As the world commences the Great Wealth Transfer, which will see $84.4 trillion bequeathed by 2045 with $72.6 trillion going directly to heirs, the landscape of global family offices is undergoing a significant transformation. This monumental shift in wealth is driving an exponential increase in the number of family offices, now estimated to be approaching 20,000 globally, compared to pre-COVID years. These changes are not just numerical but qualitative, resulting in several key trends that are profoundly impacting hiring practices around the world.
Shifting Investment Focus
One of the most notable trends is the shift away from public markets towards private investments and alternatives, particularly in real estate, private equity, and direct stakes or ownership in private companies. Family offices, with their longer-term investment horizons and focus on growth over multiple generations, are well-positioned to invest in private businesses and alternatives that pay a premium for patient capital. Warren Buffett famously described his preferred investment holding period as “forever,” a sentiment that resonates deeply with the family office philosophy.
To support these robust, enduring direct investment programmes, family offices are increasingly hiring experienced entrepreneurs and industry CEOs. These professionals bring critical knowledge and networks, enhancing deal flow and the due diligence process. This trend is particularly important as banks pull back on loans and institutional investors shy away from private equity due to the lack of initial public offerings and acquisitions. Family offices, keen on direct investments, especially in sectors where they have previous ownership experience, find these hires invaluable.
Beyond Financial Returns
Another significant trend is the growing interest in philanthropy and making a positive societal impact. Many family offices are looking beyond financial returns, seeking to make a meaningful difference in the world. This shift is influencing hiring practices, as family offices seek individuals who not only have financial acumen but also a passion for philanthropy and social impact.
Internal Challenges and Professionalization
Single family offices are increasingly focused on internal challenges such as succession planning, governance, and preparing the next generation to ensure continuity and preserve their legacy. According to a recent UBS report, 36% of single-family offices are concerned about succession planning. This focus on internal challenges has led to a shift towards greater professionalisation, more stringent governance, and sophisticated investment strategies.
Family offices are now in direct competition with Wall Street, The City, and other financial centres for the best talent.
Competitive Talent Landscape
The demand for investment professionals and financial experts has led to a significant escalation in salaries and the introduction of longer-term incentives such as portions of carried interest linked to investment performance, profit interests in portfolio companies, favourable co-investment rights supplemented by loans from the family office, and phantom equity vesting schemes to ensure alignment with the family’s long-term objectives.
These trends are conspiring to change the hiring landscape in family offices around the world. The new breed of professionals and domain experts required by family offices is difficult to source, often placing these organizations in direct competition with much larger institutions. Additionally, while family offices present outstanding opportunities for these professionals, they remain relatively unknown within the potential candidate community. This is further exacerbated by the requirement of family offices to cloak their activities in secrecy.
The Need for Creative and Connected Recruitment Solutions
The cultural shift from a large financial institution to a smaller family office can be significant for candidates. While they may have more freedom to be creative or entrepreneurial, they are also expected to take on a broader range of responsibilities. To solve these talent challenges, a new approach cantered around creativity and connections is required.
Recruiters must think outside the box and be creative in identifying where the perfect candidate may currently reside. There simply are not enough individuals with the required skills within the family office sector. That’s why TWYD & Co takes a totally bespoke approach to its client work. Its approach is cantered around the family and / or Principal and their unique attributes, motivations, vision, and values. Each assignment begins with a blank sheet of paper, as relying on past searches does not work in this context.
Conclusion
The Great Wealth Transfer and the evolving trends in global family offices are reshaping the hiring landscape. The need for a bespoke, customized recruitment solution that is both creative and cantered around connections has never been more critical. By adopting this approach, family offices can navigate the complexities of modern wealth management, attract the best talent, and ensure their long-term success and legacy.
About the Author: David Twiddle, Managing Partner at TWYD & Co, provides families, entrepreneurs and wealthy individuals with a discreet, bespoke solution to sourcing unique talent, across both their business and private lives.