Family wealth advisers get richer - right along with their clients

NEW YORK •As the number of ultra-high-net-worth people swells, so too does the pay for those who oversee their assets.

C-suite pay at family offices - firms that manage the wealth of the very rich - is surging, according to a report by UBS Group and researcher Campden Wealth. The average base salary for a chief executive officer jumped almost 10 per cent to US$367,000 (S$494,000) this year from 2016, while chief investment officers (CIOs) got an increase of 8 per cent to US$314,000.

It looks like they are earning their keep, as family office investment returns rebounded last year. Returns averaged 7 per cent in 2016, compared with 0.3 per cent the year before, according to the report, issued yesterday. The gains were strongest among North American firms, which had less money invested in real estate than their international counterparts.

"The rebound can largely be attributed to two factors, better performance in equity markets and improved returns due to allocation shifts," Mr Stewart Kesmodel, head of global family office for the Americas at UBS, said by e-mail.

With investors moving out of fixed-income and hedge funds, "those dollars have flowed into private equity, operating companies and cashflow-producing assets such real estate," he said.

With bonuses, which can account for half of total pay, the average pay for a North American family office CEO totalled US$631,000, the highest among geographic regions.

European family office CEOs made US$497,000.

As with much of the investment world, the best-paid executives are predominately male. Women accounted for only 7.7 per cent of family office CEOs and 13.2 per cent of CIOs. Women appeared more frequently as chief operations officers and chief financial officers.

Traditionally set up to manage the accounting and tax planning affairs of the rich, family offices are growing in size and complexity, in some cases even beginning to resemble small hedge funds or investment banks. They have been poaching talent from Wall Street, taking advantage of challenges elsewhere in the investment management world to build in-house staff.

Returns have risen as rich families embraced risk by pushing cash towards public and private equity investments. Public stock investments comprise 27.1 per cent of families' allocations this year, while private equity investments are at 20.3 per cent, the report said.

Family offices also continued their steady march away from hedge funds, echoing concerns about high fees and poor performance. Hedge fund allocations have fallen to an average of 7.1 per cent in 2017 from 8 per cent in 2016, despite improved performance.

Equities will remain a strong component of portfolios, according to the report. The UBS/Campden report is based on a survey of 262 families between February and May with an average wealth of US$921 million. Sixty-eight per cent of respondents manage money for a single family.

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A version of this article appeared in the print edition of The Straits Times on September 13, 2017, with the headline 'Family wealth advisers get richer - right along with their clients'. Print Edition | Subscribe