Top Family Office CEOs Earned $830,000 in 2014, Fidelity Saysby
CIOs, COOs also got median compensation of $500,000 or more
Raises of 3% are expected in 2016, according to separate study
Chief executive officers of the largest U.S. single family offices earned a median $830,000 in 2014 including salary, bonus and long-term compensation, according to Fidelity Investments, as competition for talent boosts its value.
Three of the top four positions at the firms overseeing the wealth of single families with more than $1 billion in assets paid at least $500,000 in median total compensation, the money manager said Monday in its first major report on pay in the secretive industry. Executives are likely to see moderate raises in 2016 earnings, according to a separate study.
The rapid rate of wealth creation in the past decade by technology entrepreneurs to hedge fund titans and beyond has created a growing market for family offices. Google co-founder Sergey Brin and hedge fund manager Bill Ackman are among the billionaires who have formed such firms in recent years.
"There is more competition for family office talent," said Sarah Burley Reid, a partner in recruitment firm Spencer Stuart’s wealth-management practice. "Families are increasingly seeking higher-caliber candidates and as a result, compensation is higher."
Median pay for CEOs and the investment, operations and finance chiefs is in the six figures across family offices of different sizes but trails what top leaders at corporations got in the latest fiscal year. The 200 highest-paid executives at U.S. publicly traded companies made a median of $1.17 million in salary and $28.9 million including bonuses and stock awards, according to the Bloomberg Pay Index.
Family offices vary in structure, with some operating like an investment manager while others mainly handle household staff, taxes and travel plans.
“It’s often very difficult to find comparables in this space” for employee compensation, said Bobbi Bierhals, a partner at law firm McDermott Will & Emery in Chicago who counsels family offices.
Aspects of the job leading a family office merit "combat pay," Bierhals said. CEOs usually play a very personal role, acting as advisers and sometimes mediating family disputes. It’s difficult to determine how much that’s worth, she said.
Fidelity’s Family Office Services unit surveyed 216 single-family offices, which employ an average of 11 people working for 20 family members on tasks ranging from managing art collections to legal services. Sixteen percent of the firms have a family member in an executive role, the report shows.
Many of the biggest firms provide salary and rewards packages with long-term incentives, said Kim Sheehy, vice president of business administration at the Fidelity unit, which provides custody, brokerage, investments and reporting services to more than 150 single family office clients. Thirty-six percent of firms surveyed said they offer executives co-investment opportunities alongside the family, and about 17 percent provide carried interest, or a slice of the profits, in deals.
Family offices are attracting executives from other types of financial firms. MSD Capital, the office of billionaire Michael Dell, hired Douglas Londal in September to run its private equity investments. Londal was previously president at private equity firm New Mountain Capital. Ashvin Chhabra recently left as CIO of Bank of America Corp.’s Merrill Lynch Wealth Management to help run Euclidean Capital, the family office for hedge fund billionaire James Simons.
Chhabra’s CIO peers, at family offices with more than $1 billion in assets under management, were paid a median $650,000 last year including salary, cash bonus and long-term incentives, Fidelity said. Chief operating officers at the largest family offices got $500,000 and CFOs earned $398,500.
CIOs at asset management firms and hedge funds have a median salary of $210,000 plus a bonus of $85,000, according to data compiled by Emolument.com. The London-based salary benchmarking site gathered pay on 67 CIOs in 2015 who are mainly based in the New York area.
CEO compensation declined in step with a family office’s assets, according to the Fidelity report, reaching a median of $300,000 for those below $250 million.
Families usually seek someone for a CEO or COO position who has worked at a family office before, but it’s often hard to extract a high-level family office executive from a stable firm, said Spencer Stuart’s Reid.
“Many of these executives become almost like a part of the family,” she said.
Some of the perks for family members don’t extend to those managing their fortunes. About 6.5 percent of the offices gave executives equity in the family’s business and 4 percent let them use the private aircraft, Fidelity found.
Family office executives can expect modest raises next year.
Eighty-eight percent of firms plan to increase salaries in 2016, with a median boost of 3 percent, according to a study released in October by the Family Office Exchange. That compares with a median 4 percent raise in 2015, said the Chicago-based network of family leaders, which gathered data from 112 family offices in the U.S. and Canada.