Family offices are paying for leadership they won't let work

The family office sector has a problem it is funding generously and solving slowly. Average base compensation for a chief executive in a US family office now sits at $541,000. In Europe, total compensation runs close to €759,000. These are serious institutional salaries. In too many cases, they are attached to roles without serious institutional foundations.

This is not a niche complaint about a few underprepared offices. The sector has grown from roughly 6,000 standalone family offices six years ago to more than 8,000 today, with projections suggesting 11,000 by 2030. Speed of formation has consistently outpaced depth of infrastructure. And with an estimated $84 trillion in family wealth expected to transfer across generations over the next two decades, the consequences of that gap are about to become very expensive.

Two parties, one broken dynamic

Families and the executives they hire share responsibility for this, in roughly equal measure.

Families commission the hire but resist the work that makes it viable. Building genuine governance, documented investment mandates, clear decision-making authority, and a framework that functions when the principal is not in the room is harder and more exposing than writing a compensation package. It requires families to formalize things they have managed on instinct, sometimes for decades, and to accept constraints on their own authority. Many don't do it. They hire instead, and expect the executive to compensate for the absence of structure through sheer competence and goodwill.

Executives accept this. That is their half of the problem. A seasoned investment professional or a former institutional CEO will routinely take a mandate from a family office where the reporting lines are informal, the success criteria are undefined, and the relationship with the principal is built on personal trust rather than documented accountability. They know what they are walking into. They take the role anyway, usually because the compensation is compelling and the work is genuinely interesting. And then they spend the first two years managing ambiguity that should have been resolved before they arrived.

The result is both predictable and inevitable. The executive cannot perform to their actual capability because the structure won't support it. The family cannot evaluate whether they are getting value because they never defined what value looked like. The relationship holds together usually until a moment of real stress. Some sort of market dislocation, a generational disagreement, or a high stakes decision exposes the fact that nobody wrote down who actually has authority here.

The transfer changes the stakes

The $84 trillion wealth transfer is routinely framed as an opportunity. For family offices that haven't done the structural work, it is more accurately a reckoning.

The first generation built wealth with instincts, values, and risk tolerances that were never formalized because they didn't need to be. The founder was the mandate. The second generation inherits the assets but not the clarity. They often have different priorities, different relationships with risk, and different ideas about what the family office is for. When that moment arrives, the executive hired to serve the family finds themselves mediating between competing principals without a framework to do it, in a structure that was never designed for the question being asked of it.

This is where under-institutionalised family offices will struggle most visibly, and most expensively.

What actually needs to change

The sector needs to be honest about three things simultaneously.

Families need to do the governance work before they do the hiring. An executive appointment is not a substitute for an investment policy statement, a clearly scoped mandate, or a decision-making structure that works without the principal's constant involvement. Hiring first is putting the outcome before the infrastructure.

The profession of family office leadership needs clearer standards for what these roles actually require. Although a family office CEO is not an asset manager, not a family therapist, or not a chief of staff, the role often demands all three of these roles from the individual while, crucially, not acknowledging any of them. Until the sector develops a more honest account of what it is asking executives to do, compensation benchmarks will keep rising while role clarity stays where it is.

And compensation structures need to reflect accountability. If success criteria are not defined, bonuses cannot meaningfully measure performance. The sector has borrowed the salary architecture of institutional finance without borrowing the accountability frameworks that make those salaries rational.

No one is saying that this is a straightforward task. Family offices are, by their very nature, personal. Governance feels bureaucratic when the principal built everything from scratch and trusts their own judgement. But the scale of what is coming, both in terms of assets under management and the complexity of the transfer ahead, means that personal is no longer sufficient. The families and executives who recognise that early will be in a considerably stronger position than those who wait for the problem to announce itself.

With the transfer of $84 trillion in family wealth imminent, the industry faces one question. Will the structures that are supposed to manage that transfer be ready or will the sector still be working on them when it arrives.

This article was originally published as an opinion piece on Professional Wealth Management. 

About the author

Daniel Aghdami (daghdami@heidrick.com) is a partner and leads the Family Capital Practice in Europe and Africa; he is based in the Zurich office.