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This version of the article first appeared on CNBC’s Inside Wealth Newsletter. This is Robert Frank, our weekly guide to Net-Worth Investor and Consumer. Sign up to receive future editions directly in your inbox.
According to a new report, the family office is creating new incentive plans for top executives who are bolstering war for talent and boosting salaries.
According to reports from Morgan Stanley Private Wealth Management and Botoff Consulting, the majority of family offices currently use long-term incentive compensation plans, increasing their gross salary based on performance and return on investment. According to the report, almost two-thirds of investment-focused family firms use long-term incentive coverage.
Family offices (ultra’s wealthy private investment company) have often given executives special performance bonuses, but the awards are becoming more structured and clearer.
“As time goes by, compensation plans are increasingly formalising,” said Valerie Wong Fountain, managing director and head of Morgan Stanley’s Family Office Resource Platform and Partner Management. “If you’ve returned for years, you might have seen more handshake contracts. Now it’s more structured and measured against performance.”
According to the report, investment-centric family offices are similar to in-house financial companies with more specialized teams, with a more specialized team, with a median CEO total compensation of $825,000 per year. Investment-focused family firms with assets of over $1 billion have paid a median of over $1.2 million. The top-level rise in investment-focused companies has boosted the average salary of CEOs over $1 billion to more than $3 million a year, according to the report.
Chief Investment Officer or CIO also benefit. The median wages for investment-centric CIOs are currently $900,000, with an average of $1.8 million.
Incentive plans are also changing. Co-investment has become particularly popular, allowing executives to invest in transactions with their families. The opportunity to invest with your family is an additional bonus as wealthy families often get special access to other businesses and deals.
Other common incentive plans include enforcers gaining investment benefits beyond the benchmarks, as well as phantom equity, profit sharing, and deferred incentive plans.
