A new study found that running a typical family office costs over $3 million yearly. Wealthy families spend anywhere from $1 million to over $10 million yearly on their family offices, with the average being about $3.2 million. This is because family offices are growing larger and more numerous, and they’re competing with private equity, hedge funds, and venture capital.
Family offices are having a tough time finding good staff. They compete with big companies like private equity and hedge funds to hire talented people.
Smaller family offices spend less, as you’d expect. Those managing less than $500 million spend about $1.5 million a year, while those managing between $500 million and $1 billion spend around $2.7 million. The really big family offices, with over $1 billion, spend an average of $6.1 million.
The main cost for family offices is paying their staff, which has become more expensive as there are more family offices now. They’re all trying to hire the best people.
Family offices are also investing more in different things like private equity and real estate. In the US, family offices have over 45% of their investments in these kinds of things, compared to 26% in stocks.
As family offices invest more in these areas, they’re competing more with big private equity firms and venture capital firms for top talent.
More and more, family offices are becoming like big companies. They’re hiring people from other investment firms and private equity firms, which means they have to pay more to attract them.
A survey found that 57% of family offices plan to hire more staff in 2024, and almost half are planning to give their current staff raises of 5% or more. Family office salaries have increased by 10% to 20% since 2019 because there’s so much demand for talented people.
The average pay for a chief investment officer at a family office with less than $1 billion in assets is about $1 million. For those overseeing more than $10 billion, it’s just under $2 million. Family offices are even offering long-term incentive plans, like deferred compensation, to attract people.
Competition is making salaries go up even for lower-level staff. One family office was trying to hire a junior analyst who asked for $300,000 a year.
It’s especially hard for family offices to compete with big private equity firms. So, instead of trying to hire top people from those firms, family offices are hiring midlevel managers and giving them more power, better deals, and higher pay.
Family offices offer perks like better pay, access to wealthy people, and a feeling of being more important than just a small part of a big company. Fifteen years ago, people used to go to family offices to retire, but now they’re going there for top jobs because they pay well and offer good opportunities.
