Talent spotting: how to hire the right people

Could there be a shiny silver lining for family offices from the unprecedented economic turmoil that has wracked the world for the past two years? The fallout from the global financial crisis has caused many highly qualified, highly talented people to find themselves in an unusual situation – they are jobless.

At the same time, even those who have retained their posts are seeing costs slashed and bonuses squeezed. Many of them are looking nervously over their shoulders, fearing that they may get caught in the next round of indiscriminate firings.

All of a sudden the previously unfashionable world of family offices has suddenly started to look very attractive. So attractive, indeed, that a bandwagon is being created. You know the world has changed radically when, for example, a former hedge fund manager is employed by a New-York based recruiter to create a family office practice.

But specialists working in the field on both sides of the Atlantic are more cautious. They agree that there is more talent available but say this can bring its own problems and does not necessarily make it easier for family offices to tick the most important box when recruiting, the one marked "is this the right person for us".

Linda Mack, founder and president of Mack International, the Chicago based international executive search and consulting firm, says it's true there are more people out there and available. However, for a family office "it is still about finding the person who not only has the right skills but has the right culture fit," she says. Mack says that the expanded pool of candidates can actually complicate the recruitment process. Recruitment firms, which might once have had to seek out the right candidate, are now being inundated with people coming to them. Sifting through them is no easy task.

"We have just completed a CEO search. We had so many people contacting us that it actually made it a more arduous process. We have had firms coming to us that in another market might have done their own searches but now find they are overwhelmed."

What she knows only too well is that family offices have very particular needs and requirements, these vary from family office to family office – there are no set rules – and it is likely that in many cases there may only be one or two people who meet them all. The current climate just makes these rare people that much harder to find among the large mass of competing candidates.

"What is crucial is to ensure the candidate is right for a firm's culture and its values. This is critical and finding them is still challenging. These are very, very particular people. We get called by, particularly, a lot of the investment professionals out there but often they really don't know anything about what a family office is like and what a family office does. People feel that there is an opportunity with family offices and that is why we are getting the calls. They have unrealistic expectations, they want to do things like bring their staff along with them."

Erik Spaas of Belgium-based multifamily office Praxis has seen first hand that an increase in applications does not necessary make recruiting any easier. "We are getting more applicants and CVs in but the quality is not what we are looking for. I think that the best people are staying in the environment they are already in," he says.

Praxis has been unable to fill an opening it has had for some time due to lack of candidates that fit all the required criteria.

Spaas believes the lack of suitable talent is due in part to the current unstable job market. "The problem we are confronted with is the people we want are afraid to change at the moment. There is a crisis and they are satisfied that their job is safe so they want to stay where they are instead of going to a smaller company or family office where the risk is higher," he adds.

Christian Sulger-Buel, managing director of London based executive search firm Sulger-Buel & Company, agrees that while there is an apparently rich pool of talent available, this does not necessarily make it easy for family offices to recruit the right people for them.

"The requirements of a family office are specialist, not only technical," he says. "We have specialised in this field for 10 years and it is a delicate sport - a very delicate sport. Certainly there is a bigger pool of talent. There are some very good people without a job, top quality individuals with great talent. There are also people who are in a job today who feel that they are under pressure."

However, Sulger-Buel cautions that many of the people now re-assessing their views of family offices, perhaps seeing them as an excellent place to ride out the current turmoil, may be absolutely the wrong people for those offices to hire.

"There are good individuals available who have no work or who have been working in a large environment with a lot of pressure and may now be looking to move to a smaller environment. Take investment bankers, for example; they may be good with figures, quick, talented, but traditionally what they have done is to be good at taking care of themselves.

"If they join a family office they have to think very differently. They have to think for a family, the interests of the family must come first. That is a very different approach to what they may have been used to and not every professional can re-orient his priorities in the right way."

Sulger-Buel also points out that family offices have not been immune from the effects of the financial crisis. "Some had very good CEOs or CIOs who were smart enough to advise the board or the principal to put their money into cash. Those people have been rewarded. But this is not the case with all families. Not all families have received that sort of advice and they may find themselves in trouble. They may well have lost money."

