How to attract and keep specialist financial advisors at family offices

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It will take money and incentives to keep the best staff working for families – advisors, money managers and others who are able to juggle family and business and tailored investing.

A new report from KPMG Family Office and Agreus Group suggests 2023 is the year to concentrate on talent recruitment and retention within family offices, thanks to changing investment strategies, and compensation incentives could be critical to that.

The 2023 Global Family Office Compensation Benchmark Report features data gathered from 625 single family office professionals around the world, including Canada, and tracks figures such as the demographics, career history, succession plans and compensation of family office employees.

According to the report, 41 per cent of family offices expanded their team in 2022 and 40 per cent reported they are looking to hire in 2023. As well, 58 per cent reported a salary increase last year.

Recruitment challenges and the link between compensation and retention

Recruitment challenges experienced by family offices are often unique to the environment, as there is a mixture of family and business at play. The report found these challenges come in the form of finding candidates who have the problem-solving capabilities to perform in roles beyond their job description and sharing in the family office’s core values, which are unique to each.

There are also challenges to compensating these professionals, as their job descriptions and expectations differ, but the report found it to be a valuable part of the recruitment and retention process. More family offices are offering incentives to employees like profit sharing and co-investment opportunities.

“Loyalty and longevity are vital to the success of Family Offices, so it’s important to recruit correctly,” according to the report.

Why there is more emphasis on recruiting external talent

Much of the move toward recruiting external talent has to do with the increased shift by family offices into different investing arms, such as private equity, and this has seen an uptick in recruitment of these specialized professionals, including in Canada, says Yannick Archambault, national leader of family office for KPMG in Canada.

“We are seeing [a greater professionalization of family offices] in Canada and globally. Family offices are maturing and evolving from their early days as small firms to become more institutionalized organizations. Within Canada, this has been most evident over the last three to five years.”

He adds, “Most family offices have completed or are going through an exercise to determine what they keep in-house and what makes sense to be outsourced. This is often based on their core strengths. Every family is different, however some family offices may only focus primarily on investment or tax, for example.”

Another consideration is the need to attract and retain talent able to navigate an increased focus on private market investing and direct deals, he notes.

“As family offices become more institutionalized, we are seeing compensation realign and reflect this reality. … In a competitive labour market, there is a premium for this kind of high caliber talent. Overall, we are finding that an increasing number of family offices are prepared to pay well for these professionals.

“Given current trends, it may be important to review the organizational structure of your family office to make sure it aligns with your five-year strategic plan, and then determine if your compensation structures require changes or tweaks to adapt to the new reality and competitive landscape.”

The risk, he warns, is: “ If you don’t hire the right talent, it will definitely affect your client experience.”

Wealth transfer and the shifting focus and skills of the next generation

Paul Westall, co-founder of Agreus Group, a London, England-based global resources and recruitment consultancy, was part of the team that put together the report and says there were a number of things that stood out in the report when it came to talent recruitment and retention.

“There’s a lot more wealth transfer,” he says, adding that the generation inheriting that money or business may not see it continuing on in the same trajectory as the previous generation and with new aspirations comes the need for different talent.

“Maybe they’ve got different passions or they’re not particularly business driven, then they might have to look to outsource managing the family office to bring in external talent,” says Westall.

“Also what we see is that there’s definitely been an increase in private equity, private markets of investing.

“For example, if the son or daughter is not an investment specialist, they’re not going to be able to be the CIO or CEO of the family office. They may have aspirations to do that, so they might hire someone to come in externally and give them guidance and coaching,” he adds.

Indeed, having the right people in the right roles has always been a challenge within many family offices, as the purpose, investment strategies and general dynamics of the business and family change from year to year.

Why families need to figure out their focus before hiring

For this reason, Montreal-based family legacy guide, Steve Legler, advises his clients to really sit down and figure out who they are and what they need from their family office before they set about building staff – then it’s time to take stock of the human capital available internally and externally.

“The families that don’t take the time to figure out just what it is they are trying to set up now,” may end up with problems down the line, he says.

“They jump ahead and they try to fill in the blanks and grab people where they can grab people and this is a time where finding good people is harder than it’s been in decades.”

Overall, the report highlights that while all family offices have their own specific niches and purposes, there are remarkable similarities in the challenges they may face in finding and keeping talent, as 33 per cent of those surveyed reported they will be looking at a new family office role in 2023.

But Legler says that taking the time to define the role of a family office – because they are all unique – is essential to avoiding knee-jerk reactions when trying to find the right person for the right role.

“It’s hard to not get attracted to that shiny object that you hear about – this guy who had these great results – and you go, ‘Oh wow, I can afford to hire that guy,’ and bring him in and it might not fit,” says Legler.

“So it’s important to know who you are.”

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