Family offices need to be more creative at finding and managing talent, especially in a world where understanding new trends such as ESG investment, digital technology and crypto is crucial for keeping ahead, the US firm argues.

Executives who toil in the groves of family offices must “wear many hats” and they must be more digitally literate in a world shaken up by new technology and concerns such as cybersecurity. And people with such talents are getting harder to find. 

That’s the view of Vincent Hayes, global head of family office and international wealth management at BNY Mellon Wealth Management. Family Wealth Report recently interviewed him about the work this US-based firm does in the family offices space, and the trends he sees. 

“Executives working in family offices have to wear many hats, and I do not see that dynamic changing in the near-term. People in specific roles such as CIO and technology positions have begun to adapt to the rapid and ever-changing environment and needs of families,” Hayes said.

“CIOs will need to be well-versed in crypto (digital assets), ESG, alternatives as well as traditional assets in order to deliver value; additionally technology has evolved into the digital experience. The new digital experience, includes effective communication across different platforms, privacy protection and immediate access to financial information,” he continued. “The roles have become more demanding – and finding experienced, versatile and competent talent to answer the call has proven to be a difficult problem to solve.”

“In the past, lots of talent came from CPA firms and law firms. Now firms are engaged in areas such as ESG investing, cryptos….the pool of talent to draw from isn’t the same,” he said.

“Some family offices and families are having to rely on each other and various peer networks and affinity groups and other family members. Families need to rely on each other now more than ever,” he said. 

The crunch
Talent shortages are a regular pain point for wealth management – and not just in the US. Examples of complaints abound. For example, at the start of the year, Dave McKay, chief executive of Royal Bank of Canada, warned that talent shortages will be a big issue in 2022. He was quoted saying “we’ve never faced more competition for talent, and [it is] particularly acute in the engineering, AI, data, mathematics and coding space.” In 2021, median total cash compensation, including profit distributions, jumped by an eye-popping 19 per cent over a five-year period for senior client account managers at US advisory firms, according to the Charles Schwab RIA Compensation Report, issued that year. As far back as 2018, figures from Cerulli Associates, the analytics and research firm, found that the average age of wealth advisors was 50 while only 11.7 per cent of them were under 35. 

But demands on family offices and other entities aren’t relenting. The pandemic accelerated the use of digital tools; it also arguably added to security vulnerabilities with so many people working remotely.

Enthusiasm for ESG investing, whatever the geopolitical difficulties and problems with surging energy bills, isn’t going away. Digital assets – bitcoin and the rest – are still a hot item. Understanding all this means that executives must be polymaths, with a human touch. 

A recent BNY Mellon study found that for those looking to hire new executives, about two-thirds (64 per cent) indicated that word of mouth and relying on personal networks were more effective than working with headhunters.

The situation is not ideal because some families won’t have the required resources, creating a need for them to deal with third-party wealth managers and other sources of expert or presumed expert advice.
 

Being creative
“Family offices have to be more creative in identifying talent,” Hayes said, arguing that FOs must consider hiring people from more diverse backgrounds with differing outlooks  – and outside the world of finance, from engineering or marketing for example.

There is now considerable research showing that diversity along a number of lines is good for profitability, business continuity and competitiveness, he argued. 

There is a big focus on costs, which affect the decision about what services families outsource and what they do in-house. That said, families understand “the importance of hiring exceptional talent,” he said. 

Learning
Hayes also mentioned the role in some family offices of the “chief learning officer” – a role tapping into the idea that learning doesn’t stop in college for even the wealthiest dynasties.

“The role of a chief learning officer within a family office or enterprise structure has become increasingly important, as families want to build better cohesion across generations. Multi-generational families of wealth continuously strive to prevent significant financial loss as wealth transitions from one generation to the next. The chief learning officer would be in charge of creating an educational program that promotes generational family sustainability,” Hayes continued. 

The business
We asked the firm about its actual business of looking after family offices in the US and other parts of the world. Chuck Long, head of international wealth management, global family office, responded.

“Our practice is built to serve the unique needs of global families of wealth and their family office entities. Roughly a third of the clients we serve are in EMEA, a third in Latin America and a third in Asia,” he said. 

“We serve international clients through multi-lingual international teams based in New York, Miami, San Francisco, The Cayman Islands, London and Dubai. Our clients have normally created a formal or virtual family office entity; however, it is more common outside of the US, especially in Asia, to find a new client looking for our assistance and advice in establishing their family office as we begin to serve them. Often concepts like master global custody and outsourced chief investment officer are new to them, but highly relevant in meeting their objectives.   

“We develop and manage tailored, tax-efficient, discretionary portfolios and OCIO mandates for many of our clients in each region. Through our Cayman Trust Company and Delaware Trust Company we work with our clients and their advisors to develop cross-border fiduciary structures to protect and transfer assets across generations and geographies. We also work with our clients to deliver NextGen education programs and family governance services,” he added.