ROUND UP THE USUAL SUSPECTS. That could well be the motto of most families when it comes to hiring a chief executive to run a family office. Many families draw senior managers from private banking, accounting or other financial backgrounds—the better to look after the primary purpose of the office: managing the family assets.

But families have also espoused much broader missions than simple wealth preservation, spurring some of them to take a radically different tack. They fill senior management positions with people whose core duties pertain to nonfinancial matters—a passionate interest in philanthropy or art, perhaps, or an urgent family need, such as educating family members in decision-making or financial skills. While these executives often have little or no financial background to speak of, they have the management and leadership skills needed for them to serve as the interface between the public and the family office, says Eric Wasserman, head of family office services and managing director of JP Morgan Private Bank in Los Angeles.

While the practice is hardly new among the 3,000 family offices in the United States—wealthy families have hired high-level advisors to help them plan philanthropic missions since the Gilded Age—it has gone on largely below the radar. That is, until recently. “With the explosion of the number of ultra-high-net-worth families and family offices, more organizations have been studying them and sharing information about how they work,” Wasserman says. As a result, the existence of these non-traditional managers is increasingly coming to light.

Finding appropriate candidates, generally a delicate matter even for more conventional family offices, is a difficult task. “There’s no clear career ladder for these roles,” says Kelin Gersick of Lansberg Gersick in New Haven, Conn., a family business consultant and one of the authors of the book Generation to Generation. “You have to cast your net broadly.”

For Susan Remmer Ryzewic and her family, the answer to this conundrum was to join a multifamily office that emphasized helping relatives deal with family dynamics. About 15 years ago, her family sold the future rights to projects produced by the business her father started in 1958, while retaining its assets; the firm originally built factories that manufactured synthetic fabrics. The deal made the family wealthy enough to consider setting up its own family office.

But while Remmer Ryzewic, her two sisters and her brother were all adults, they had never worked together. Consequently, during frequent meetings to discuss what to do with their new wealth, they were unable to reach a consensus, or even listen to each other. “We’d been a family that had vacationed together, but had never had to make business decisions together,” says Remmer Ryzewic, who now lives in northeastern Florida. “We each had our agendas, and just kept trying to convince each other to accept our own positions.” The siblings, along with their mother, quickly realized they were getting nowhere, and they needed help.

Eventually they decided to join a multifamily office. “We were basically neophytes and needed more experience,” Remmer Ryzewic admits. More so than financial advice, the family members needed to learn to improve their communication skills, which meant finding a group of professionals that could do more than provide fiscal counsel. The family hired Asset Management Advisors of Palm Beach Gardens, Fla., then a new multifamily office aimed specifically at placing as much emphasis on nonfinancial issues as it did on investments.

While their first advisor did have a financial background, he focused on helping them learn how to talk to one another as business partners, rather than siblings burdened by the rivalries and patterns established in childhood. “With my sisters, we knew how to push each others’ buttons,” Remmer Ryzewic says. “And there were all sorts of unspoken issues that undermined our ability to work together.”

Humanitarian Resources
Remmer Ryzewic and her family faced a complicated series of emotional and interaction issues, a challenge for even an experienced advisor. But for families that want to focus on less menacing areas, finding the right manager can be more straightforward. This is particularly true of philanthropy. In these cases, board or staff members of charities can prove resourceful family office managers. Wasserman recalls a family in which the second generation was about to hand control of the family business to the next generation. Simultaneously, members of the family’s three branches were considering going their separate ways. They called in a consultant to help them decide on the best course of action. Because the family had long been involved in a wide range of charities, from local organizations to international groups, they concluded that the family office should focus on these activities first and foremost. The relatives replaced their family office CEO, a finance specialist, with someone who had run a large governmental agency and had sat on the boards of several charities focusing on areas that piqued the family’s interest. In addition to the family office, the new hire headed the family foundation.

Similarly, Gersick points to a family with multiple foundations run by six family branches. The family members wanted an executive to oversee all their activities and to help teach the younger generation about philanthropy, and decided the individual should come from a charitable organization. They hired a former program officer at a foundation involved in funding organizations that jibed with their own causes.

Besides seeking out philanthropic commonalities, families often work through their own social network—fellow board members, friends, business acquaintances, members of organizations they have supported. Wasserman cites a family whose patriarch, a scientist, had founded a biotechnology firm. When his family decided to focus the family office on philanthropic giving in medicine, their first move was to contact the dean of a medical school to which they had contributed. They hired him to run the office.

