Now, the financial interests of the world´s richest people are represented by autonomous entities. These bodies are hardly to be ignored since they are unique employers and provide top-notch service for high-end clients at the same time. In general, a family office provides for the entire financial needs of an ultrahigh-net-worth family or individuals (UHNWIs). The entry point to establishing such a business is a family with at least $100 million of investable assets.
Fast-Growing Pace
The family office sector has USD 10 trillion in assets under management (AUM), as it follows from the lessons learned at the London Business School Family (LBS) Office Conference 2023 held in April this year. At the same time, it is “one area where we really have no clue what is happening,” according to Professor Florin Vasvari, Academic Director of the Institute of Entrepreneurship and Private Capital at LBS. The wealth management sector has been growing at a very fast pace over the last 10 years, which means that there is a significant level of new wealth. KPMG estimated that around 20,000 family offices exist today.
The truth is, as almost always, very simple: once you get up to USD 100 million, your life becomes complicated enough that you need more than just an accountant and a lawyer to manage it. So what are the modern wealth management solutions?
01 Pay the kind of salaries that are necessary, or at least find other ways of compensating people.
In recent years, firms have realised that this is the best way to attract the kind of talent they need to do private equity or run in-house portfolios. On average, a typical American single-family office supports around 14 staff members, eight households, and around 20 family members, as well as around 59 entities, including foundations or nonprofits, business entities, and individual trusts, according to a report on single-family office compensation trends published this September by Morgan Stanley.
02 Employ staff with more sophisticated skill sets.
In particular, top investment managers are in high demand. Ideal candidates are often already trained by a big bank, consulting firm, or asset manager. The position goes with the salary: the median pay for a chief investment officer at a family office in the Morgan Stanley study, reflecting the highest tier of employee compensation, came in at almost USD 926,497. If a family office wants to grow, it must not only pay wages and bonuses but also offer incentives like co-investment opportunities.
03 Attract the personalities.
Family offices (FOs) should lean into what the banks or other large firms might not have. It is personalised compensation, a perspective on career beyond classical hierarchical growth. Family offices can be wildly different in terms of work culture, investing strategies, taxes, and estates. It takes a unique personality to work at a family office, though. It’s not only the hard numbers of working a portfolio that must be accounted for, but also the soft skills and chemistry of getting along with all the members of a family.
04 Always have a plan.
The family office is mostly more than just the management of wealth. The FOs are dealing with all of the families, their residences, their trusts, their tax issues, and often their philanthropic pursuits. Or they are dealing with the household staff or trying to fix a leak in the roof at the ski house. And finally, they must know how to steer the family through governance in the future. Therefore, creating a clear system that families can use to guide their decision-making and wealth transmission is extremely important.
05 Make the family happy.
According to the website Financial Planning, therapy and addiction services are some of the biggest new support services a wealth manager can offer a family office. “The biggest change in the last year has been the desire for families to have connectivity on the physical and mental health side of things,” Aaron Bates, the head of ultrahigh net worth and growth strategies at Bernstein Private Wealth Management, said in an interview. The demand has been driven by younger Gen Z clients exhibiting a generational shift in attitudes towards mental health from ignoring it to centering it. “As an advisor to these families, it is our duty and our job to understand what those complexities are,” Bates said. “Because getting that right is as important, if not more important, than getting the asset allocation or asset location right.”
