There was a time when everyone who was anyone in corporate finance wanted to work in private equity. But then private equity funds cut back on carried interest payments and became less attractive as employers.
There was also a time when the top traders in banks wanted to leave for the top hedge funds set up by former top bankers. But then the top hedge funds stopped being so lightly regulated and started struggling to find good investment opportunities. And so that option fell away too.
If you’re the exemplary banker or trader of your generation, this leaves you with only one real alternative: you need to join a family office.
“It’s so much more fun here,” one ex-banker turned family office investment professional informs us in a discreet City bar. “We make a decision about what to invest in, and we go ahead and do it. There’s none of bureaucracy and compliance you get in a bank. We see a hotel we like, a retail chain, we just go and buy it.”
Does he work long hours, like in banking? He looks blankly across the table: "I never really think about the hours I work."
Family offices manage money for the richest families in the world. By nature they're highly covert, so you won't read much about them. But they're also big, and growing. Cerulli Associates, a Boston-based investment company, estimated in 2011 that so-called single family offices were managing $2.1 trillion globally and that multi-family offices (in which several families club together) were managing $777bn.
In London, family offices quietly occupy large parts of Mayfair. "People would be outraged if they knew how much money there is there," says the ex-banker, who's traveled east to the City. "A lot of people are managing money for these wealthy families."
Christian Sulger-Buel, managing director the Family Office Exchange (a membership organization for family offices) and a former headhunter, says a position in a family office is often the apogee of a successful financial services career. "It's one of the pinnacles," he says. "If you don't want to run a business at Morgan Stanley or BAML, you can join a family office."
It's not easy to get a family office job though. Sulger-Buel says most families only employ two or three people in investment positions. Those people are often ex-bankers who've joined in their mid-40s. Increasingly, they're also younger people who've gained experience at an institution like Goldman Sachs or Morgan Stanley and decided banking isn't where it's at.
In London, family offices have more than Mayfair and a lack of regulation in their favour. They also pay well. Last year, when Sulger-Buel was still a headhunter, he conducted some research into compensation and found that London-based single family offices pay their chief executives anything from £150k to
£390k, plus bonuses. Alongside the chief financial officer typically earns £70-£230k, plus bonuses, and the chief investment officer typically earns £100k-£250k, plus bonuses. It's usually paid in cash. No deferrals.
The downside of working for a family office is that you could end up working for a family of multi-millionaires who like to blow thousands in clubs populated by lightly dressed 20 year old women. The ex-banker said this isn't necessarily a problem. "The family I work for are very quiet in their approach," he said, before drinking up and disappearing back into the ether.