There are also a number of professional advisors who will work with families to recruit the right executive. Remmer Ryzewic and her family, for example, turned to Family Office Exchange (FOX), a Chicago-based consultancy, for advice. FOX helped steer the family toward Asset Management Advisors. Executive search firms specializing in family offices are another option. They utilize their contact networks to locate candidates that families might never find on their own.

This strategy sometimes leads families to recruits whose backgrounds seem, at first glance, to be off the mark, but who have skills and interests that make them appropriate possibilities. M.J. Rankin is president of the Rankin Group, a Lake Geneva, Wis., search firm specializing in wealth management services. She recalls a Chicago family with a vast art collection that needed someone to curate their holdings. In her search, Rankin tapped several contacts who had worked for regional art institutions, as well as private bankers. In the end, she found someone with more traditional investment banking experience coupled with a passionate interest in art history. “We need to look at what’s not on the resumé,” she says.

Because executive positions in family offices are as unique as families themselves, the search usually requires an exhaustive—and sometimes unusual—interview process. Rankin, for example, asks each family member to undergo a behavioral assessment in order to ascertain each individual’s style and how the group interacts. She does the same for family office staff. From these, she produces a profile of the characteristics the candidate needs to have. The profiling process can take up to two weeks. “We get a sense of the kind of people who will best complement the individual styles of family members and employees,” she explains. While she interviews candidates, Rankin uses the profiles to match a candidate’s style and values with those of the family. Finally, the family interviews two or three finalists and makes a decision.

Galvanic Guides
Unconventional family office executives are also charged with being more dynamic than their more traditional counterparts. Families require these professionals to evolve over time, as Remmer Ryzewic and her family discovered. While her brood initially sought help on how to make decisions collaboratively, their needs have changed in ensuing years. More recently, they have focused on educating their children, who range in age from 10 to 21, in how to manage wealth. They have engaged in role-playing exercises, for example, involving board members, shareholders and other associates. They have also taken personality tests to help them better understand how to interact with each other. Last summer, they discussed the values central to their family mission statement and, two weeks before Remmer Ryzewic’s mother died, created a family legacy video, which they showed at her funeral. “In the beginning, we were worried about how we work together,” she says. “Now we’re more focused on trying to pass along values to the next generation.”

That natural evolution is one reason why it is often older, multigenerational family offices that seek nontraditional managers. Fredda Herz Brown, who works with family offices as managing director of the Metropolitan Group in Cresskill, N.J., cites a 200-person family in its fourth generation, operating a family office long headed by a finance expert. As the family grew more numerous and spread into five branches, its members began to lose the ability to make group decisions. Strong personalities with different goals clashed at these pivotal junctures. When the veteran CEO decided to leave, he suggested the family hire, as his replacement, someone who not only understood family dynamics, but who could also help with educational issues.

Eventually, the family found an individual with a financial planning background who had not only headed up educational services for financial planners in a large bank, but had also left his job to pursue a master’s degree in education. Since coming on board, he has developed programs for teaching family members everything from governance techniques to the intricacies of the family holdings. He also supervises investment specialists on staff, who attend to the family finances.

Compensation for these professionals varies, depending on their areas of expertise. In almost every case, unconventional CEOs come at a premium. Often, a family simply pays a nonfinancial CEO a salary comparable to the one usually found in the industry from which he or she came. Because families cannot use investment results as a benchmark for evaluating job performance, they tend to set goals and objectives at the beginning of each year and measure how effectively executives reach those goals 12 months later. If the family office CEO has a soft-skills background, the family must bear the additional expense and time of hiring and managing additional staff members to oversee investments and other financial matters. Total expenditures for such a multifaceted executive team can run $2 million to $5 million a year in salary and infrastructure expenses, according to Wasserman. “Only a family with significant wealth can support that kind of infrastructure,” he says. Generally, families should have at least $250 million to $300 million in net worth for such a move to make economic sense. But, if they do, it might be the best strategy to make sure their family office effectively meets their goals. 

Anne Field is a freelance writer based in Pelham, N.Y., and is a frequent contributor to Worth. annearf@aol.com

Illustration By Kevin Spaulding