How LTIPs help family offices secure and retain top talent

Family offices operate on a longer horizon than most institutional employers. Where a listed company might measure executive performance in quarterly earnings cycles, a family office thinks in decades, or across generations. This creates a compensation challenge: how do you attract and retain the calibre of CEO, CIO, or CFO who could command a lucrative package at a private equity firm, hedge fund, or multinational, and keep them engaged over the long term?

With traditional stock options unavailable, a growing number of family offices are incorporating a long-term incentive plan (LTIP) as part of the compensation package for senior roles. This helps align executives with the family’s long-term goals, build a sense of ownership, and boost retention.

How prevalent are LTIPs in family office compensation packages? 

Research by Morgan Stanley shows that over half (54%) of US-based family offices offer LTIPs, rising to 65% for those offices with more than US$1BN in AUM. The most popular structures overall are co-investment opportunities and deferred incentives, while among investment-focused family offices specifically, carried interest plans are also common. And following the trend in the US, we’re increasingly seeing LTIPs form part of compensation packages for family office executives in the UK, Europe and Asia.

How are LTIPs usually structured in a family office context?

The preferred type of LTIP varies by market and role, but the most common structures, in approximate order of popularity/frequency of use, are as follows. In some offices, a hybrid model is used, incorporating elements of more than one structure. 

Co-investment rights

Executives are sometimes permitted to invest personal capital alongside the family in specific deals or funds, sometimes on preferential terms such as reduced fees or a leveraged allocation. This creates alignment through shared risk and reward – and is especially popular for investment-focused roles.

Deferred cash bonuses with performance vesting

A portion of annual compensation is set aside and paid out only after a multi-year period, subject to continued employment and achievement of agreed benchmarks. This structure is relatively easy to administrate and easier for executives to understand and value.

Carried interest or profit participation

These structures tend to appear in offices with significant direct investment programmes, most frequently offered to CIOs and heads of direct investments, where the executive’s contribution to deal sourcing and value creation is most measurable.

Phantom/synthetic equity

Similar to an equity stake, with the executive benefiting from appreciation in a defined pool of assets, without transferring any actual ownership (preserving control for the family). This model is particularly common for CEO and family office director roles, where the executive oversees the entire enterprise.

The challenges of LTIPs (for families and executives)

The main challenge to bear in mind is that for the LTIP to serve its intended function – attract and retain talent – the value must be clear. If an executive cannot clearly articulate what their LTI is worth or what triggers a payout, the incentive loses its motivational power.

Without a public market price, valuing equity or co-investments can be complex, so it’s crucial that clear criteria are agreed upon at the start of the employment, whether that’s using an independent appraisal or a mutually agreed methodology.

There’s also a degree of uncertainty around LTIPs, especially for executives coming from more traditional institutional roles. What happens if a founding principal passes away or the next generation assumes control? When can the executive realise the value in the LTIP? It’s important that hiring teams can settle these questions up front.

Best practices for family offices

• Formalise all arrangements in writing – usually, the best practice is to include an LTIP scheme that activates after a minimum period in the role.
  
• Use independent advisers – specialists can accurately benchmark proposed structures against the broader market and stress-test them under various scenarios.
  
• Align metrics to what the family actually values – e.g. preservation, growth, or impact. Misaligned metrics incentivise behaviour that clashes with family objectives.
  
• Communicate value clearly during recruitment – candidates from institutional backgrounds won’t value an LTIP they cannot model or understand.
  
• Build in review mechanisms as the office evolves – ensuring the incentive remains relevant and motivating over time. 

Attracting and retaining talent with LTIPs

LTIPs are no longer a “nice-to-have “; they’re key to acquiring the best senior talent. But package design and structure need careful thought to balance competitiveness, value and alignment with the family’s objectives. Those offices that invest in getting this right can build long-term stability in senior roles, while those that don’t risk hiring and retention challenges.

If you’re building or growing a family office team, Victus Search can help. We understand the nuances of family office compensation and what it takes to secure top talent in this market, particularly for key executive and C-suite roles. 
Our deep sector experience, combined with our global network, gives you access to a wide pool of experienced professionals – including those not actively seeking a move. Contact us to discuss your requirements in confidence.

For a broader view of what competitive packages look like across senior family office roles, download our Family Office Remuneration Guide.