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.
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.