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Leading family office CEOS earned $830,000 in 2014

By Michael Finnigan

Chief executives working for the largest single family offices in the United States had an average remuneration package of $830,000 last year, according to a new survey from financial services empire Fidelity Investments.

Insights on Family Office Compensation, which was co-authored by family-run research company Botoff Consulting, found that chief executives from family offices with more than $1 billion in assets typically received a base salary of $550,000 as well as additional perks to the tune of $280,000.

Trish Botoff, principal consultant and founder of the eponymous Botoff Consulting, said that such perks might include a company car, performance-based bonuses, or insurance, but stressed that historically such compensation, including both salary increases and bonus/incentive compensation, have been very discretionary. 

She added: “As the family office industry evolves and becomes more sophisticated, so do the needs/demands to approach the compensation process in a more formalised way.  This is being manifested in several ways, including through the recruitment process and the increasing use of long-term incentive plans.”

According to the report, 47% of family offices reported using long-tem investment plans, such as co-investment opportunities and supplemental deferred compensation, in order to attract, retain, and align the interests of executives with family.

It also revealed that family member chief executives make nearly 18% less base salary and 30% less total direct compensation than non-family member chief executives, confirming findings in this year's Global Family Office Report 2015.

“I wasn't really surprised by this finding. A family member serving in an executive role is more predominant in family offices with assets under management less than $500 million, and even more so in family offices with assets under management less than $250 million,” Botoff said.

She added: “Many family member executives may take the approach that they don't have a financial need to be paid a competitive salary, and compensation isn't the most tax effective method of accessing resources. The result is they are more willing to take on less or no compensation at all.”

The report surveyed 216 single family offices for the study and found they employ on average 11 people working for 20 family members. Family offices with assets under management of more than $1 billion typically employed 23 staff to service 34 family members.

The Fidelity Investments financial empire is headed up by third-gen Abigail Johnson, who took over the role of chief executive from her father last year, following her 26-year history with the business. She began as an equity analyst and took on the role of president in 2012.

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