Europe’s ultra-high-net-worth families are proactively preparing for the Great Wealth Transfer, though a significant challenge they face is the scarcity of workers willing to take a pay cut to manage their vast fortunes.
A report by HSBC Global Private Banking and Campden Wealth studied the status of European family offices, surveying 101 offices with a collective wealth of $136 billion. These families are primarily concerned with ensuring strong returns and effectively implementing generative AI.
The most significant hurdle, however, is the inability to find qualified individuals to manage their fortunes. More than 36% of the affluent respondents indicated a limited pool of talent with the necessary personal skills for estate management. Additionally, nearly 32% reported difficulty in finding leaders with suitable interpersonal skills.
Operating a family office can be lucrative, with the highest-paid CEOs earning $500,000 (€476,000) annually, although the average salary stands at $288,000 (€274,600). Despite these attractive numbers, they are less competitive compared to similar investment roles. Executive search firm Heidrick & Struggles found the average salary for CEOs of private equity-backed firms was $447,000 (€426,000). Conversely, the lowest-paid CEOs in family offices earn about $120,000 (€114,000) a year.
For families possessing over a billion dollars in assets, the average base salary paid to CEOs is approximately $370,000 (€353,000), with an additional 88% bonus. This compensation accounts for less than 0.037% of the family’s enormous wealth. Generally, family members or leaders of offices valued below $500 million receive lesser amounts.
To attract talent, family offices are offering incentives such as discretionary performance bonuses, co-investment opportunities, or sharing in generated profits. Traditionally, these offices have drawn leaders due to their prestige and smaller employee numbers, which enables significant individual impact. They also typically appealed to heirs eager to uphold their legacy.
However, there are concerns that these incentives are not as enticing to non-family members as previously. Additionally, younger generations show less interest in maintaining their family’s legacy, preferring instead to forge their paths. A UK founder of a family office stated a potential shortage of personnel to manage these offices as current family members retire, necessitating the recruitment of professional staff from financial institutions, which may alter the office culture.
One family office CEO noted that compliance and regulatory complexities at larger investment firms are leading some investment managers to consider roles in smaller family office setups.
As baby boomers transition their wealth and companies to the next generation, hiring non-family members for management roles is becoming increasingly attractive. This strategy can help avoid succession conflicts, which often involve multiple siblings and cousins from the same founding family. According to a CEO of a UK family office, managing the interests of seven cousins, children of three siblings, could pose challenges in terms of cooperation and competition for leadership roles.
