Compensation at family offices: What to expect

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Job seekers looking for a tidy compensation grid that might explain what their salary would be at the average Canadian family office are pretty much out of luck.

Salaries, bonuses and incentive plans vary widely and are governed by many factors, say recruiters and experts in the sector.

But that doesn’t mean candidates must come in with no idea of what might be on the table, says Peter Leo, director, human capital, at Family Office Exchange (FOX) in Chicago. Compensation surveys are readily available, including a 2023 report by KPMG and Agreus that provides data on family office compensation around the globe.

“I don’t think they’re flying blind,” Leo says. “This type of data is out there, which I think candidates obviously use in a lot of cases.”

KPMG and Agreus report data for the Americas (North/South/Latin), but they also survey the U.S. separately. They found that the most common base salary range for U.S. CEOs at family offices is US$280,000 to US$330,000. But numbers can also top out at more than US$1 million. Of the U.S. firms surveyed, 13 per cent were paying more than $1 million.

On top of that is a host of bonus and incentive programs that vary from office to office. The KPMG-Agreus report showed CEO bonuses running at 12 per cent to 30 per cent of base salary on average and long-term incentives being offered to 34 per cent of CEOs.

Surveys can provide compensation information, but “sometimes there’s no rhyme or reason,” says Andrew Mushore, Toronto-based director, engagement manager, interim management and executive search, for B. Riley Farber.

“From my side of the [recruitment] fence there’s a sense of the range, but I wouldn’t say family offices are generally aware of what other family offices are doing,” says Mushore.

Executive packages for CFOs, CIOs, COOs and other senior executives have a base range in Canada of $250,000 and up, reaching as high as $750,000 to $850,000, he says.

Andrew Stockton, managing partner at the Toronto-based executive search firm Gilmore Partners, says the major compensation factors are the family office’s size and complexity. “It really depends on work, the size and the complexity of the organization you’re talking about. At a larger scale, you’re going to have teams of dozens of people reporting directly or indirectly.”

Location can make a difference. A family office in Idaho would likely pay less than one in New York or Toronto, says Mushore, because the pool of talent being recruited is coming from well-paying environments in these major cities.

If offices are seeking specific kinds of candidates, the compensation those candidates might be enjoying at a financial, legal or similar professional firm will affect the offer.

Compensation structures and practices vary across family offices, Leo says, and those offices would negotiate according to the client’s background.

“For example, if they’re coming from a publicly traded organization, they may be walking away from stock or other deferred compensation, which can be a large component of the compensation package. So you have to look at another vehicle from a total compensation perspective, including long-term incentive plans, to get them there.”

At the senior level, Mushore says, short-term bonuses can be 50, 60 or even 100 per cent of base pay. Those bonuses might be structured on individual performance, office performance, or both.

Longer-term incentives designed to promote executive retention are “a more difficult piece to speak to as they vary more depending on the family office,” says Mushore.

Family offices might also offer co-investment opportunities, which allow executives to invest side by side with the family office in order to take advantage of investments that require a large amount of capital.

Mushore adds that sophisticated family offices that have structured themselves almost like private equity or fund firms may offer carried interest, a share of investment profits typically offered to fund general partners.

Some families offer phantom shares, which mirror the family’s equity investments. Stockton says that structure may be used more in offshore family offices, especially when wealth comes from the technology sector.

Family offices may also offer more standard employment benefits such as insurance, professional fee payments and golf club and gym memberships.

Ed Giacomelli, a senior Toronto-based advisor who works with families on family office and succession matters, says severance packages also tend to be a negotiated item. “When they’re well negotiated, they serve both parties.”

The family office scene in Canada is expanding quickly, so the level of experience of the firm can also affect compensation.

“There are a lot of family offices that are starting up, and they may not necessarily know what they’re all about yet. Certain roles are well defined, and others are more aspirational, and therefore recruiting the right candidate is tricky,” Giacomelli says. “Those that have been around for a while have a clear role they need to fill and understand that they have to be competitive.”

One element that is very important to families is retention, he says. “Loyalty is a big factor. So when I talk to people about comp structures … [the question is] how do you create the right alignment, so that if things are working out, you’ve created an incentive for them to stay?”

Stockton says when working with a family new to the space he asks them to consider what they currently pay external firms to do the work, not just in one year but over a few years.

“It’s generally good — I’m not slagging top accounting or legal firms out there, but they have many clients,” he says. “I get [families] to see the opportunity to have undivided attention.”

Stockton adds that the role of the individual in the team affects the incentives.

For instance, he would point out to a client that a compliance person shouldn’t participate in the same way on the investment side because they would be overseeing things that could lead to a better return for themselves.

“You have to be mindful of the structures and particular roles. It’s not a one-size-fits-all bonus structure,” he says. An analyst might receive a small discretionary bonus while the top executives get broader and larger participation in bonus pools.

Given the difference in roles, responsibilities and performance measurement, candidates can expect variations between single and multi-family office compensation as well.

Giacomelli and Leo agree they would expect to see reasonable base salaries plus short-term and possibly long-term incentives in the multi-family space because, like any professional services firm, the professionals who are very good at their jobs are very valuable to their firm.

That being said, compensation may lean more to the base salary than the bonus side for multifamily employees, Stockton says.

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