It is no secret that having a well thought-out hiring strategy that takes into account the sourcing and training - as well as retention - of staff is essential in the single family office space.

Indeed, in a client service-based industry such as wealth management, it is the people that make or break the business, family office recruitment firm Agreus says in a new report (this can be viewed here).

“There is a shortage of specialist family office recruitment firms, so often when SFOs reach out to hire, they will use a generalist recruiter who doesn’t necessarily understand the sector,” Paul Westall from Agreus told this publication.

But perhaps more crucially, SFOs often think they can “cut corners” when it comes to recruitment, says Sebastian Dovey, managing partner, Scorpio Partnership. “They can, but they just increase the risk of failure.”

Dovey believes that one of the main challenges is often that the SFOs themselves are “poorly constituted,” with unstructured reporting lines, governance protocols and oversight committees.

“This makes it tough to attract truly good talent from the institutional market as they would be uncomfortable in this environment,” he said.

Not in a straight line

Likewise, the decision-making process in the SFO is usually “very circular, not linear,” according to Kathryn McCarthy, a New York-based independent advisor to families and family offices. McCarthy sits on a range of family office boards and investment committees and, notably, started the family office for the Sulzberger (New York Times) family.

“You have to be able to deal with this circular type of reasoning sometimes because it’s a family - there are a lot of things going on. It’s not a corporate environment,” she said.

The “key issue,” Scorpio's Dovey added, is to meet the principle wealth holders and also, typically, the board of trustees.

“Quite often, only the latter really has a role to play, particularly with many European families. It means that the recruit is often pretty blind of the underlying characteristics of the principal wealth holders,” he said.

As McCarthy highlighted, smaller offices - with, say, three members of staff and three family members - perhaps don’t need a formal structure for governance.

But when it comes to larger organisations with multiple family branches and generations, “you’ve got to have some formality about the way you make decisions,” she said.

Candidates

Tayyab Mohamed of Agreus believes that SFOs need to have a clearer definition of the roles they hire for. As noted by Evan Jehle, a principal in Rothstein Kass’ Family Office Group: hiring the wrong person can be “catastrophic.” 

Key questions raised by SFOs during the hiring process will likely include: Is the person a good fit for the family culturally? Will they have long-term commitment to the family’s objectives? Do they have the right mentality for working in the SFO environment? Do they understand the SFO model?

“The amount of extra time SFO employees have to spend in training a new employee in addition to their regular day is voluminous. Remember the old adage, ‘if you have seen one family office, you have seen ONE family office.’ No two are alike, so there is a tremendous amount of time spent in transitioning that new employee to the processes and procedures, learning the family structure and financials, etc,” Jehle said.

Another key challenge, McCarthy added, is that new recruits have to fit into the SFO’s culture, and believe - or at least honor - what the family is all about. Having said that, candidates seem to be “getting smarter” about the questions they ask.

“They want to know that the office is viable…they want to know about the family and the decision-making process, particularly if there is an investment component,” she said.

Sources

It has been argued that employees for SFO roles are often sourced via individuals within a family office’s network of business and/or social contacts, but that this may not be the most effective way to successfully hire.

Click here to view leaders in the family office and wealth management space discussing the issues and challenges they face.

“There is a high tendency for this in the first round of hiring,” Dovey said, adding that this tends to change as the SFO grows. “Once the employee headcount is greater than ten it is no longer dependent on close contacts.”

According to McCarthy, who has worked with large SFOs in the US, UK, Middle East and Latin America, the SFO market in the US tends to be “more open” compared to other regions, which could be attributable to the fact that some of these offices are older.

Although, she added: “Many of the newer offices have spun out of an operating business, so that’s where they’ll go first and where they’re most comfortable. I’ve seen a lot of CFOs coming out of operating businesses and being asked to run the family office.”

And while many families engage executive search firms, even the search firms they select are “most likely coming from a recommendation from one or more of those contacts,” says Jehle.

Another point is that, while most people agree that clients should be involved in the recruitment process, this depends on the nature of the family and the profile of the individual.

“We often see a desire from the families that they do not want to be involved,” Dovey said. “In some ways they already feel that by committing [to] the family office they are essentially distancing themselves from the day-to-day of managing their wealth and wealth interests. To a degree they are right, but if they are too disconnected from the business they will usually end up disappointed.”

SFO vs. MFO

While it could be argued that there is larger scope for career progression at multi-family offices, primarily due to their size, there are of course many reasons why the SFO sector is highly sought-after.

“What I hear most from people I speak to is that they like…to see the results of their work; they’re not part of a group that then goes to another group, and another and so on,” McCarthy said.

She added: “They can have direct input and better control the process, particularly if they are running the office or have a senior role. They’re not a cog in the wheel and unlike MFOs they don’t have sales pressure. All the MFOs - particularly as regards senior roles - are for-profit and have to bring in clients.”

Conclusion

Although there is “all kinds of buzz” about the SFO space, McCarthy noted that it’s not a big subset of the overall market. “So when you think of the opportunity set [in recruitment], it’s fairly small.”

What is happening, however, is “much more global,” she explained.

“You see families in regions where they have a local office and then they have one in London and New York to do investing or more high-end technical work, for example.”

And, while there are of course many “robust” family offices in the US, personnel don’t turn over that much, she added.

“What is going on now - particularly with the long-established offices - is that you’re seeing (to a lesser degree in the UK) a transition in the office leadership from someone who is about to retire. There, there are recruitment opportunities. But they typically don’t promote from within, they hire from outside.”

Meanwhile, Jehle said he is seeing some SFOs move to an outsourcing model, which he believes has created a “great opportunity” for MFOs and outsourced providers to hire current and former SFO employees.

“However, SFOs are not going away, so the job opportunities are out there. They just might be hard to come across if you are not using an executive recruiter or you don’t know someone who knows someone.”

Jehle emphasised that, because each family office is unique, their specific requirements are going to of course be based on their needs.

In his words, a candidate should be:

1.       Confidential. You can test for this by asking the candidate for names of former clients or information on families and see what they share.

2.       Competent. While this seems like an obvious one, it is often overlooked, potentially because they are well liked. The person needs to actually be qualified for the specific job they are being hired for.

3.       Caring. There is a huge difference between someone who sees this as a job versus someone who truly cares for the family.