One of the biggest challenges in running a successful family office is hiring and retaining talent. This week, Nora Macaluso explains why it’s so hard for family offices to recruit — mainly because it all boils down to whether the candidate is the right behavioral and cultural fit. Family office roles have traditionally been sought after, thanks to things like lifestyle perks, but that’s only one piece of it today. According to top recruiters in the field, family offices are also getting more competitive with compensation packages, hoping to find the brightest talent.
We also bring to you news from our sister publication Pensions & Investments that S&P Global Ratings has halted including new environmental, social and governance credit indicators in its reports and will no longer update existing scores, effective immediately. What’s important to note is that this new policy will not, however, affect its ESG principles criteria or research and commentary on ESG-related topics.
As always, we appreciate any comments, ideas and insights that would make this newsletter more useful. I look forward to growing this family office community with your help. Please email me at [email protected].
HANDPICKED: Navigating talent acquisition: Unraveling the challenges faced by family offices
By NORA MACALUSO
Family offices often struggle with recruiting talent. They’re looking for a specialized set of skills and someone who will be with them for the long haul. But as the family office space grows and competition heats up, many offices are becoming more like traditional firms in their organization and benefit structure, recruiters said.
When family offices recruit for senior roles, they want executives who already have experience at a family office or a top law firm or hedge fund and are familiar with areas like succession planning and governance, as well as the tax and investment needs of an ultra-high-net-worth lifestyle. That’s a small talent pool, particularly for those firms that want a diverse staff.
At the same time, family offices want to be discreet about their searches, requiring several preliminary interviews and sometimes nondisclosure agreements, which slows the hiring process.
“Family offices will seldom hire someone who is not already connected to their inner circle somehow or is maybe one degree of separation from it,” said Vanessa de Samame, co-founder of the placement firm Hedley May. The same is true when it comes to hiring a search firm, said de Samame, whose firm places senior leaders in industries including financial services.
That’s starting to change, said Trish Botoff, founder and managing principal of Botoff Consulting. “It’s becoming more of a business,” said Botoff, whose firm works with family offices on compensation and benefits. “In the old days, everybody was very private, very isolated. Now it really has come of age as a highly profitable business.”
THE SFO AND MFO DIFFERENCE
Similarities exist in how single- and multi-family offices recruit. A big difference is that MFOs need someone who is able to bring in revenue, recruiters said. As a result, compensation may be more incentive-based than at an SFO.
SFOs and MFOs are now “going after the same pool of candidates,” said Tim Spidel, managing partner at Spidel Burnfin, which specializes in retained executive search for family offices. “Some of the large, generational SFOs that once had a mom-and-pop feel to them now have much more structure around their org chart and services provided to family clients.”
“One of the biggest selling points to working with an SFO over an MFO or private bank is the essence of a service culture,” Spidel said. “Client service is paramount in an SFO,” whereas an MFO may be looking for leaders who can drive business and revenue growth, he said.
At a family office, an executive’s job is to serve the family’s interests, not climb the corporate ladder and achieve recognition. That can be attractive to some in the corporate world who like the idea of staying in a job for decades — layoffs are rare in family offices, recruiters noted — and helping a family accomplish notable goals.
“Some say they’re at a point in their career where they want to make a difference in the world,” said Linda Mack, founder and president of Mack International LLC, which recruits C-suite executives for family offices as well as investment and enterprise firms.
For investment professionals, the longer timeline for investments in a family office is attractive, said Mark Somers, founder of the talent management firm Somers Partnership. “That doesn’t mean it’s slow-paced,” he said. “To be a really good family office professional, you need to understand you only have one client, and whatever that client says is what goes. You have to understand whose money it actually is.”
Family offices are still looking for “expert generalists” who can be strategic and proactive about the family’s interests, said Mack.
