Staffing a family office is a significant — and growing — expense. From UBS’s Global Family Office Report 2023, here are five takeaways about the cost of family office staffing:
1) Staff costs are family offices’ most significant operational expense. The pure cost of running the family office (as opposed to asset management and banking-related costs) accounts for 61% of the overall cost. Staff costs are by far the largest part of this pure cost: almost 70%. And 60% of survey respondents expect spending on staff to increase over the next three years.
2) In-house functions start with the financial core of the family office. The most likely family office functions done in-house are strategic asset allocation (85%), portfolio risk management (77%) and financial accounting and reporting (73%). A majority of family offices also have bookkeeping and accounting functions (72%), portfolio administration (62%), philanthropy (60%) and succession planning (51%) done in-house.
3) Family offices outsource strategically. The functions most likely to be outsourced are legal services (64%), tax planning (58%), and cyber security (53%).
4) Base salary is just the beginning. Bonuses are the most common form of compensation above a base salary: 60% offer family office employees a discretionary bonus and 47% offer a performance-linked bonus. Co-investment opportunities are the next most common form of additional compensation, offered by 23% of respondents.
5) Family offices in the United States are particularly likely to look beyond base salary. In the U.S., 76 % of family office offer discretionary bonuses, and 69% performance-linked bonuses. And 48% of U.S. family offices offer co-investment opportunities.