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Attracting and Retaining Talent in Family Offices

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Top talent is a driving force behind the operational excellence of family offices, so the need for effective and proactive recruiting and retention strategies can’t be overstated.

Attracting and retaining key people in foundational roles is essential for success, especially given the fact that family offices have robust growth plans on the agenda. According to Botoff Consulting’s 2023 Family Office Compensation and Talent Planning Report, for example, 53% of family offices intend to hire additional staff this year.

Yet recent business and labor-market trends present challenges. Nine in 10 family offices point to a lack of available talent as their primary issue and 51% identify pay conditions as a factor, the Botoff data shows.

These issues affect all organizations, but the talent squeeze has an even greater impact on the critical positions that family offices must prioritize – specifically the accounting, finance and tax disciplines. For instance, a decline in accounting graduates, heightened competition with big-name accounting firms for a smaller candidate pool and increased turnover in these fields all contribute to a challenging environment.

“Historically, the family office space has experienced little or no turnover,” says Jane Flanagan, Director of Family Office Advisory at Northern Trust. “Once hired to work in a family office, you’d retire from that family office. That has changed.”

Contemporary talent solutions must be intentional and creative

Family offices intent on devising competitive solutions to secure the talent they need should pay attention to three engagement trends that are particularly important today:

1

Compensation and bonuses edge higher.

According to the Botoff findings, 75% of family offices budgeted for or approved executive salary increases of 5% or more for 2023, while 80% planned the same boost for staff — levels that outpace the overall U.S. market.

And with many states and municipalities passing legislation requiring pay transparency, job candidates expect organizations to provide greater visibility into the full spectrum of pay practices. Such openness may pay off for both parties: 82% of workers are more likely to apply for a job that lists the pay range in the job posting; 70% of organizations that list pay ranges say it’s led to more applicants; and 65% say pay transparency makes them more competitive in attracting top talent, according to research by the Society for Human Resource Management.

2

Flexibility is now table stakes.

Remote and hybrid work arrangements are no longer temporary, pandemic-inspired responses. “What’s non-negotiable now — and what used to be a perk — is flexibility,” Flanagan says.

More than 75% of family offices have adopted an optional or hybrid work approach, with a mix of in-office and work-from-home schedules, the Botoff data shows.

Personalized employee benefits that emphasize choice, such as those tailored to different age groups, life stages or employee interests, can also help set family offices apart as employers that are able to customize rewards much more nimbly than others. “The key is understanding what your employees value most,” Flanagan says.

Flanagan cites a family office that created a program named after the Dr. Seuss character Thing One. The organization sets a budget devoted to employees discovering “what lights them up — whatever their Thing One may be,” she says. One employee used the funds to take a woodworking class. Another asked for the afternoon off once a quarter to serve on a nonprofit board. This creative benefit program honors each employee’s unique interests and personal development.

Another more frequent practice? At least once a year, family offices share a detailed statement with employees that outlines the full value of the total rewards package they enjoy: “It’s a great reminder of all the reasons to stay,” Flanagan says.

3

Long-term incentives (LTIs) extend beyond the C-suite.

Reliance on LTIs is increasing, with nearly 60% of family offices using one or more LTI vehicles, according to the Botoff report.

Whether they’re using deferred incentives, co-investment opportunities or carried interest, family offices are tying retention-focused LTI plans to long-term goals and performance drivers. They’re also extending the reach beyond top leadership to other critical roles, Flanagan notes. Sequencing cash payouts to encourage employees to stay results in a program that works less like a bonus plan and more like an equity plan.

“The biggest line-item expense on every family office’s budget is compensation and benefits,” Flanagan notes. “Success is all about giving these crucial elements the time, attention and resources they deserve.”

Finetuning your competitive advantage

To remain competitive, family offices should consider revisiting compensation packages on an annual basis. They should also regularly benchmark their talent strategies relative to their family office peers using trusted family office data sources such as the annual Botoff Consulting Family Office Compensation Survey or the FORGE Community Family Office Compensation Survey. Access to quality peer data helps family offices stay competitive as they endeavor to build and sustain high-performing teams.

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Disclosures

This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting or tax advice from their own counsel.  All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.

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