Europe’s billionaires are struggling to find talent to manage their wealth

A new report from HSBC Global Private Banking and Campden Wealth examined the state of European family offices, surveying 101 offices that collectively had $136 billion in assets. Ensuring high yields and learning how to adopt generative AI were the main concerns for these families.

However, the biggest obstacle is finding suitable people to manage their assets.

More than a third (36%) of wealthy survey respondents said there is a limited pool of available talent with the appropriate personal skills to manage their wealth. Almost a third (32%) said they had difficulty finding managers with appropriate interpersonal skills.

Running a family office can be a lucrative job. The study shows that the highest-paid family office CEOs earn $500,000 (€476,000) per year, although the average is $288,000 (€274,600). Although the numbers are attractive, they don’t compare particularly well to other investment jobs at a similar level. Human resources consulting firm Heidrick & Struggles found that the average salary of private equity-backed CEOs was $447,000 (€426,000).

The worst-paid family office CEOs now only earn around 120,000 US dollars (114,000 euros) a year.

Billionaires look outside the family

If you look more closely at the numbers, families with assets of more than $1 billion pay their CEOs an average of just $370,000 (€353,000) per year as base salary, with a bonus of 88%.

The base value represents less than 0.037% of these families’ wealth. The number is lower for family members, as well as for CEOs of family offices with assets of less than $500 million.

To attract talent, the report says, family offices are using additional incentives to bring the best talent on board. Most offer a voluntary performance bonus, while a minority offer co-investment opportunities or a share of profits generated.

Family offices have historically used prestige to recruit executives who were also attracted by their smaller structure. They are usually in the single-digit employee range, so that each employee can have a defined influence. They also tended to attract heirs who wanted to carry on their legacy.

However, there is concern that these factors no longer have the same impact on non-family members as they once did. Meanwhile, younger generations are becoming less interested in preserving their parents’ legacy and more interested in building their own legacy.

A British family office founder told the authors: “I think there will be a shortage of people who can run family offices. The family members who were born in the 1960s and have been running the family office for 15 or 20 years are retiring.

“Many Next Gens will want to do their own thing away from the family office and recruiting staff will become increasingly difficult. Who will fill the gap? Family offices will be forced to hire more professional staff from financial institutions and their culture will change.”

However, one family office CEO told the authors that compliance and regulatory overload at larger investment firms led more investment managers to consider switching to a smaller family office setup.

As baby boomers pass on their businesses and wealth to the next generation, hiring a family member to run a family office is becoming increasingly attractive. This can save a grisly succession dispute between descendants, which increasingly involves multiple siblings and even cousins ​​descended from the same founder.

“The CEO of a British family office told the authors: “Our next generation includes seven cousins, the descendants of three siblings.” All or some will go on to work in the family business or family office. I’m not sure how well they can work together when there are actually seven family members competing for the top job.”