“When you have seen one family office, you have seen one family office”, so the saying goes. If true it means that it’s difficult for senior executives to draw any general conclusions about working in the sector. Fortunately although the phrase is useful to remind us of the diversity of the sector it is not, in the final analysis, any more true than most generalisations.
In fact talking to family office executives and executive search firms some clear themes do emerge. These revolve around the special issues faced by staff who join a small family-run entity, the key role of the principal in choosing new staff and how they go about finding executives they can trust with the task of managing their family wealth.
Senior candidates are aware that the key to the family office is the personality of the principal who has the final say in its running. What’s more, like any family business run by big personalities, this can mean offices which are managed in more or less of an eccentric fashion.
But, unlike a business, there is not always a clearly capitalist objective. The plan is not always to maximise returns, and setting objectives based on ‘profitability’ can be challenging for senior staff and lead to confusion for new hires. “If staff are unclear over their role, the relationship can quickly breakdown” says Paul Cook, founder of Executive Search firm Alderbrooke.
Families are likely at least to expect wealth preservation, but this is relative and some executives will see it as their professional obligation to maximise risk-adjusted return. A CIO of a family office explains: “Even if you are trying to preserve wealth you need to take a professional approach to managing money. Without a clear goal there is a danger of becoming overtly risk-averse and if you badly look after it, capital will be recycled away from you. My duty is to recycle my families’ capital efficiently.”
So if a cast iron relationship with the principal is indispensable, one of the best ways of achieving this longer term is be clear over their objectives and the philosophy they are seeking to follow. This means agreeing a clear brief on investment philosophy from the outset of your employment.
A major difference with family offices over other forms of employment is that over time you are often expected to become a pseudo-family member. As Oliver Stanley, of Oliver Stanley Partners explains, “You will become ‘of’ the family but not ‘part of’ the family”. For those who are literally minded think Charles Ryder and the Flyte family in Brideshead Revisited, or perhaps less happily, Nick Guest in Alan Hollinghurst’s The Line of Beauty.
Some family offices take the approach that, when hiring new staff members, they value cultural fit over professionalism. Others take an arms-length approach and hire and fire on a more objective basis. What’s clear is there is something of a tension between families who are above all seeking such a ‘cultural fit’, and those who value skills and qualifications. That’s not to say that both can’t be achieved, but there needs to be an awareness that fit for the family may not mean fit for the family office.
This is partly because cultural fit is notoriously hard to define, and a know-it-when-you-see-it attitude may prevail when hiring. Words like character, temperament, flexibility, sense of humour and discretion spring to mind when defining cultural fit. Class, religion, nationality, and background may play an equally important role, even if this is not explicitly made clear. For example some families, in what you might call a mini-trend, prefer ‘military types’. “People from a military background can deal with multiple issues at the same time, are unfailingly polite, diplomatic and don’t take themselves too seriously.” explains Oliver Stanley.
This need for a ‘cultural fit’ may extend to the wider family, especially if a transition is expected, and the family is looking to pass on management of the family office to the next generation. Indeed, one gets a strong sense it is more important for your employer to like
you as well as respect you in the family office sector. The distinction between the personal and professional personality is more blurred, and senior executives tend to both like and respect their employers in return.
Happily, as employers, the best family offices have some perceived advantages over the wider financial services sector. They provide long-term job security, a reasonable work/life balance and provide a platform to effect real change. Moreover the practice “tends to be much less bureaucratic, friendlier, and based in nicer parts of town”, explains Oliver Stanley.
But there is a danger in mythologising the sector. “Family office work is not glamorous” warns Oliver, “From an external perspective you become relatively anonymous. You work in a boutique and you keep
a low profile. There are no opportunities for equity.” Indeed since offices are relatively small, there is not the same level of support as large corporations, and you may well be expected to muck in when it comes to administrative tasks.
Average levels of compensation are difficult to assess, although published figures suggest a ball park where CEOs receive around £100-£250k and CIOs £80- £150k basic, with an additional 20% as bonus. But, cautions Paul Cook, such estimates may not worth the paper they are written on. “You have to weight family offices from £150m to £5bn in size. Then you have to consider the complexity, objective, workload, professional background and years of experience required. What’s more, executives can get additional benefits, like access to deal flow and family assets like ski chalets.”
Broadly speaking there are two approaches to hiring senior staff. One is “DIY” based on the principal’s own network of connections and friends. The principal will get the word out, ultimately do the hiring himself and objectives and guidelines will be agreed on a hand-shake and established in detail after-the-fact. The process will be informal, ad-hoc and the guiding principle will be, to paraphrase Robert Cialdini, Author of Influence the Psychology of Persuasion, “People prefer to hire those they know, and like”.
This does have advantages in as much as the person hired has the trust of the principal, and it simplifies the administrative burden and costs of the recruitment process.
The second approach is to look at the skills needed to do the job and from there create a mandate. The family may also use an executive search firm to help them with the mandate and the search and references.
Paul Cook explains: “Although cultural fit is vitally important it is often over played via a vis due diligence. People do not always go out into the market to find the best possible candidate, which may not be from a family office background. First off the family should consider the mandate. Better to say ‘we need to achieve X, how are we going to do that’, rather than ‘this is the person we need to look at’.”
Once the mandate is better understood it will become clearer what solution is needed. Sometimes the idea of employing someone full time falls away and interim managers are considered as alternatives when you don’t need a full time hire. Project work might also be more appropriate for interims rather than having a full time employee on the payroll and bringing in Non- Executive directors is increasingly common.
“Once the mandate is agreed and candidates identified its best to undertake a process of proper due diligence, references, market views, and speak to former bosses, clients and peers,” says Paul Cook.
These two approaches, from DIY to mandate-driven executive search, suggest a creeping professionalism in a sector whose watchwords remain trust and discretion. The trust placed in senior executives inspires many to remain committed for years to those families who reciprocate.