White Paper: Reliable Compensation Data As A Strategic Business Tool
From Overhead To Opportunity: The Power of Quality Data
“Unlike traditional corporate environments, family offices can vary widely in structure, purpose, and culture. A data-driven approacth that accounts for these nuances will help ensure that compensation strategies are not only competitive but also aligned with the family’s values, long-term goals, and operating model.”
Since 2019, the number of family offices has increased by nearly a third*, resulting in intensifying competition for top-tier talent. In an increasingly crowded landscape, compensation packages have become a critical strategic tool to attract and retain bespoke family teams.
For most family offices and family organizations, compensation often is the most significant and visible annual expense for a family office. Tied to families’ financial goals and linked to their mission, vision, and values, compensation plans that strategically link these items can be leveraged as a powerful business tool that reduces ambiguity and:
· Aligns talent with family office goals
· Links rewards to defined performance and accountability expectations
· Offers families a critical key employee retention tool
But where should family principals and family office leaders begin when navigating pay, benefits, and incentives? The answer lies in leveraging quality, statistically sound, and contextually relevant data to guide decision-making. When considering any data source to inform compensation decisions, consider the following to determine the appropriateness of the data:
· Use recent data collected within a defined and relevant timeframe, rather than an open-ended or continuously evolving dataset
· Utilize data sets and/or custom peer groups reflecting the most comparable type of firm, asset mix, or level of assets under management (AUM)
· Ensure the sample size is sufficiently robust to support meaningful conclusions (see chart below)
· Rely on data that is statistically validated and confirm if the publisher of the data follows quantitative analysis best practices
· Understand whether data is employer-reported (more reliable) vs. self-reported vs. anecdotal
· Rely on reported median data vs. average, as median is more resistant to outliers
Benchmarking compensation and incentive plans against industry best practices while considering the unique characteristics of an individual family office is a strategic differentiator. Unlike traditional corporate environments, family offices can vary widely in structure, purpose, and culture. A data-driven approach that accounts for these nuances will help ensure that compensation strategies are not only competitive but also aligned with the family’s values, long-term goals, and operating model. This level of customization is what sets high-performing family offices apart.
Implementing a data-driven compensation strategy transforms its compensation from a tactical decision to a strategic advantage. The process includes an evaluation of family office structures, pay ranges, incentive plans, benefit packages, and total rewards strategies. Accurate benchmarking enables family offices to identify their competitive position, assess priorities and performance goals, and ultimately make better-informed decisions about compensation strategy and positioning.
Founded in 2014, Botoff Consulting spent the past decade addressing and filling a critical gap in reliable, sector-specific data developed specifically for the family office space. “The firm was built on a simple but powerful principle, ‘Bad data is worse than no data at all,’ and that has driven our firm to apply rigorous data integrity norms and practices to all of the information we collect and publish,” said Botoff Consulting Founder and Managing Principal Trish Botoff.
The data Botoff has published consistently has reflected the evolution of the family office industry. Over the past decade, family offices have reported delivering steady, significant (above national average) increases in compensation, tied primarily to overall market, investment performance, and business performance. This performance-based trend aligns with family offices increasing levels of professionalization, sophistication, and, in surveys and practice, reporting an increase in formal compensation strategy, including an emphasis on annual and long-term incentive plan development.
In Botoff’s upcoming 2025 flagship U.S. Compensation Report for Family Offices, Family Investment Firms, and Private Trust Companies, to be released this fall, survey respondents reported that 51% of all single family offices are now using long-term incentive (LTI) plans, including 46% of firms with less than $2.5 billion in AUM and 67% of firms with $2.5 billion in AUM or more. Following a 2024 trend shift, deferred incentive compensation returned to the most prevalent plan type (51%), followed by co-investment opportunity (43%) and carried interest (33%).
The costly risks of overpaying, underpaying, or misaligning incentives with actual performance alone justify the effort, but with pay transparency laws gaining momentum, the stakes are even higher. In many jurisdictions, being able to justify pay decisions using accurate, defensible data is both a best practice and a compliance requirement.
Reliable compensation data, when paired with expert consultants who understand the family office landscape, becomes a powerful strategic tool. Together, they enable leaders to design pay plans that reflect market realities while aligning with a family’s unique goals, values, and structure. In today’s environment, where transparency and compliance are increasingly critical, this combination is not just smart – it is essential.
* Deloitte Private. The Family Office Insights Series: Defining the Family Office Landscape. 2024, p. 5. Link
