The Rising Costs of Operating Wealthy Family Offices: A Look at the Growing Expenses and Competition for Talent

The cost of operating a family office is skyrocketing, with wealthy families spending anywhere from $1 million to over $10 million a year, according to a recent report by J.P. Morgan Private Bank. The average annual cost now stands at around $3.2 million, reflecting the growing size and number of family offices.

The report, which surveyed 190 family offices with average assets of $1.4 billion, found that smaller family offices spend less, with those managing less than $500 million spending an average of $1.5 million a year. Family offices with assets between $500 million and $1 billion spend an average of $2.7 million, while those with over $1 billion spend an average of $6.1 million.

The biggest cost for family offices is staffing, as the demand for talent has increased significantly in recent years. Family offices are now competing with private equity and hedge funds for top talent, driving up salaries and benefits.

Furthermore, family offices are shifting more of their investments into alternatives such as private equity, venture capital, and real estate. This move has put them in direct competition with big private equity firms and venture capital firms for talent.

According to experts, the professionalization and institutionalization of the family office space have led to increased compensation for staff. Chief Investment Officers at family offices can earn up to $2 million overseeing assets of over $10 billion, with additional long-term incentive plans being added to sweeten the deal.

Competition with private equity firms is particularly fierce, with family offices trying to attract talent from the big players in the industry. To compete, family offices are offering higher pay, better access to deals, and even profit-sharing opportunities to entice top talent.

Overall, the landscape of family offices has evolved significantly in recent years, with top talent now flocking to these institutions for the opportunity to work with billionaires, access unique investment opportunities, and enjoy a more personalized work environment. The days of family offices being seen as retirement destinations are long gone, as they now stand toe-to-toe with big firms and banks in the battle for talent.