A major report examines pay and compensation trends in the world's family offices sector, and examines trends in hiring, location and structure. The proliferation of reports on FOs also shows how their profile is higher than ever before.
A global study of family offices finds that 80 per cent of professionals working in them get a performance bonus that can be more than 200 per cent their basic salary. And 58 per cent secured a salary rise last year amidst higher inflation.
The figures come from Agreus Group, the consultancy, and KPMG Private Enterprise - part of KPMG - in their 115-page 2023 Global Family Office Compensation Benchmark Report. The findings are based on responses from more than 650 FO professionals worldwide.
Some 40 per cent of FOs plan to hire staff this year, the report said.
With as many as 8,000 single-family offices around the world, overseeing tens of trillions of dollars (exact hard numbers are hard to pin down), FOs wield a large financial club, and the compensation of their staff is an increasingly important topic. Many FOs are structured as limited liability companies and partnerships, sometimes because of tax considerations in jurisdictions such as the US. (For information, note that this news service works on an exclusive basis with Highworth Research, a data and research organization tracking the sector. To register for a free trial, click here.)
“2022 was all about recovery, retention, and regulation with an objective of building up and giving back. Family offices began to turn their attention away from the effects of macroeconomic factors and instead looked to review the affairs of the families they serve and put structures and relevant planning in place to protect their wealth in light of potential legislative changes and reputation management,” the report’s authors said.
Family offices typically cost from 0.1 per cent to 0.5 per cent of total assets under management to run, the study found.
Tapping into a trend that accelerated dramatically during the pandemic, the report said 74 per cent of FOs enable people to work from home.
Drilling into the data, the survey found that 58 per cent of respondents said they had received an uplift in salary in 2022; 41 per cent received a rise of 6-10 per cent, and 20 per cent chalked up a rise of more than 15 per cent. Of all those getting a raise, 36 per cent said it was caused by inflation.
On bonuses, 60 per cent of those questioned received a discretionary bonus; 26 per cent received a formulaic one; 20 per cent had no bonus and 13 per cent took home more than 100 per cent of their salary but the most commonly awarded bonus was 21-30 per cent of salary taken home by 20 per cent of professionals. As far as long-term incentive plans (LTIP) are concerned, 23 per cent of FO professionals received them, of which the most common structure was carried interest.
Some 41 per cent of FOs expanded their team sizes last year and 40 per cent said they intend to hire in 2023.
In what remains a largely male-dominated occupation, 21 per cent of all FO professionals identified as female. The UK has the highest share of female CEOs, at 37 per cent. In Asia, all CEOs were male. In Europe, 80 per cent were male, and in the Middle East, the percentage was 75 per cent.
Almost a third (30 per cent) of FOs had more than location.
In other details, the report said 52 per cent of FOs had succession plans; most family offices had fewer than five employees but a quarter had 20 or more.
“While Family Offices began to think about compensating their staff for the long term, the huge strain on talent that we witnessed in 2022 means that family offices will standardize their compensation, embed long term, incentive structures and professionalize their entire approach to recruitment,” the report said.
“To address this issue, UHNW families are increasingly introducing employee participation schemes like profit sharing, rise in B corps and interest in employee ownership trusts, whereas on the personal side family offices are devising professional compensation structures that incentivize excellence and ensure longevity in their new hires.”
“This will see the likes of carried interest, co-investment opportunities and long-term performance bonuses rise in popularity and for the first time, they will not just be offered to C-suite family office professionals but instead, anyone deemed critical.
The report said 42 per cent of participants answered from North and Central America, 29 per cent from Europe, 10 per cent from Australia, 9 per cent from Asia and 7 per cent from the Middle East. The remaining 3 per cent of respondents answered from Africa, the Caribbean, and South America.
Editor’s note: The business of producing reports and surveys about family offices is getting crowded, potentially leading to a law of diminishing returns in their impact. By our reckoning, the following reports come out, not including the KPMG/Agreus one:
-- UBS Global family Office Report;
-- Credit Suisse SFO Survey Report;
-- BlackRock Global Family Office Survey;
-- Citi Report – Direct Investment by Family Offices;
-- Dentons Family Office Direct Investing Report;
-- Goldman Sachs Family Office Survey;
-- North America Family Office Report – RBC (& Camden);
-- Morgan Stanley Single Family Office Best Practice;
-- PwC Family Office Deals Study; and
-- The Global State of Family Offices – Cap Gemini.
This news service intends to undertake a “meta-study” of these reports to see what common points – and striking differences – exist. To comment, email firstname.lastname@example.org