Ultra-rich families are increasingly involving their millennial and Gen Z heirs in personal investment firms. This trend is partly due to a challenging job market, offering young family members valuable experience. Joshua Gentine, a family office consultant, believes that as families diversify into alternative investments and startups, more opportunities will arise for these younger generations.
However, the topic of salary remains a complex issue, even among wealthy families. Gentine notes that family members often earn less than their peers in similar roles outside the family business. This pay discrepancy is especially noticeable in smaller family offices. He argues that some assume family members don’t need competitive salaries because of their wealth. “This reasoning is flawed,” Gentine says. Lower pay can lead to resentment, especially when family members hesitate to discuss their compensation. Many feel a loyalty that makes it uncomfortable to negotiate with parents or senior family members.
On the flip side, some family employees may feel “golden handcuffs” if they’re paid well but dread leaving their roles. Disputes over compensation often simmer below the surface. Kyler Gilbert, a consultant, shares an example where a client faced tension with uncles over a delayed bonus. His client felt hesitant to address the issue, fearing a rift in family relationships.
Generational differences play a role in these tensions. Gilbert, who is 27, points out that when a family business is run by self-made entrepreneurs, they often use their own earnings at a younger age as the benchmark. They fail to account for today’s higher living costs. “Things have changed. Markets and assets have risen, making everything costlier,” he explains.
Most family offices lack formal compensation structures, which can lead to inequities. Gilbert suggests that addressing these issues proactively is essential. Hiring compensation consultants to set clear salary levels or creating a committee to resolve disputes can be effective strategies.
Trish Botoff, a compensation expert, notes that younger family members are advocating more for themselves. They want clarity in compensation agreements rather than relying on informal promises. “The new wave of leaders is looking for written plans and more transparency,” she says.
This shift signals a broader cultural change. As the new generation steps into leadership roles, their approach to compensation and job structure may redefine family business dynamics for years to come.
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