Here’s an interesting question - are family offices paying their staff less than they’re actually worth? The question arises with the release of a new pay survey for chief executives of single-family offices in the US.
The survey, by Fidelity Investments, found that chief executives of the biggest US single-family offices earned a median $830,000 in 2014, which includes salary, bonus, and long-term compensation. That’s a lot of money, and the Fidelity research doesn't comment on whether it is, or it isn't, but it’s way short of what CEOs are earning at US publicly-traded companies. According to Bloomberg data, the 200 highest-paid executives at these businesses earned a median of $1.17 million in salary, and $28.9 million including bonuses and stock awards in 2014.
The salaries of family office CEOs are never going to compare with top corporate pay, but total packages of less than $1 million might seem a bit stingy given their responsibilities. These can mean combining the skills of a diplomat to manage the family along with business skills to manage the family office. On top of that, CEOs of family offices will often have to manage a diverse portfolio of assets, as well as tax and legal affairs of the office and the family.
In many ways, CEOs at family offices have to be more adept at different responsibilities than their counterparts at corporations. Nevertheless, head-hunters say that most family office CEOs come from the financial services sector. That would make sense given the investment focus of most family offices. But is it necessarily the best place to hire them from? Some have suggested a better place to look is the non-financial corporate world - after all, CEOs of family offices are running businesses.
Whatever the case, given the increasing number of salary surveys coming out about the sector, salary creep among top managers at family offices would appear to be inevitable. These surveys serve as useful benchmarks to start salary negotiations. Maybe for “under-paid” CEOs of family offices that isn’t such a bad thing.