The majority of family offices pay higher salaries to senior executives from outside of the family in a bid to recruit and retain talent, according to a new report from Campden Wealth and UBS.
Non-family CEOs on average receive a base salary of $338,000, while family CEOs receive a salary of $302,000, according to the Global Family Office Report 2015, which was released this week.
Additional compensation for both family and non-family CEOs was reported to be worth approximately $120,000. The prevailing belief is that family office compensation is made up from performance-based bonuses or tax benefits.
According to Stuart Rutherford, director of research at Campden Wealth, the pay disparity is partly influenced by the recognition among family members that they also benefit financially from the success of the family office.
“It could also reflect differences in the skills and experience levels of family and non-family CEOs, and will certainly be linked to competition in the marketplace for non-family CEOs,” he added.
One respondent from the study warned that the pay disparity could cause resentment between family and non-family executives and suggested that the issue could dissuade the next generation from joining the office.
Rutherford said: “Resentment is something that tends to gradually build over time, but when it does, the resulting actions can be quite dramatic. It is quite possible that lingering resentment might prompt a family member to leave the family office”.
Other findings from the study suggest CEO salary as a percentage of assets under management is the highest in Asia-Pacific, where the average tenure is also the shortest, followed by North America and then Europe.
The report also showed that family offices primarily recruit for roles via their professional networks or by using a recruiter. Prior experience in financial services was seen as more important than experience in a family business.
Rutherford concluded that an interesting point for future research could be the trend in North America to using long-term compensation linked to performance to help with retention. He said the move mirrors changes within the wider financial services space.