“Families are resetting models,” said Neil Kreuzberger, president and founder of the family office search specialist firm Kreuzberger Associates. “They’re putting in best practices, they’re adopting new technology, they’re changing out teams. They’re doing all the things normal, commercial businesses that are evolving and growing and developing do.”
Family offices are also getting more competitive with compensation as they seek to recruit top talent from private equity, recruiters said. And since they’re small, they can get “creative” with other benefits, tailoring incentives like bringing in lunch or offering yoga classes, Botoff said.
IF THE SHOE FITS ...
Family offices are family businesses at heart, and they’re not for everyone. “Culture fit is paramount for success,” Mack said. “Finding someone who has the requisite skills and qualifications is just the first step for us.”
The importance of culture fit is just one of the differences between filling a leadership role at a family office and a similar one in the corporate world, recruiters said. “We’re big behavioral interviewers,” said Mack.
“Every family’s unique in terms of their culture. There’s no standard ‘This is what a family CIO is, or CEO.’ Each one is going to be really unique to the family they’re serving.”
S&P credit agency stops scoring ESG
By BLOOMBERG NEWS
The credit agency S&P Global Ratings will cease to include new environmental, social and governance credit indicators in its reports or to update existing scores, effective immediately.
S&P Global Ratings said in a news release Aug. 4 that while it “remains committed to providing the market with transparency on how and when environmental, social and governance factors influence our assessment of creditworthiness,” the firm will no longer publish new ESG credit indicators in its reports or update outstanding ESG credit indicators.
S&P defines ESG credit factors as "those ESG factors that can materially influence the creditworthiness of a rated entity or issue" that it has "sufficient visibility and certainty" to include in its credit rating analysis.
The agency said in the release that it had commenced publishing alphanumeric ESG credit indicators for publicly rated entities in some sectors and asset classes in 2021. "These indicators were intended to illustrate and summarize the relevance of ESG credit factors on our rating analysis through the use of an alphanumerical scale," the agency said. "They supplemented the narrative paragraphs in our credit rating reports where we describe the impact of ESG credit factors on creditworthiness."
But after further review, S&P Global said, it determined that the "dedicated analytical narrative paragraphs in our credit rating reports are most effective at providing detail and transparency on ESG credit factors material to our rating analysis, and these will remain integral to our reports."
S&P Global added that this policy will not affect its ESG principles criteria or its research and commentary on ESG-related topics, including the influence that ESG factors can have on creditworthiness.
Richard Hunter, chief credit officer at another major credit agency, Fitch Ratings, stated by email that "Fitch believes that there are profound limits to what text disclosures can do for investors monitoring an entire portfolio of hundreds of serviced issuers and bonds.
"We have found that having a numeric score that crisply identifies individual issuers with actual rating changes that can be classified as driven by a factor which has a direct relevance for ESG as well, or where those factors are heavily discussed at the committee without rising yet to an actual rating change, has been highly valued by users."
The credit agency Moody's said in a statement that it "incorporates all risks, including those related to ESG, into its credit ratings when they are material and also publishes ESG scores on a 1-to-5 scale."
From Pensions & Investments, a sibling publication of Crain Currency
LOOSE CHANGE
Citi expects to see its family office clients in Asia grow by 25% this year: Due to the surge in family offices in the region, as well as friendly regulatory measures adopted in Hong Kong and Singapore, banks in the region are building out their family office arms in the expectation of more clients.
At NYC’s ritzy condo buildings, two pools are sometimes better than one: Once a rarity in the city’s space-starved housing market, a second pool has become a must-have perk for many condo buyers.
Hamptons partygoers cast a worried eye on New York’s future: For wealthy New Yorkers who sought refuge in Southampton and Palm Beach at the height of the pandemic, the question now is how much New York will recede or resurge in its historic dominance as their primary/work/school destination.
Help us with a story: We are working on a story about the new era of family offices and how it's being driven by the next gen's need to be more public than the generations before them. If you have any comments on the topic, reach out to [email protected].