Talent war between family offices and Wall Street drives up salaries

cnbc.com:

A version of this article first appeared in CNBC's Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer.  Sign up  to receive future editions, straight to your inbox.

The typical family office costs more than $3 million a year to operate, as competition for talent drives up staffing expenses, according to a new study.

Wealthy families are spending anywhere from $1 million to more than $10 million a year to operate their family offices, with the average now at around $3.2 million, according to the J.P. Morgan Private Bank Global Family Office Report released this week. While the costs vary widely depending on assets, experts say expenses are growing across the board as family offices explode in size and number and compete more directly with private equity, hedge funds and venture capital.

«There's a real war for talent within family offices,» said William Sinclair, U.S. head of J.P. Morgan Private Bank's Family Office Practice. «They're competing for talent against private equity and hedge funds and banks.»

Smaller family offices spend less, of course. According to the report, which surveyed 190 family offices with average assets of $1.4 billion, family offices that manage less than $500 million spend an average of $1.5 million a year for operating costs. Family offices between $500 million and $1 billion spend an average of $2.7 million, and those above $1 billion average $6.1 million. Fifteen percent of family offices spend more than $7 million, while 8% spend more than $10 million.

The biggest cost is staffing, which has become more expensive as family offices have tripled in number over the past five years. Family offices are increasingly competing with one another