agreements protect sensitive information. Make it all crystal clear.

Lastly, remember your job is to protect. When you expose FOs to an unwarranted third party also exposes them to many damaging risks. Your responsibility is to mitigate these risks and protect their wealth.

Above all, no matter who you’re dealing with, remember that safeguarding the family's interests should be your number one priority. It may be easy to leave loose ends unattended, but it’s always in the careless oversight that things can go sour.

Because, regardless of what the job is, at the end of the day, the buck stops with you.