A Guiding Light: Developing an Impactful Strategic Plan

Peter Moustakerski, CEO, FOX

Carolann Grieve, Truist Wealth Center for Family Legacy

When a strategic plan is developed with the family's values and mission in mind, they can serve as a family-endorsed roadmap for family offices

• Developing a vision and mission statement
• Create proven strategic plans that are driven by the core values and mission of the family itself

The Strategy Checklist

• How can this be achieved?
• Purpose, Planning, Execution
  • Purpose
    • Values – Our beliefs and motivations
    • Vision – The future we want to create
    • Mission – How do we realize our vision
  • Planning
    • Market – What clients need
    • Planning – What we want to achieve
    • Capabilities – People, process, technology
  • Execution
    • Priorities – The short list of objectives
    • Initiatives – The C-Suite project portfolio
    • Results – How we measure success

FOX Strategy Update

• The Strategy Checklist – Our recent progress
  • Purpose – Why – WE ARE HERE
  • Planning – What
  • Execution - How

FOX Internal Values

• Respect
• Integrity
• Collaboration
• Excellence
• Innovation
• Individuality

FOX External Values

• Objectivity
• Discretion
• Connections
• Curation
• Learning
• Foresight

Current Draft of FOX Vision – Realize the Full Potential of Private Family Capital in all its Forms.

FOX Mission – Work In Progress

• Community
• Knowledge
• Standards
• Events
• Resources

Truist – Purpose Led Strategy

• Purpose – Inspire and build better lives and communities
• Mission – Clients, Teammates, Stakeholders
• Values – Trustworthy, Caring, One-team, Success, Happiness

Managing Outsourced Services for Family Offices

Scott Metsch, Pulver Metsch, LLC

Amjed Saffarini, CEO, Maestro

Peter Moustakerski, CEO, FOX

Perspectives on the Practice of Outsourcing

• Family offices solved problems by hiring more people. As the industry has grown, tendency is towards smaller more efficient.
• First theme: going beyond investing and accounting – services being asked for are unwieldy and beyond current skills.
• Second theme: current asks are niche and need professionalized solutions.
• Third theme: difficult to do more with less (or same number of people).
• Families see the family office as a cost center, not as a value add, so it’s hard to expand services to meet family needs.

What services have gained most traction and are the most popular?

• Investment and tax, but also for philanthropy and general business operations (for example, payroll – change to remote nature has led to the need for HR support).
• Layer 1 needs (what everyone wants regardless of family office setup), are usually:
  • Data and decision making – thematically this is a big one. Driven by wealth-creating events coming from businesses taking advantage of data.
  • KPIs are coming into family offices. Quarterly is not enough to make decisions in real-time. One of biggest data products is mind-shift to real-time data products that support decision. Crypto and social media risk management examples.

How do you deal with scope creep?

• Scope creep is inevitable. Keep on top of the client, letting them know where you’re going, how what and when is being done. Decision log. Keep it live, so there’s no surprises at the end. When people get comfortable at the beginning, they’re more comfortable with additional services.

Efficiencies without losing control or institutional knowledge?

• Exciting projects are ones where research/templates/process/training development is transferrable. Can apply to majority of families. Tough projects are ones where we know it’s a dead end. Opportunity to do more information sharing, even in forums like this. Genericize things that work well and make applicable to broader audience.

Where are client needs going?

• Wealth management has been professionalized – you have it within, or you outsource it. Not the case in other swim lanes we deal with. Rising gen, governance, succession, education – knowledge transfer. Families are starting to ask a lot more about this.
• Main situation is usually leveraging opco. Questions are usually because liquidity event is coming. How to life out of operating business is big question.
• Risk management is another big one; cyber is one piece.
• Reputational risk is also big. Professionalizing reputational risk management – putting discipline, research, etc. into it.
• Dynastic wealth transfer – still people to people, but levels of wealth and philanthropic giving have exploded. People just as concerned with generational wealth transfer in philanthropic arena.

General tips:

• Rely on outsourced for anonymity/privacy. Very easy to tie back to family office, but intermediaries give confidentiality.
• We can’t work with family if we don’t understand the family – so how do you understand the family? Need to get a complete view of everything – assets, risks, anything in traditional balance sheet. Then can go one level below, then ask about scope. What are you good at, not good at or no interest in doing? It’s a collaboration for every box. Dialogue of codifying, scoping, and executing operating guide (limits of work we do, expectation setting). But not a static document, updating as family changes.
• Need to understand how tech or outsourcing will solve the family or office’s problems. Your job is to bridge the gap and understand the need and solution sets then match it up.

What is a secret sauce technology?

• QuickBooks online. Use technology in lieu of creating a solution wherever possible.

What are examples outside standard asks that worked/didn’t work?

• Culture fit of outsourced provider – make sure it fits with the family office principals.
• Pride ourselves in doing boring stuff. Success stories that go beyond, have gotten into business of taking over family offices. Retiring execs, etc. lead to different need than before.
• Failures are around lack of clarity and end goal.

Developing an Effective Total Compensation Program

Eric Gonzaga, Grant Thompson

Ken Cameron – Grant Thornton

Peter Leo – FOX, Moderator

Money is the new table stakes, but is it sustainable?

