Morgan Stanley’s Single Family Office Advisory group today released a benchmarking report on family office compensation data, in collaboration with Botoff Consulting. The study reports that 87 percent of family offices review and adjust compensation on an annual basis. In fact, over the past two years, almost all family offices participating in compensation studies have provided salary increases. Furthermore, nearly 40 percent of family offices report salary increases between four percent and 10 percent or more, which outpaces the national average of three percent.
“Compensation is the highest ongoing expense required in operating a family office, and therefore requires careful review and consideration,” said Valerie Wong Fountain, Head of Signature Access at Morgan Stanley. “Understanding not only the competitive landscape, but also the trends driving the landscape, is critical to recruiting and retaining the best talent.”
Additional key findings in the report include:
- Eighty-four percent of participating family offices report awarding bonuses last year, up from 80 percent the previous year
- As family office AUM increases, family offices typically will transition from having family members serve in executive roles to employing non-family members
- Compensation for executives is directly correlated with AUM, especially from a total direct compensation perspective
The report provides evidence that the family office industry overall is maturing, demonstrated by the growing use of long-term incentive (LTI) compensation plans. As family offices become more complex and sophisticated, so do compensation structures. Three out of five family offices provide some form of LTI, with co-investment opportunity and carried interest being the most prevalent. The use of formalized annual incentive plans is a growing trend; however, a majority of family offices still award discretionary bonuses, creating a gap with best practices.
“LTI is an important recruitment and retention tool in today’s increasingly competitive landscape. Families considering adding LTI to their compensation plans should ensure that the incentives match their family’s values and goals, as well as the current market environment,” said Fountain. “Most families continue to award bonuses on a discretionary basis in addition to offering LTI plans, making it clear that there is no silver bullet for winning the talent race. Every family is unique; therefore, every compensation structure will be unique.”
The report discusses that candidates often do more research on a potential family office employer than the family office does on the candidate, demonstrating that families must make their compensation plans a priority. Candidates who feel that a family office has well-defined plans for compensation, performance management and governance are more likely to leave their current post to join a family.
The Morgan Stanley Family Office Compensation Benchmarking Report presents a composite of market data from a variety of data sources reflecting family office and general industry roles. The study includes national averages, plus data for San Francisco, New York, Chicago, Miami, Los Angeles and Boston. Data was aged to January 1, 2019. The data sources referenced in the study reflect more than 300 family offices.
The complete study, plus more information on how it was conducted, can be found here: https://www.morganstanley.com/cs/pdf/9528132-FOR-Compensation-Report-Broch.pdf
Morgan Stanley’s Single Family Office Advisory is part of Signature Access within Family Office Resources, a platform of specialized services for ultra high net worth clients to enhance Morgan Stanley’s Wealth Management capabilities. Morgan Stanley Private Wealth Management is the division within Morgan Stanley Wealth Management that is exclusively focused on the ultra high net worth client segment. By providing advice founded on a culture of excellence and driven by global insight, Morgan Stanley Private Wealth Management is devoted to helping clients preserve and grow their financial, family and social capital.
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