Thinking of working for a family office?
Wealth managers with the right resume—and personality—should find a seller’s market when it comes to filling chief executive and investment officer positions, say search firm executives specializing in the field. But there’s a catch: single-family offices are peculiar places, and prospective employees need to know what they’re getting into.
Since privacy is one of the major reasons wealthy families set up a professionally-run office to handle their investment, tax, accounting, legal and asset management needs in the first place, detailed information about single-family offices (SFOs) is hard to come by. Indeed, even the major family office associations aren’t quite sure how many SFOs there actually are. Estimates range from 2,500 to just under 4,000.
But there’s no doubt that there are plenty of single-family offices with at least $500 million in liquid assets who need talented executives to run the office and oversee investments.
And while many wealth managers, as well as lawyers, bankers and fund managers are interested in working for family offices, few are well qualified, according to Linda Mack, president of Mack International, a Chicago-based executive search and consulting firm.
“There’s a lot of supply,” said Mack, who addressed hiring and compensation trends at the recent Family Office Forum in Chicago. “Put another way, there’s a lot of hay in the haystack. But there are still only a few needles in the haystack that are the right fit for a family office.”
Candidates for a chief executive/chief operating officer position are usually wealth managers, registered investment advisors, private bankers or lawyers who have a strong accounting and investment background as well as management experience, Mack said.
Keeping Many Balls in the Air
“They need to be what I call ‘expert generalists,’ who can fly at 20,000 feet with peripheral vision, see the whole spectrum of the family’s needs, and be comfortable handling a variety of different situations in depth,” she explained.Flexibility and the ability to juggle multiple tasks for a family, ranging from keeping up with the latest developments in trust and estate laws to making sure the driveway for a vacation home gets paved, is critical, agreed Joseph Reilly, president of the Greenwich, Conn.-based Family Office Association.
“You’re going to be thrown into new situations repeatedly,” Reilly said. “It could be a new business the family gets into or it could be a generational transition. But you’re going to be in the middle of it, and you have to be up to speed.”
Above all, executives have to be comfortable with a family’s distinctive culture, say industry executives.
“There’s a saying that when you’ve seen one family office, you’ve seen one family office,” Mack said. “They’re all different, just like every family is different. When things don’t work out for an executive at a family office, it’s usually because there wasn’t a good cultural fit.”
Working for one family is also a double-edged sword for chief investment officers, said Greg Coules, managing director for Hunter Advisors, a New York-based executive search firm.
The attractions, said Coules, who heads the firm’s family office practice, include being able to have a long-term investment time-frame and not having to worry about month-to-month performance and attracting new clients; being able to invest in less liquid assets such as real estate and businesses as well as the opportunity to work with an extremely smart family patriarch who has built businesses and amassed a personal fortune worth billions of dollars.
Blood Is Thicker Than Water
The downside, however, includes unclear reporting lines among family members and getting caught in the middle of family politics and feuds as an outsider. “It can be a very sensitive situation,” Coules said, “because blood is thicker than water.”
And both investment and executive officers who join family offices risk being thrown off traditional career paths, whether as fund managers or at wealth management firms. “You’re not in the game, and it can be hard to get back in,” Coules said. “It’s one of the things that keep people away.”
Nonetheless, the lure of working for a family office remains strong for wealth managers.
“There’s no sales involved,” said Reilly. “You have one client and you don’t have to get more. You also have a big portfolio all to yourself and you don’t have to go through a big bureaucracy to make a decision. There’s also a perceived lifestyle advantage. It’s not as stressful. You’re not up nights worrying about an overnight position you have overseas. And these families can be very interesting. They’re usually made up of interesting people who do interesting things.”
Compensation and Perks
As for compensation, experts say because single-family offices are so heterogeneous, payouts vary widely. Chief executives can expect deals starting at a base salary of around $200,000 to total compensation that can climb to $1 million dollars or more at multi-billion dollar family offices.
Investment officers, who are often recruited from hedge funds, can expect to make more, and pay is usually tied to performance, measured against benchmarks such as the S&P 500 or the Nacubo Composite Financial Index, according to Coules. “The CIO is going to be the highest paid person in a real family office,” he said. “Families aren’t used to it, but I tell them they have to pay up for talent.”
While family offices may not be able to match Wall Street levels of compensation, they can offer executives generous forgivable loans, flexible schedules and the opportunity to co-invest in highly desirable private deals with the family.
Some families will even let executives use their vacation homes or their private plane or yacht. “Families have the ability to be creative, and think of things that would be meaningful to an executive they’re pursuing,” Mack said. “They can customize their offer to attract and retain the right candidate.”