Morgan Stanley Releases Family Office Compensation Benchmarking Report
22 May 2019 - 12:00AM
Business Wire
87% of family offices review and adjust compensation on an
annual basis, according to report
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
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Wealth Management is devoted to helping clients preserve and grow
their financial, family and social capital.
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Media Relations: Christine Jockle, 914.225.6827,
Christine.Jockle@morganstanley.com
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