Market Overview

Morgan Stanley Releases Family Office Compensation Benchmarking Report

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87% of family offices review and adjust compensation on an annual basis,
according to report

Morgan Stanley's Single Family Office Advisory group today released a
benchmarking report on family office compensation data, in collaboration
with Botoff Consulting. The study reports that 87 percent of family
offices review and adjust compensation on an annual basis. In fact, over
the past two years, almost all family offices participating in
compensation studies have provided salary increases. Furthermore, nearly
40 percent of family offices report salary increases between four
percent and 10 percent or more, which outpaces the national average of
three percent.

"Compensation is the highest ongoing expense required in operating a
family office, and therefore requires careful review and consideration,"
said Valerie Wong Fountain, Head of Signature Access at Morgan Stanley.
"Understanding not only the competitive landscape, but also the trends
driving the landscape, is critical to recruiting and retaining the best
talent."

Additional key findings in the report include:

  • Eighty-four percent of participating family offices report awarding
    bonuses last year, up from 80 percent the previous year
  • As family office AUM increases, family offices typically will
    transition from having family members serve in executive roles to
    employing non-family members
  • Compensation for executives is directly correlated with AUM,
    especially from a total direct compensation perspective

The report provides evidence that the family office industry overall is
maturing, demonstrated by the growing use of long-term incentive (LTI)
compensation plans. As family offices become more complex and
sophisticated, so do compensation structures. Three out of five family
offices provide some form of LTI, with co-investment opportunity and
carried interest being the most prevalent. The use of formalized annual
incentive plans is a growing trend; however, a majority of family
offices still award discretionary bonuses, creating a gap with best
practices.

"LTI is an important recruitment and retention tool in today's
increasingly competitive landscape. Families considering adding LTI to
their compensation plans should ensure that the incentives match their
family's values and goals, as well as the current market environment,"
said Fountain. "Most families continue to award bonuses on a
discretionary basis in addition to offering LTI plans, making it clear
that there is no silver bullet for winning the talent race. Every family
is unique; therefore, every compensation structure will be unique."

The report discusses that candidates often do more research on a
potential family office employer than the family office does on the
candidate, demonstrating that families must make their compensation
plans a priority. Candidates who feel that a family office has
well-defined plans for compensation, performance management and
governance are more likely to leave their current post to join a family.

The Morgan Stanley Family Office Compensation Benchmarking Report
presents a composite of market data from a variety of data sources
reflecting family office and general industry roles. The study includes
national averages, plus data for San Francisco, New York, Chicago,
Miami, Los Angeles and Boston. Data was aged to January 1, 2019. The
data sources referenced in the study reflect more than 300 family
offices.

The complete study, plus more information on how it was conducted, can
be found here: https://www.morganstanley.com/cs/pdf/9528132-FOR-Compensation-Report-Broch.pdf

Morgan Stanley's Single Family Office Advisory is part of Signature
Access within Family Office Resources, a platform of specialized
services for ultra high net worth clients to enhance Morgan Stanley's
Wealth Management capabilities. Morgan Stanley Private Wealth Management
is the division within Morgan Stanley Wealth Management that is
exclusively focused on the ultra high net worth client segment. By
providing advice founded on a culture of excellence and driven by global
insight, Morgan Stanley Private Wealth Management is devoted to helping
clients preserve and grow their financial, family and social capital.

Morgan Stanley Wealth Management, a global leader, provides access to a
wide range of products and services to individuals, businesses and
institutions, including brokerage and investment advisory services,
financial and wealth planning, cash management and lending products and
services, annuities and insurance, retirement and trust services.

Morgan Stanley (NYSE:MS) is a leading global financial services firm
providing investment banking, securities, wealth management and
investment management services. With offices in more than 41 countries,
the Firm's employees serve clients worldwide including corporations,
governments, institutions and individuals. For more information about
Morgan Stanley, please visit www.morganstanley.com.

Morgan Stanley Wealth Management is a business of Morgan Stanley Smith
Barney LLC.

Morgan Stanley Private Wealth Management is a division of Morgan Stanley
Smith Barney LLC.

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