Family offices are private wealth management advisory firms that serve ultra-high-net-worth (UHNW) individuals and their families. Right now, they’re losing the talent war against tech and other industries. This unfortunate situation is a product of many things. These challenges count their unique operational structures, misaligned career pathways, and the growing expectations of trust from families. The number of family offices around the world is expected to increase from 8,030 to 10,720 by 2030. With this rapid growth, assets under management are slated to increase from $3.1 trillion to $5.4 trillion, all emphasizing an immediate need to address challenges that accompany their rise.
From the interview subject’s experience, family offices can seem like a gamble to prospective employees given their typically less-formal structure that can lead to added ambiguity. The undefined reporting lines and career progression paths add to the mystery even more. Retto Jauch, a partner at the family office advisory firm SZ&J, noted how difficult a tightrope act they have to walk. He highlighted a unique challenge for employees. They need to engage deeply and authentically with family members, yet be sensitive and respectful to their needs.
This needs talent and desperation is driving many family offices to provide very competitive compensation packages. For example, that they might spend as much as $190,000 a year on executive assistants. And even with lucrative salaries, family offices contend with an alarming turnover rate for jobs connected to investments. Employees gone in one to two years max. This makes it clear that not even the biggest financial carrot alone is going to be enough to keep staff.
The importance placed on relationships and trust is perhaps the most important consideration in family office hiring decisions. Even as a startup, Jauch noted that some families are more interested in trust than credentials when hiring new team members. This sentiment is echoed by Tobias Prestel, managing director of Prestel and Partner Family Office Conferences, who stated, “Why did the boss give the accountant the money? Because they have a lifelong relationship.”
Given that family offices are facing an advisor crisis in U.S. wealth management, there is a huge shortage projected. The competition for these skilled professionals makes it no easier. A report from McKinsey highlights this impending crisis, indicating a growing need for experienced advisors as the wealth management landscape evolves.
Beyond just money, it seems that family offices have been more creative at wooing talent. To attract these highly sought after professionals, they routinely offer co-investment opportunities and a cut of investment management profits. This method typically leads to highly challenging positions. People will be forced to combine many roles, including serving as their own chief investment officer and chief financial officer.
Even the founder of Jenga, Iris Xu, recently pointed out this pernicious challenge. Out of all positions in family offices, she remarked investment-based roles are the most difficult to recruit for. She remarked, “That’s a very tall order. Very few professionals are both willing and capable to cover all these areas.”
Many candidates are reluctant to sign on with family offices. They’re concerned about the lack of transparency and process in general. John, a lawyer who recently declined an offer to be general counsel to a Singapore-based family office, specifically raised red flags over the dangers that could arise from ambiguous conversations about pay and advancement. He expressed his apprehension: “Maybe you get along really well with that person, maybe you don’t. For me, at that point of career, the balancing act between my family and all my responsibilities was crushing. The idea that one person’s arbitrary decision to fire me was enough to ratchet up the personal stakes too much.”
Family offices struggle to create a culture that is supportive of permanent employees in the long-run family office careers. As Jauch described it, “You have to have the desire to want to be included in something. You agree to take an editorial approach over a promotional approach on content, quality, delivery and professionalism. Professional development isn’t at the top of your agenda. This outlook mirrors the societal change occurring in how prospective employees see their lives and careers playing out in family offices.
Because of the unusual conditions that create such a family office environment, family employees need a very specific personality type. Moderating egos Taming egos was a common refrain for successful practice, Jauch stressed, especially in these new collaborative environments. Simultaneously, they need to remain confident enough to voice their perspectives. I think there’s a different kind of personality that thrives in that sort of chaotic environment as well,” he added. As a steward of your profession, you counsel the family in a fiduciary nature, discussing their needs and providing sound wisdom and direction. Don’t lose sight of the fact that the ultimate decision is always theirs.