A recurring debate in family office compensation is whether the annual bonus should be expressed as a percentage of assets under management. Westwick's view, applied across every mandate we run, is that it should not.
The logic is simple. The person funding the investment is the family. The family carries the risk, takes the ultimate decision, and chooses the asset. An operator's contribution to the outcome does not scale linearly with the number of zeros on the cheque. A CIO who recommends the right stock, times its entry, and watches it like milk on the stove does the same work whether the family invests ten million or a hundred. The job is the same. The compensation should be too.
That is why Westwick recommends paying bonuses as a multiple of salary, rather than as a percentage of AUM. For an ordinary year, a modest multiple. For an exceptional year (a genuine game-changer contribution), a larger one, even doubling, tripling, or quadrupling the base. But never a basis-point slice of the family's balance sheet.
Linking a family office professional's compensation to AUM distorts their judgment in ways that are hard to unwind. It creates an incentive to grow assets where growth is not needed, to chase allocations where caution is called for, and to conflate the professional's career with the size of the family's wealth.
That said, the desire of operators to share in upside is legitimate, and there are clean ways to honour it. Westwick often helps families set up dedicated investment vehicles in which employees can participate with their own capital, alongside (but separate from) the family's. Staff take real risk, earn real returns, and align themselves with the family's investment thinking, but they do so with their own money rather than a percentage of the family's. The incentive is genuine; the family's balance sheet stays untouched.
Compensation drives most of what an office costs to run — our family office cost calculator shows the share.
Clean compensation, aligned with contribution, is one of the quiet structural decisions that separates a healthy family office from a drifting one.
Frequently asked questions
How should a family office CIO or CEO be compensated?
Compensation in a family office should be structured on salary and discretionary bonus based on contribution and behaviour, not on assets under management. AUM-based compensation creates misaligned incentives: it rewards scale rather than judgment, and penalises the family for reducing risk. A family office CIO managing a larger balance sheet is not necessarily doing a better job than one managing a smaller one.
What is the right bonus structure for a family office executive?
The right bonus structure for a family office executive is one that reflects the quality of decisions made, the alignment with the family's values, and the contribution to the family's long-term position, not a percentage of assets or returns. Discretionary bonuses set by the family, against clear criteria agreed in advance, produce the best alignment.