As family offices grow in scale and sophistication, recruitment consultant Tanya Lutyens is out to broaden her approach and expand in the US.
She says: “We increasingly like to look at things from a consulting perspective. Executive search remains at the core but we also explore broader issues.”
The Americans know what they want, listen carefully and they want to grow. They are well resourced and decisive. We are talking to a potential partner in the US and see huge opportunities over there
Her business, Lutyens Advisory, already produces narratives to help clients define their culture, purpose and values. “We may go further to discuss the family’s future direction of travel which can be complex, and sensitive. The next gen, for example, is often keener on squaring social impact with future returns than older generations. They are less wary of the media and tend to be tech savvy.
“Succession planning implies incumbents need to get this relationship right. You need to communicate to find consensus and this can lead to radical changes from the past.”
Lutyens is sometimes retained by clients through an ongoing arrangement to offer access to information on potential hires, new trends, ideas and themes. Networking to find and develop co-investing opportunities is part of the service.
Lutyens likes to discuss performance benchmarks with clients: “Some can be very aggressive in what they are looking for but we find conservative targets, in the main.”
This caution generally hails from generations desperate to preserve their wealth. Family offices whose principals are hedge fund managers – and there are more of them than you might think – prefer to crack on with growth opportunities.
The largest family offices, like those owned by the Agnellis and Safras, have pulled off a succession of ambitious deals but they are cautious where they put their money.
Lutyens Advisory is on the point of launching the Family Office Collective, which will provide clients with access to an array of services ranging from education to lifestyle.
Lutyens says: “It’s essentially a black book which clients can access. It might involve coaching to help deal with generational change, family dynamics or targeted career advice. It could offer property advice to help Middle East families relocate to London; services to get children into the right school or help individuals gain membership of an exclusive club.”
Tanya Lutyens is the great-great-niece of UK architect Edwin Lutyens, designer of New Delhi. She started her career in fund sales at Mercury Asset Management, now part of BlackRock.
She entered the recruitment world when Oliver Stanley brought her to his Armstrong International group. She started her own recruitment firm, which Stanley now chairs, twenty years ago.
Co-founder Anna Rolt used to research and produce TV documentaries. Rolt says: “Neither of us wanted to build a business that would stand still.”
Tanya Lutyens started to work with family offices ten years ago and learned to appreciate the challenge of answering the diverse range of needs. She’s an upbeat individual who hated losing face-to-face access during the pandemic, but concedes that Zoom is now helping her to evaluate candidates: “I’m saving a lot of time.”
US family offices particularly impress her: “The Americans know what they want, listen carefully and they want to grow. They are well resourced and decisive. We are talking to a potential partner in the US and see huge opportunities over there.”
Wherever family offices are based, their starting value would need to be significant – ideally $1 billion – and the issue which matters to all of them is governance. Shareholders vote out bad managers at listed companies but poor governance at family offices can be pervasive unless you develop the right structure.
Lutyens says: “What we often do for a new family office is to start by hiring the board. It might already have a couple of non-executives, but a principal may want to add specific expertise such as private equity. You also need to achieve balance and ideally hire some experts who have already advised family offices and helped to design their structure.”
If a principal is a professional investor, it can make sense to hire a CEO all-rounder to take care of the operation. If a principal has no investment experience it can make sense to build a team around a CIO. Ideally, you also develop rules which let investors develop their strategy without too much interference from the principal. They also need to accept there are limits to the degree of family involvement required by a board. They may have to realise that cousin Percy wouldn’t quite fit with the investment team. And none of this is easy.
A principal may also keep the services of a trusted advisor whose level of access and understanding means their views need to be considered by any third-party adviser.
Lutyens says: “You do need to have their trust. It takes time but one day, if you are any good, they want your advice. That’s a rewarding moment because part of our job is to hire the right people for the right money and incentivise them to stay.”
A good hire reflects well on everyone: “The best managers are the people who are prepared to hire people who are better than they are.”
None of this comes cheap. Whether you need to hire a CIO or a CEO, possibly both, you won’t get much change out of $500,000 a year for each of them. A CEO could even cost $750,000 and a CIO would expect a generous incentive package.
Investment specialists can also be expensive. In a recent survey, SVB Capital said a head of venture capital might expect $360,000, including bonus.
Lutyens points out family offices can be wary of offering large performance-related bonuses based on a formula, for fear their investors end up taking too many risks. Again, it’s all about achieving the right balance.