Family offices are known for the long tenures of their professional staff — but they are not immune from labor market trends. And as the family office world becomes increasingly professionalized, it’s even more important for family offices’ recruitment and retention strategies to evolve.
The 2023 Global Family Office Compensation Benchmark Report from KPMG Private Enterprise and Agreus, a resourcing and recruiting firm that works with family offices, sheds light on the staffing challenges facing family offices — and some solutions.
The report, based on a survey of 625 single family office professionals worldwide, found that family offices do indeed have loyal staff: 25% of family office professionals have been working for their family office for more than 10 years; an additional 21% had been for six to 10 years. But despite this longevity, one-third said they would look for a new role this year. The most frequently cited reason for making a move: a growth opportunity (42%), followed by the ability to make a greater impact (22%) and better compensation (16%).
Long-term financial incentives
As family offices find the recruiting landscape increasingly competitive — and especially as they look to compete for talent with private equity firms — they need to find ways to retain their key employees that go beyond simply depending on the employees’ loyalty. This can be a challenge, however, since family offices often make longer-term investments than do private equity firms, reducing the opportunities for payouts.
“If you’re not intending to sell an investment for 30 years, how do you incentivize that?” Tayyab Mohamed, co-founder of Agreus, asks.
The KPMG/Agreus survey looked at long-term incentive plans(LTIPs), which have become increasingly popular in recent years and can include carried interest, co-investment opportunities or long-term performance bonuses.
The survey found that overall, 23% of family office professionals receive an LTIP, with the most common reported structure being carried interest (44%). There was some regional variation in the prevalence and types of LTIPs:
• United States: 34% are offered an LTIP, with the most common types being co-investment opportunities (38%) and carried interest (38%)
• UK: 18% are offered an LTIP, most commonly co-investing opportunities (50%)
• Europe: 19% are offered an LTIP, most commonly carried interest (55%)
• Asia: 11% are offered an LTIP, with the most common types being co-investing opportunities (50%) and stock options (50%)
Varying paths to the family office
“Until this professionalization of family offices happened, the usual approach for families was, ‘Why don’t we hire the banker that helped us over the years?’ or ‘Why don’t we hire the accountant we know?’” says Mohamed. “It’s all about who they know and who they trust. It was never really professionalized until recently.”
Now that family offices are broadening their talent searches, there are a number of different backgrounds that can lead to a family office role.
The KPMG/Agreus survey found that 31% of family office professionals came from investment management backgrounds, 15% from accountancy and 13% from banking. Smaller percentages had tax or legal backgrounds, and 19% fell into the “other” category, which includes engineering and property management, as well as those who entered the field straight out of college. Over half of the family office professionals surveyed had no prior family office experience when they joined their current family office.
A challenging role
However, not everyone easily makes the transition from a large, structured corporate environment to a family office. Taking a family office job is not, for example, a good way to ease into retirement after a taxing career in professional services, Mohamed says.
“You are not siloed like in a corporate environment, where you have a very defined remit and performance measurements in place,” Mohamed says. “You’ve got to be a real problem solver. You might not have the answers for everything, but you would go about finding those answers.”
Family office professionals also need to deal with interpersonal relationships – with family members and sometimes among them – that can be more complex than in a typical corporate office.
“It’s actually an extension of the family in many ways, in terms of the ethos, the culture, the vision – everything is very closely tied in with the family,” Mohamed says. Family stakeholders could include multiple generations and potentially married-in family members. “Sometimes that creates a clash of personalities, like a bad Christmas dinner. The really smart family office professional accepts that and knows how to navigate those situations in a professional way.”
An eye to succession
Although family office professionals often stay on the job for years, they will eventually retire or move on — and when they do, replacing a long-tenured key staff member can be a challenge.
Families that have some warning that a key family office staff member is planning to retire may want to consider a succession hire, Mohamed says. The family office can hire a deputy to the CEO or CIO who will work alongside the executive for some time before the person retires. This can make for a smoother transition both inside the office and in relations with family members.
“You don’t want to wait until the person has left – you want to have a handoff,” Mohamed says.
