By Thomas Coyle
Compensation for family-office executives varies widely–reflecting a financial-service segment that makes very different demands on senior staffers.
All family offices help rich families manage their lives, but the extent varies. In every conceivable combination, different family offices undertake different tasks: paying bills, booking flights, preparing taxes, keeping balance sheets, managing investments and financial risk, overseeing philanthropy, making estate plans and so on. No two family offices do exactly the same things.
Nor are they staffed alike. Some simply pull an accountant over from a family’s operating business. Others have the look and feel of small private banks, with more than 100 employees. On average, a noncommercial single-family office has a full-time staff of seven, according the Family Office Exchange, a Chicago-based firm that advises ultra-wealthy families.
It’s not even clear how many U.S. family offices there are. By some counts it’s 2,000; others say 5,000.
In this cloudy milieu, it might make sense that total annual compensation for family-office chiefs can go from $100,000 to several million dollars. On average, family-office heads make about $340,000 a year, according to a Family Office Exchange survey of 180 family offices.
In part this variance has to do with assets under management. A family with a few hundred million–the minimum needed to operate a reasonably sophisticated family office–is going to pay less than one with $10 billion.
But function also plays a role.
While some family-office chiefs are “glorified gophers,” others are “asset-management gurus” who command top dollar wherever they go, says Allan Starkie, a partner of the New York-based recruiting and consulting firm Knightsbridge Advisors.
Where family-office heads are pulling in $1 million or more, they’re either so effective–as money managers or as confidantes–that the family puts a premium on keeping them around.
In addition, family offices that became for-profit multifamily-offices may reward executives who led the charge. In this context, Starkie mentions Don Herrema and the late James McDonald; respective heads of the Phipps and Rockefeller family offices as they moved to commercial multifamily status.
By and large, compensation for a top executive at a medium-size single-family office is on par with that of a midrank relationship manager at a private bank.
But where a wealth manager employed by a corporation risks getting pigeon-holed, running a family office can be “all-encompassing,” says Starkie. “You get exposed to more facets of business than most wealth-management executives.”
Family offices are also good places to be if you hate selling. “Single-family offices almost never do business development; at banks, almost every client-facing employee is expected to sell,” says Starkie.
There are social perks too. A high position in a family office can provide an entree to high society–or secure spots in exclusive schools and summer camps for one’s kids.
Finally, with more banks and brokerages chasing ultra-rich clients, some ambitious wealth managers think a stint at or near the top of a single-family office “fast tracks them to running a big firm’s high-net-worth group,” says Starkie.
Thomas Coyle is a special writer with Dow Jones Newswires who focuses on wealth management.