He says that given the economic circumstances, the emphasis and philosophy of many family offices has changed radically. "Protection of assets has become as, if not more, important than growth. This motivation requires a person capable of adopting the right mindset," says Sulger-Buel.

John Bender is involved in family office wealth management in the Channel Islands and Switzerland and acts as special advisor to HRH The Prince of Wales's Charities Office. He points to the differences between the family office environment and that of other financial services institutions as a key factor in family office recruitment difficulties.

"A capacity to be discrete and prudent are vital qualities to accompany professional ability. Furthermore, it is essential that a long-term approach can be taken. A candidate needs to understand that a family may think in terms of generations rather than quarterly results and he must be someone who enjoys making strategic decisions," he explains.

Adapting to a different working environment can also prove challenging to investment bankers looking for a place to ride out the storm. "A family investment office can lack the dynamism of the dealing floor. It is important to identify a candidate who thrives on making strategic decisions and who would not become bored working in a more subdued environment," says Bender.

He also points out that hiring for family offices will always have its difficulties. "Finding the right expertise for a single family office will remain a challenge. Not only does one need to identify the requisite competence, it is also necessary to find someone who can identify with the values of the family," he says.

Stuart J Rabin is president and chief executive of Nine Thirty Capital, the New York based investment adviser that manages assets for a select group of families from around the world. As such, he is someone who has to recruit and is also always looking to find great investment talent. He is therefore dealing with the consequences of a greatly expanded talent pool.

He says: "I would agree that there is no question that the poor economic climate and dislocation in financial markets and in the investment industry has created a large pool available to hire generally and specifically for family offices and investment firms."

"The perceived stability is attractive for a lot of people, but that said, most family offices and family investment companies are, and will be, very wary and very selective. In our business we come to it from an investment company perspective. First and foremost we always strive to find excellent investment partners and managers for our customised family portfolios. The question to ask is whether the former investment banker, private banker or private client service person in front of you will make the best investor or steward of your family fortune? Many of the people out of the large banks and private wealth management companies are not necessarily going to be 'world class' investors."

Rabin also says that it is vitally important for those looking to enter the family office world to have the right personality, the right skill set and the right psyche to equip them to work successfully for a family owned organisation. Given the large number of people keen to secure jobs with family offices and investment firms that actively manage family and charitable fortunes, these companies need to drill down very carefully into the backgrounds and abilities of the people approaching them.

"The skills set of such individuals is not always easily transferable. A private banker or consultant may be good at working on intra-family relationship or other issues, or capable of allocating money to bank or institutional products, but will he excel at seeking out and finding great investment managers and partners and in actively managing a family fortune? Not necessarily. When people say they work in private wealth you must ask yourself what that actually means. Did they really invest capital day-to-day and has their own money been on the line in each of the recommended investments? Such a background and alignment of interests between the investment advisor and the family is quite rare but it radically alters the dynamic to the benefit of the family.

"Or, did the candidate merely allocate money in a passive manner and without a genuine alignment of interests? You have to get granular about what they actually did, how they did it, whether they have directly managed family capital and what their skills set really is."

But Linda Mack has one last warning for those thinking this way and drooling at the prospect of choosing from a vastly expanded talent pool. It may tempt them to think that they can hire cheaply and get hold of high quality talent at a bargain price. This, however, may ultimately prove to be a self-defeating strategy.

"We work very hard with companies on compensation. We tell them not to be tempted to try and do this. The problem is if you hire someone and they think they have been ripped off, they are likely to leave as soon as they possibly can. They will leave as soon as there is an upturn," she says. "This can put companies right back to square one. They need to make sure that compensation remains competitive and their employees feel valued. That way they will be happy and they will be much more likely to stay in place."

With the sort of talent that is now available, that sort of message would seem to be particularly apposite at the current time. As the old maxim goes, hire too quickly and too cheaply, repent at leisure.