Last week, we hosted our exclusive Family Office event “Unlocking Family Office Governance, Compensation & Retention”. This event brought together over 60 Family Office Principals and executives. Apart from the opportunity to socialise and network with like-minded peers in the community, the event featured incredible discussions of the critical considerations surrounding Family Office structure, governance, and the importance of professionalisation.

For those who have missed the event or would like to refresh their memories, this article is a summary of the discussions.

Global Family Office Compensation Benchmark Report 2023

Agreus’ cofounder Paul Westall began the session by sharing the Global Family Office Compensation Benchmark Report 2023 findings. The 115-page report was created in collaboration with KPMG Private Enterprise, it comprehensively covers all aspects of Family Offices and their recruitment needs, including regional-specific data so Family Offices from across the world can better understand the compensation benchmarks in their respective jurisdictions. He presented to the audience the most common purposes, operational costs, typical Assets under Management (AUM) and compensation structure of Family Offices globally and in comparison, to the ones in the United Kingdom (UK).

He also highlighted the challenges faced by Family Offices worldwide in his presentation. He stated that Family Offices are facing fierce competition from professional services firms and bigger corporations when it comes to recruiting talent. As a result, recruitment and retention of key talent have become a pressing issue in the Family Office space. He also spoke on the lack of professionalisation and formalised governance structure. This was later discussed in further detail in the panel session.

Panel discussion

The panel session featured experts in the Family Office space and was the highlight of the event. Agreus’ cofounder Tayyab Mohamed was joined by esteemed panellists Greg Limb, Partner and Global Head of Family Office and Private Client at KPMG UK, Alice Killingbeck, Partner and Head of Private Client Legal Services at KPMG UK and Jody Symons, CFO and CIO of a Single-Family Office. The panel was moderated by Jeremy Green, UK team head at Agreus.

Proper governance is key

Amid the greatest wealth transfer in history, Family Office governance has become more important than ever. Alice advised that poor governance can be disastrous for families and urged them to consider measures for risk management and cyber security. Tayyab called attention to the lack of a formalised governance structure among Family Offices. Drawing from findings of the global compensation report, he advised families to consider setting up an Investment Committee to add an extra layer of checks and balances to the investment function. Families are encouraged to take a proactive approach to governance and continue to professionalise their entities.

Understandably, many families may be worried about the talk of governance creating problems within the family. Jody offered his insider perspective on this issue, he stated that there are a lot of soft skills involved in pushing for changes in governance structure in a Family Office environment. Alice added that family governance and corporate governance are equally important in the context of Family Offices. Despite it being challenging to implement, all panellists agree that family governance mechanisms and principles are essential to the success and longevity of a Family Office.

Later in the Q&A session, when asked about the time cost associated with the governance process, Jody stated that the time and cost invested into governance shall not be seen as a cost but rather, a necessity. Further accentuating the importance of effective governance.

Having the right team

“A right team of employees that can support the family in achieving their objectives is powerful”, Jody stated. People are the biggest assets of a Family Office, and it is crucial to get that right.

Depending on the scale and needs of the family, the Family Office may have accountancy, legal, tax and investment functions. When it comes to deciding whether to outsource or bring in-house certain functions of Family Offices. Tayyab advised the audience to keep the structure as simple as possible in the early stages. Based on his observations, many Family Offices outsource non-essential functions in the beginning and only internalise more, when they have matured. Jody added that this may also depend on the area of interest and the level of expertise of the Family Office. Tayyab also pointed out that, if the family’s source of wealth creation has been within the investment space, they are more likely to bring in-house their investment functions.

There is an increased appetite for direct investment, especially in the private markets. Indeed, Private Equity has grown to be a very popular asset class among Family Offices. Jody noted that it is important for Family Offices to possess the knowledge and experience needed for Private Equity investment. Tayyab also added that finding and retaining the right talent for Private Equity has become increasingly challenging for Family Offices, as the demand in the space is extremely high and Family Offices are in direct competition with PE firms. To attract and effectively retain this high-calibre talent, he advised Family Offices to familiarise themselves with the industry benchmarks and consider adopting remuneration practices that are common in the Private Equity sector such as Carried Interest.

Multiple jurisdictions and Trusts

Many Family Offices tend to operate in multiple jurisdictions. Jody noted that most Family Offices have functions that perform better in a financial district. Cities like London tend to attract more Family Offices as they offer better sources of investment and investment talent for Family Offices. Greg and Alice believe that Trust can be an excellent vehicle for wealth preservation and noted that there is an increasing trend of families setting up Trusts in another jurisdiction. Tayyab noted that while Trust can be great, it is important to have checks and balances in place by ensuring there is an appointed protector of the trust to oversee the trustees. Alice echoed the statement and suggested that the family shall review the structure of the Trust regularly.

The full Global Family Office Compensation Benchmark Report 2023 can be accessed on our website. If you would like to speak to us about Family Office recruitment and governance, please do not hesitate to reach out, we are happy to take questions. We would like to express our sincere gratitude to those who attended the event, it was great seeing our clients and meeting new faces. We are looking forward to seeing everyone again at our other events in the future.