In a client service-based industry such as wealth management, it is the people that make or break the business, says family office recruitment firm Agreus.

It is no secret that having a well thought-out
hiring strategy that takes into account the sourcing and training - as well as
retention - of staff is essential in the single family office space.

Indeed, in a client
service-based industry such as wealth management, it is the people that make or
break the business, family office recruitment firm Agreus says in a new report (this can be viewed here).

“There is a shortage of specialist family
office recruitment firms, so often when SFOs reach out to hire, they will use a
generalist recruiter who doesn’t necessarily understand the sector,” Paul Westall from Agreus told this publication.

But perhaps more crucially, SFOs often think they can “cut
corners” when it comes to recruitment, says Sebastian Dovey, managing partner,
Scorpio Partnership. “They can, but they
just increase the risk of failure.”

Dovey believes that
one of the main challenges is often that the SFOs themselves are “poorly
constituted,” with unstructured reporting lines, governance protocols and
oversight committees.

“This makes it tough
to attract truly good talent from the institutional market as they would be
uncomfortable in this environment,” he said.

Not in a straight line

Likewise, the
decision-making process in the SFO is usually “very circular, not linear,”
according to Kathryn McCarthy, a New York-based independent advisor to families
and family offices. McCarthy sits on a range of family office boards and
investment committees and, notably, started the family office for the Sulzberger (New York Times) family.

“You have to be able
to deal with this circular type of reasoning sometimes because it’s a family -
there are a lot of things going on. It’s not a corporate environment,” she
said.

The “key issue,” Scorpio's Dovey
added, is to meet the principle wealth holders and also, typically, the board
of trustees.

“Quite often, only the
latter really has a role to play, particularly with many European families. It
means that the recruit is often pretty blind of the underlying characteristics
of the principal wealth holders,” he said.

As McCarthy
highlighted, smaller offices - with, say, three members of staff and three
family members - perhaps don’t need a formal structure for
governance.

But when it comes to
larger organizations with multiple family branches and generations, “you’ve got
to have some formality about the way you make decisions,” she said.

Candidates

Tayyab Mohamed of Agreus believes that SFOs need to have a clearer
definition of the roles they hire for. As noted by Evan Jehle, a
principal in Rothstein Kass’ Family Office Group: hiring the wrong
person can be “catastrophic.” 

Key questions raised by SFOs during the hiring process will likely
include: Is the person a good fit for the family culturally? Will they
have long-term commitment to the family’s objectives? Do they have the
right mentality for working in the SFO environment? Do they understand
the SFO model?

“The amount of extra time SFO employees have to spend in training a
new employee in addition to their regular day is voluminous. Remember
the old adage, ‘if you have seen one family office, you have seen ONE
family office.’ No two are alike, so there is a tremendous amount of
time spent in transitioning that new employee to the processes and
procedures, learning the family structure and financials, etc,” Jehle
said.

Another key challenge,
McCarthy added, is that new recruits have to fit into the SFO’s culture, and
believe - or at least honor - what the family is all about. Having said that,
candidates seem to be “getting smarter” about the questions they ask.

“They want to know
that the office is viable…they want to know about the family and the
decision-making process, particularly if there is an investment component,” she said.

Sources

It has been argued
that employees for SFO roles are often sourced via individuals within a family
office’s network of business and/or social contacts, but that this may not be
the most effective way to successfully hire.

Click here to view leaders in the family office and wealth management space discussing the
issues and challenges they face.

“There is a high
tendency for this in the first round of hiring,” Dovey said, adding that this
tends to change as the SFO grows. “Once the employee headcount is greater than
ten it is no longer dependent on close contacts.”

According to McCarthy,
who has worked with large SFOs in the US, UK, Middle East and Latin America, the SFO
market in the US tends
to be “more open” compared to other regions, which could be attributable to the
fact that some of these offices are older.

Although, she added:
“Many of the newer offices have spun out of an operating business, so that’s
where they’ll go first and where they’re most comfortable. I’ve seen a lot of
CFOs coming out of operating businesses and being asked to run the family
office.”

And while many
families engage executive search firms, even the search firms they select are
“most likely coming from a recommendation from one or more of those contacts,”
says Jehle.

Another point is that, while
most people agree that clients should be involved in the recruitment
process, this depends on the nature of
the family and the profile of the individual.

“We often see a desire
from the families that they do not want to be involved,” Dovey said. “In some ways they
already feel that by committing [to] the family office they are essentially
distancing themselves from the day-to-day of managing their wealth and wealth
interests. To a degree they are right, but if they are too disconnected from
the business they will usually end up disappointed.”

SFO vs. MFO

While it could be argued that there is larger scope for career progression at
multi-family offices, primarily due to their size, there are of course many
reasons why the SFO sector is highly sought-after.

“What I hear most from
people I speak to is that they like…to see the results of their work; they’re
not part of a group that then goes to another group, and another and so on,”
McCarthy said.

She added: “They can
have direct input and better control the process, particularly if they are
running the office or have a senior role. They’re not a cog in the wheel
and unlike MFOs they don’t have sales pressure. All the MFOs - particularly as
regards senior roles - are for-profit and have to bring in clients.”

Conclusion

Although there is “all
kinds of buzz” about the SFO space, McCarthy noted that it’s not a big subset
of the overall market. “So when you think of the opportunity set [in
recruitment], it’s fairly small.”

What is happening,
however, is “much more global,” she explained.

“You see families in
regions where they have a local office and then they have one in London and New York to do investing or more
high-end technical work, for example.”

And, while there are
of course many “robust” family offices in the US, personnel don’t turn over that
much, she added.

“What is going on now
- particularly with the long-established offices - is that you’re seeing (to a
lesser degree in the UK)
a transition in the office leadership from someone who is about to retire.
There, there are recruitment opportunities. But they typically don’t promote
from within, they hire from outside.”

Meanwhile, Jehle said
he is seeing some SFOs move to an outsourcing model, which he believes has
created a “great opportunity” for MFOs and outsourced providers to hire current
and former SFO employees.

“However, SFOs are not
going away, so the job opportunities are out there. They just might be hard to
come across if you are not using an executive recruiter or you don’t know
someone who knows someone.”

Jehle emphasized that, because each family office is
unique, their specific requirements are going to of course be based on their needs.

In his words, a candidate should be:

1.       Confidential.
You can test for this by asking the candidate for names of former clients or
information on families and see what they share.

2.       Competent.
While this seems like an obvious one, it is often overlooked, potentially
because they are well liked. The person needs to actually be qualified for the
specific job they are being hired for.

3.       Caring.
There is a huge difference between someone who sees this as a job versus someone
who truly cares for the family.