According to RBC’s Family Office Report 2021, family offices in North America saw an 86% increase in their wealth in 2021, with 20% saying it rose significantly in the last year. It is because of this growth that US family offices are at an important juncture and are now undergoing a phase of continuing and growing sophistication and institutionalisation. With this comes additional regulatory scrutiny and growing resource requirements.
The Human Capital Challenge
In 2021, the introduction of the HR 4620, the Family Office Regulation Act of 2021 and its impacts on Family Offices were widely reported and marked a seismic shift for US family offices. This bill requires family offices with more than $750m of assets under management (“AuM”) to register with the Securities and Exchange Commission (“SEC”) in order to achieve greater transparency. While we anticipate that this regulation will be both difficult to pass and perhaps even harder to enforce, family offices are preparing for the imposition of a greater compliance burden – with 29% of family offices now looking to hire in-house legal professionals within the next 12 months.
They may be looking to hire, but US family offices have not been exempted from the global race for talent – particularly when looking for legal and compliance professionals with the right skillsets to support their businesses. America’s family offices are seeking the most knowledgeable regulatory minds, not just to help them ensure full compliance and best-in-class governance for their existing wealth, but to scale their legal and regulatory framework for future growth and succession planning. This is driving a highly competitive race to hire operational talent in the industry.
With salaries for in-house talent at a premium, for example $300,000 plus bonus for an in-house counsel, family offices are finding that outsourcing provides a way to continue to work with the best global talent and cut their fixed cost base.
It is largely accepted that for single-family offices, or those beneath the $1bn AuM threshold, it is not economic to rely on a large staff and that it is essential to outsource some functions to carefully chosen partners. With hiring the right people an increasingly time-consuming exercise, working with a third party makes it easier for family offices to scale up or decrease their operations.