Solving The Family Office Talent Conundrum - EIA Family Office Pte. Ltd.

Human capital is a fundamental pillar of organizational success, yet it presents a significant challenge for family offices. Not only are inflation and a talent shortage escalating staffing costs, but the very nature of family offices inherently creates complexities that often hinder talent acquisition and retention.
 

With the rise in popularity, many family offices are being formed and will need to hire their first employees — a bit like startups. However, if scaling a family office longevity is also intrinsically linked to talent, successfully navigating the various human capital obstacles is vital.
 

Below is an overview of the five family office talent challenges that require careful consideration when formulating strategies to address them.

Reputation is critical in attracting top talent, yet it remains a tricky subject in the family office space. The innate lack of opacity, privacy concerns and little to no media coverage on any aspect of their operations or dealings, all of which exist for obvious reasons, also work against family offices when it comes to reputation building outside of the industry's inner circle. Li Ka-Shing said it best when he stated, "A good reputation for yourself and your company is an invaluable asset not reflected in the balance sheets."

While those in the know can construct opinions about various family offices informed by their knowledge, experience and personal networks within this space, most fall outside this purview. If there is an awareness of a family office at all, little is known about their brands, values, objectives and ethos. This makes connecting with them or even considering a career within one highly unlikely.

Several new boutique family offices have launched in recent years and even though there’s an increased awareness around what family offices are (both serving single or multiple families), attracting talent is still a challenge. Alberto Casna, head of marketing and business development at one of these new family offices Brightside Capital explains, "Family offices are not the first thought when a talent approach the labor market. This is the very first challenge. Right after a financial degree, many people want to go into investment banks, hedge funds or other big players in this industry. These players are well known, and since they are big, they can provide a different solution for someone's career. Family offices, on the other hand, are often small, and their brands are usually unknown, so for young talent, it's difficult to get to know them."
 

Simultaneously, family offices struggle to gather relevant data on new talent as the available data is too generic for their specialized needs, exacerbating this disconnection.

Now more than ever, family offices must raise their public profiles and make their circles bigger. Brand-building exercises are invaluable and should be streamlined across all communication platforms. Key executives should consider engaging in thought leadership initiatives beyond the family office space. This may involve publishing insightful articles, seeking speaking opportunities at events or sharing expertise on relevant topics. Participation in philanthropic and social impact projects also garner broader community awareness and engagement that builds reputation. Attending professional networking events to build a network of contacts within complementary industries strategically is of immeasurable value. Finally, creating peer groups with trusted and reliable members across sectors can address the talent data challenge.

Industry insiders are acutely aware of the benefits of working in family offices. The unique organizations enable employees to participate in a wealth ecosystem that can shape the future. With touchpoints in almost every industry and exposure to new technologies and service providers on an ongoing basis, a career in the family office space is rarely mundane and allows for creativity that many financial and investment institutions cannot afford.

Still, only those in the inner circle know this, and these talent pools are rapidly drying up. This has necessitated recruitment in other ponds. Where and how to connect with talent is a vital consideration. Traditionally this has been executed through personal networks, but the current market conditions necessitate a shift. While few resources focus on family offices and potential employees, this is evolving with the creation of targeted family office jobs platforms in this space.

One way to attract talent early on is to conduct outreaches within top universities to tap into young talent, introducing the family offices and their brand. In addition to in-person outreaches, students can also be engaged digitally with relevant weekly content and invitations to educational initiatives, much like a nurture campaign.

Thinking outside the box when attracting talent requires significant time and resources. Still, it is a strategy that can yield considerable dividends when effectively executed.

Because of the traditionally discreet nature of family offices, information is often kept confidential — for good reason. However, even when talent has been identified, withholding critical information during the hiring process can count against the family office as it can either deter the right talent or attract the wrong talent due to ambiguity in the role description and responsibilities. Elements like assets under management are often kept confidential, but the skill set required to handle different asset values varies considerably as these increase.

These factors need to be considered when recruiting, and specs with as much detail as possible need to be drafted to create trust with prospects. Additionally, as recruitment drives occur outside trusted networks, the need for transparency surrounding the job spec, interview process, and selection criteria increases. Timely, honest feedback and clear communication throughout the process are vital.

Recently the latest editions of several multi-year reports on family office compensation have been published. This is fantastic benchmark data for an industry that previously disclosed little in the way of this type of confidential information. The insights garnered from these reports are useful when it comes to talent acquisition and retention and serves to inspire competitive compensation packages.

The KPMG / Agreus Global Family Office Compensation Benchmark Report notes that family offices are "increasingly introducing employee participation schemes like profit sharing, rise in B corps and interest in employee ownership trusts, whereas, on the personal side, Family Offices are devising professional compensation structures that incentivize excellence and ensure longevity in their new hires. This will see the likes of carried interest, co-investment opportunities and long-term performance bonuses rise in popularity and for the first time, they will not just be offered to C-suite Family Office professionals, but instead, anyone deemed critical." The Morgan Stanley Compensation Report (produced alongside Botoff Consulting) indicates that nearly 40% of family offices report salary increases between 4% and 10% or more, which outpaces the national average of 3%.

These types of data points allow family offices to review their compensation and benefits packages and ascertain whether these align with offerings in the family office industry and the broader marketplace. Based on this information, remuneration packages aligned with the family office's mission, vision, values and objectives can be constructed, or adjustments to existing ones made. This helps to build competitive offerings and long-term retention structures that can be marketed to broader talent pools to entice and retain the right employees.

Recruiting the right talent for family offices is only one of the challenges faced. Retaining talent is another. While compensation and benefits packages are a powerful retention tool, it's not always only about the money.

Softer factors are often at play. Transitioning from large corporates and investment or financial institutions can be a significant culture shock for executives. The expected degree of freedom is often tempered by the principal's ability to allow this. Additionally, family offices are often smaller, accompanied by certain expectations, such as being involved in the training and mentoring young talent, a function not usually required in larger firms.

Much of this can be mitigated if clearly outlined in the hiring process. Again, transparency is critical. Furthermore, investments should be made to foster open communication and engagement, and programs designed for professional development and growth should be implemented. Flexibility and autonomy within roles should be explored and defined as this can help to compensate for any limits imposed on freedom. Whatever the family office can do to consider and facilitate their employees' needs and ambitions goes a long way to retaining them long-term.

These challenges are not unique to family offices, and a lot can be learned by how startups approach similar challenges. Solving the family office talent conundrum requires agility, creativity, transparency and connection to overcome the obstacles its nature inherently creates. This shift is necessary to secure the talent required to guarantee longevity and success.