Today’s labor market is increasing wages for employees in many industries, and domestic workers and estate managers are no exception. As the threat of the pandemic on normal life fades with each passing day, ultra-high-net-worth (UHNW) families are reassessing their lifestyles and service needs. Wealth has increased for many, and those families are willing to spend to meet their desire for an exceptional level of service at their properties. The current hiring market for household staff is one of the busiest in two decades, and UHNW individuals with estate staff need to focus on retention or risk losing the employees who keep their estates—and lives—running smoothly.
Financial professionals who work with UHNW families should be aware of best practices and considerations for staffing and retention so they can effectively assist their clients with any challenges and risks that may occur. Morgan Stanley’s latest Estate and Household Staff Compensation Report provides benchmark compensation data from approximately 300 participating families/family offices for roles across estate, household and property management, family care, food preparation and security to help UHNW individuals set appropriate salary and benefit levels for in-house estate and household staff.
Compensation Trends
Findings show that UHNW families are providing salary increases that outpace the broader U.S. market for 45% of management and 36% of staff. Families that use a compensation strategy to guide pay decisions are pushing wages even higher. A clear correlation remains between pay and staff size, tenure, number of properties and number of families, showing that families with larger estates and staff—and likely a more formalized pay scale—are offering greater compensation.
More than one-third of incumbent staff have fewer than two years’ tenure with families, and 59% have fewer than five years—indicating a high rate of turnover. This could be because pay for less tenured staff (0-2 years) exceeds pay levels for staff with 3-10 years of service, leaving tenured staff potentially at risk to be recruited elsewhere.
Best Practices for Clients
So, what does this mean for clients? Although employers all around the world are feeling pressure to retain top talent, UHNW families may need to prioritize retention more than other organizations due to the personal, confidential nature of service. There’s a greater need for rigorous recruitment and hiring practices to avoid turnover and ensure that the talent they’re bringing on and investing resources in is talent that will stay. Today’s families conduct much more thorough screenings, including background investigations, psychometric testing and subject interviews.
While compensation is undoubtedly a key driver in retention, developing defined and consistent HR processes is also critical for families, including onboarding, benefits and regular performance management, including training and performance reviews. Benefits that are common with estate and household employees include competitive vacation policies, paid time off for sick days and holidays, 401(k) plans with matching contributions and health insurance.
More specific to the role of these employees, scheduling is becoming increasingly important: giving employees advance notice of need-to-work days is becoming more necessary as a way to demonstrate respect for employees’ time. Student loan reimbursements or continuing education and training opportunities, like classes that provide employees with continuing education, communicate to employees that their employers—the family they’re working for—is invested in improving their lives and future prospects.
Further, the report found an increased hybridization of traditional roles with more contemporary lifestyle needs, such as executive personal assistants, estate operations managers, family personal assistants and more. This hybridization can help roles cover a broad range of needs with less staff, which offers them elevated salaries and room for growth. It also empowers families to justify full-time hires over part-time, shared or outsourced agency support.
However, pay ultimately prevails as the top factor to ensure your clients’ staff feel valued and appropriately compensated. Beyond normal pay increases aligned with tenure, seniority and performance, families may need also to spend more to compensate for the increased cost of living and housing, especially in rural areas, which have been particularly hard hit from past waves of pandemic-fueled migration from cities to less dense areas. These factors are vital to consider when making decisions on pay.
As wealth management professionals, it’s important to be able to guide UHNW clients to make thorough decisions as items like compensation impact their broader financial plan. Data is important to use and demonstrate to clients what compensation trends are directly impacting their employees, especially amid ongoing market volatility and a challenging job market. Providing these best practices and guidance will equip clients to make the best decisions to retain talent that helps them keep their estate operating successfully.
Valerie Wong Fountain is managing director, head of FOR platform and partner management at Morgan Stanley Private Wealth Management.
Morgan Stanley collaborated with Botoff Consulting to conduct its 2022 Estate and Household Staff Compensation Report.