Family office compensation: The complexities and considerations affecting staff salaries (2024)

FAQs

What is the compensation structure of a family office? ›

Long-term compensation plans in family offices typically consist of deferred cash or stock payouts that vest over a period of time, often three to five years. The vesting element provides a retention incentive, as well as a reward for meeting objectives.

- Cons: Complexity in governance, potential conflicts among families, shared liabilities. - Pros: Consolidation of assets, potential tax benefits, centralized control. - Cons: Complexity in structure, potential legal liabilities, possible lack of flexibility.

Most MFOs have a minimum assets under management (AUM), net worth, or fee level threshold—with most working for families with over $30 million in net worth.

Family offices specialize in managing ultra-high-net-worth individuals (UHNWI), with a net worth of $250 million for a traditional family office and at least $30 million for multi-family offices.

Salary structures are often expressed as pay grades or job grades that reflect the value of a job in the external market and/or the internal value to an organization. Seventy-one percent of surveyed companies reported having formal base salary range structures.

Traditional pay structure is defined as a collection of pay ranges, each with minimum, midpoint, and maximum pay levels. The range spread (i.e., the percent difference from minimum to maximum) typically is from 40% to 60% wide.

A challenge when working through a family office may be the expectations of the family. From their perspective they have hired a company to think about household things for them. Meaning that there could be some blurring of responsibilities due to the more removed nature of the relationship.

The primary difference between family offices and hedge funds is the scale at which they operate. Family offices can be much more meticulous in their management services because they are responsible for a small number of specific families.

Key Takeaways: A family office centralizes wealth management, streamlining interactions with your advisors and simplifying complex legal and compliance matters.

Generally, a family office makes sense for individuals or families with a net worth starting in the range of a minimum of $50Million. However, when making the decision to establish a family office, factors such as the complexity of the financial situation and the priorities of the family should be considered.

What are the rules for family offices? ›

To be considered a family office that qualifies for the exclusion, it must: (1) provide investment advice only to “family clients”; (2) be wholly-owned by family clients and exclusively controlled by family members/family entities; and (3) not hold itself out to the public as an investment adviser.

Common legal entities that are formed include the central family office operation itself as well as related entities like ancillary family offices (secondary family offices set up in other jurisdictions), real estate property management companies, captive insurance companies, registered investment advisors, private ...

The first hire is oftentimes a chief investment officer (CIO), who, for smaller family offices, often serves as the day-to-day CEO as well. Larger family offices typically have a CEO, a CIO, and investment teams that the CIO hires and manages.

In essence, family offices serve UHNW families seeking services that encompass not only financial matters but also aspects like estate planning and philanthropy. Traditional wealth management offers essential financial planning and investment advice to individuals with diverse financial profiles.

A family office typically helps manage the wealth, insurance, and trust and estate issues. A holding company is a portfolio of business equity stakes.

Compensation structures are the pay-based frameworks companies use to establish fair and equitable pay for all employees in the organization. A compensation structure gives a business clear guidelines for assigning initial pay rates, managing raises and distributing bonuses.

Family offices can provide support for the family's long-term vision and broader needs—generally in the areas of unity-building, talent-building, and social impact. For example, a family office can organize family retreats that build unity or family projects that foster teamwork and collaboration.

Most Account Executives are on a fifty-fifty split, meaning commissions can range from approximately $60,000 to $150,000. A talented and experienced AE stands to earn a fair amount. The above information doesn't include other benefits such as bonuses, equity, or profit sharing.