• Base pay is the #1 reason people stay at their company, leave their company, and join a new company
• 35% Listed base pay as a reason for staying at their current company
• 37% Listed base pay as a reason for leaving their former company
• 34% Listed increased base pay as a reason they would return to their former company
• 42% Have turned down job offers because base pay did not meet their needs
• 46% Believe their pay allows them to live the lifestyle they want to live
• 43% Listed base pay as a reason for selecting their new job
• 52% say their merit increase was less than 4%, while 54% say their expectation for a salary increase this year is 4% or more

Employees who have switched jobs have received large increases in pay

• 21% have switched jobs in the past 12 months
• 70% Are confident in their decision
• 75% Are more engaged than at their former company
• 79% Received an increase in their total pay
• 2 in 3 said their position and their new company has met their expectations
• 40% Received a salary increase of 10% or more
• 40% of Job Switchers are actively looking for a new job with a new company
• 54% of Job Switchers are not actively looking for a new job but would consider a switch if a new opportunity came along

Salaries and Annual Incentives

• Historically, salaries and annual incentives have represented the largest portion of total pay at family offices
• Organizations often adopt compensation philosophies that dictate their desired market positioning and types of incentives used
• Most family offices have some form of an annual bonus/incentive plan. Metrics used in incentive plans are dependent upon an organization's (i) industry/sector and (ii) the stage they are at in their "lifecycle" (i.e., start-up, mature, decline, etc.)
• Most employees are leaving, joining, and staying at their companies based on pay, benefits, and advancement opportunities

Talent Retention Programs

• Total Rewards
• Performance Management
• Training
• Employee Management
• Organizational Culture

A successful incentive plan should:

• Be aligned with strategy; performance measures need to focus employees on key drivers of organization success
• Provide a return on investment
• Be flexible to meet the organization’s changing needs
• Be simple, easily understood by participants
• Be fair; employees need to perceive that all participants have equal stretch
• Have support through proper infrastructure (processes and systems for tracking performance)
• Be aligned with an employee's role; it must reward what participants can influence

Short-Term Incentive Plan Design Decision

• Guiding Principles
  • What are we trying to accomplish with the plan?
• Eligibility
  • Who should be included in the plan?
• Performance Measures and Standards
  • What are we trying to measure and reward?
  • Depending on the measure, how can the actual performance standard be determined?
• Measurement Level
  • Do we measure individual performance along with the entire organization, division, department, etc.?
• Target Payout Opportunities
  • Market competitiveness
  • Internal equity
  • Existing bonus or other plan design
• Payout Range
  • What is a reasonable range of expected performance?
  • What are appropriate award levels to associate with that range?
• Terms and Conditions
  • Payout timing, communication, etc.

Long-Term Incentive Plan Design Decisions

• Purpose
  • What is the purpose of the plan?
• Participants
  • Who will be eligible? Is a non-compete agreement required for participation?
• Vehicle
  • What is the long-term incentive vehicle (cash, stock, synthetic equity)?
• LTI Target
  • What is the benefit?
• Annual Grant
  • When will the awards be granted?
  • How frequently will awards be granted?
• Units
  • Will units awarded be full value or appreciation?
• Vesting
  • When will the benefit vest?
• Payouts
  • How will the benefit be paid?
  • When will the benefit be paid?
• Valuation
  • How is the fair market value of the benefit determined?
• Termination
  • What happens to awards in the event of a sale, death, disability, retirement, or termination?

Cracking the Family Office Talent Code

Deon Hornsby, AIG, Private Client Group

Jack Kristan – Plante Moran

Michelle Javier – Plante Moran

Gaby Griffin, FOX, Moderator

• The UHNW world is facing a myriad of talent challenges
  • Increased outsourcing
  • Designing competitive incentive and compensation programs
  • Convincing the family that the office needs more staff

• What are the strategies you can use for hiring?
  • Values of the firm
  • The values must be communicated to recruits
• Where are the best places to recruit candidates and have more diverse teams?
  • Looking at all resumes
  • Make sure the environment seems welcoming
  • Being intentional on where you look and how you want your team to look
• How can families still be private but improve their marketing for candidates?
  • Must communicate the expectations of privacy
  • Talking to contacts or a private recruiter
• How do we help as an industry on branding?
  • Finding the right expert partners that you can work with
  • They will be on top of the current laws and trends

2022 Compensation and Benefits Survey: Emerging Themes; Closing Comments and Forum Wrap-Up

Glen Johnson, FOX

Hilary Leav, FOX

Current Backdrop and Competing Demands

• Transitions
• Talent
• Technology
• + Time

FOX Compensation & Benefits Study - Survey designed to increase overall participation and expand governance insights

• Board, Trustee & Committee compensation – 158 participants
• Family Office staff benefits – 240 participants
• Family Office staff compensation

Four early themes arising from the Board, Committee and Trustee survey

• What (are people using) – Family office board, investment committee
• Who (is on it) - Family members.  Also, executives and trustees
• How often (do they meet) - Every other month
• How much (do they pay per meeting or on retainer) – The majority do not pay, but for those who do, it ranges from $77k to $36k

Benefits survey early themes – work, retention and benefits

• Where we work is changing! Flexible work from home options
• Retention
• Benefits – Retirement, Time off – PTO increases with more flexibility, carryover
• Retirement matches become more generous

What’s in the family office staff compensation survey?

• Compensation oversight
  • Who makes the decisions?
  • How often are they made?
• Compensation design
  • What in included in total compensation
  • How is it structured
• Incentive Structures
  • Long-term incentives
  • Short-term incentives Incentive structures
• Position Information
  • 30+ positions
  • Detailed compensation data