For the outsider, single-family offices might seem like hedge fund and private equity groups – black-box like and staffed by financial wizards from investment banking background (mostly of the Goldman Sachs variety). The black-box comparison has some merit, most single-family offices value their secrecy and few people outside of the family and those that work for them know what they’re up to. But when it comes to staff, what matters is loyalty first, and financial wizardry second.
Loyalty is valued above all else because it has often been the quality most appreciated when building a business that led to their success and the setting up of a family office. Families want that loyalty to be replicated at their family office. Of course, expertise is important, but most family office managers are more likely to be ex-lawyers and accountants rather than ex-investment bankers. Also, many of the more senior staff probably have worked for the family in other businesses connected to them in the past. Their time and commitment at these businesses builds loyalty.
Ex-investment bankers often don’t fit into the culture that exists at family offices because they don’t appreciate the fact that the family often has the last say on how to run the business. Many want to run their own businesses and hence set up hedge funds and private equity groups. The glass ceiling of the family at their investment office doesn’t go down well.
The loyalty aspect of family office staff is probably best illustrated by the fact that headhunters – so active in other parts of the financial services industry – play a much less significant role in the sector. That’s because the flipping of senior staff doesn’t happen as much at family offices. As one headhunter told Family Capital: “Managers (at family offices) tend to leave within the first six months because the cultural fit isn’t there, or stay for many years when there is a fit.” He added that having grey hair is valued at family offices. “A 20-something investment banker isn’t getting a job at a family office. A 40-plus investment banker will have a better chance.”
Of course, there are family offices that have employed financial wizards from investment banking or asset managment backgrounds. Michael Larson, the head of Bill Gates’ Cascade Investment is an ex-fund manager, and Marc Rowan, the co-founder of Apollo Global Management, employed ex-Goldman Sachs banker Ken Glassman to head his family office, RWN Management. But loyalty looks equally important to these ex-bankers, Larson has been with Cascade for more than 20 years, and Glassman at RWN has been there since 2010.
Loyalty can be taken to extremes at family offices. For instance, there is the case of a Geneva-based family office employing a very close friend of the family to do little more than open the mail – and is rewarded with a ridiculously high salary for doing so. But, for anyone thinking about a job at a family office, getting to know the family and proving loyalty in one of their businesses beforehand might be a better way to get a job with one than being a financial wizard. And, having a few grey hairs will also help.