While compensation is the largest expense for family offices, family office executives are receiving compensation increases above the national average, according to a Morgan Stanley study released Tuesday.
Nearly 40 percent of family offices report salary increases for executives, who could be family members or outsiders, of between 4 percent and 10 percent or more, which outpaces the 3 percent national average for wage increases, according to the Morgan Stanley Single Family Office Advisory Group Study of 300 family offices.
The benchmarking study, which was done in collaboration with Botoff Consulting, also showed that 87 percent of family offices review and adjust compensation on an annual basis. In the past two years, almost all family offices have provided salary increases, the study said.
“Compensation is the highest ongoing expense required in operating a family office,” said Valerie Wong Fountain, head of signature access at Morgan Stanley. “Understanding not only the competitive landscape, but also the trends driving the landscape, is critical [for family offices] to recruit and retain the best talent.”
The percentage of family offices paying bonuses increased last year to 84 percent from 80 percent in 2017. Compensation for executives is directly correlated with the amount of assets under management, the report said.
“The report provides evidence that the family office industry overall is maturing, demonstrated by the growing use of long-term incentive compensation plans” as part of the compensation package, the study said. Three out of five family offices provide some form of long-term incentive compensation, with co-investment opportunity and carried interest being the most prevalent.
The complete report can be found here.