European billionaires fear that those who pay $370,000 a year to CEO of family offices will not be able to find the talent to manage their destiny
While very high net families in Europe are moving rapidly to get things ahead of a massive wealth transfer, the biggest challenge to hand over fate is the clear shortage of workers eager to seek pay cuts to manage billions.
a Report HSBC’s Global Private Banking and Canden Wealth examined the status of European family offices and examined 101 offices with a wealth of $136 billion. Ensuring strong returns and learning how to deploy generative AI was an important concern from those families.
But the biggest obstacle is finding the right people to manage their destiny.
Over a third (36%) of wealthy respondents in the survey said they have a limited pool of talent available with the appropriate personal skills to manage the property. Just a third (32%) said they had a hard time finding a leader with the right interpersonal skills.
Running a family office can be a lucrative gig. The survey shows that the average is $288,000 (274,600 Euros), while the highest-paid CEO at Family Offices earns rakes at $500,000 (476,000 Euros) per year. Although attractive, the numbers do not compare favorably with other investment jobs at similar levels. Executive search company Heidrick & Stargals Found The average salary for a private equity support CEO was $447,000 (426,000 Euro).
Meanwhile, the CEO of a minimum wage family office earns only about $120,000 (114,000 euros) a year.
Billionaires look outside their family
Looking deeper into the numbers, families with assets of over $1 billion pay the CEO with an average of just $370,000 (353,000 euros) per year.
Baseline numbers represent less than 0.037% of the fate of these families. For families, the numbers are low because it’s for CEOs of family offices that cost less than $500 million.
To attract talent, the family office is looking to add more incentives to bring the best talent, the report says. Most offer discretionary performance bonuses, but offer minority co-investment opportunities or share of profits generated.
The Family Office is using historically fame to recruit leaders. Leaders are also tempted by small set-ups. They are usually a single digit number for employees, allowing each worker to have a defined impact. They also tended to attract heirs who were keen to carry their estates.
However, these factors, like before, may not have the same pull for non-family members. Meanwhile, younger generations are increasingly fascinated by retaining their parents’ heritage and are interested in creating their own heritage.
One of the UK founders of the Family Office told the author: “I think there will be a shortage of people to run family offices. A family born in the 1960s and running family offices for 15 or 20 years, has retired.
“Many next Jens will want to do their own thing from their family offices. Recruiting staff gradually becomes more difficult. Who will try to fill the gap? Family offices are forced to bring more specialized staff from financial institutions, and their culture will change.”
However, the CEO of one family office told the author that compliance and regulatory overload at large investment companies is considering moving more investment managers to set up smaller family offices.
As baby boomers hand over businesses and assets to the next generation, the appeal of hiring non-family members to manage family offices is growing. This will save you from the horrifying battle of inheritance among your descendants.
The CEO of the UK Family Office told the author: “Our next Jen has seven cousins and three siblings, all or part of them work in a family business or family office.
Editor’s Note: A version of this article was first published on Fortune.com on December 5th, 2024.
This story was originally introduced Fortune.com