There’s a war for talent in the family office world. An astonishing 60% of new hires now come from outside traditional family office networks, and to compete, families need to go the extra mile.
The best people expect more than a pleasant environment and a steady paycheck, they want to participate in the upside they help create.
In July, Morgan Stanley and Botoff Consulting released their latest compensation report for family offices. Today, we’re looking at their findings and what it means for family offices.
Long-term incentive (LTI) plans are fast becoming standard practice rather than a nice-to-have benefits.
Structured properly, they align everyone’s interests around performance, accountability, and staying the course through market cycles.
Let’s look at what’s actually happening, and why so many family offices are rethinking how they pay and motivate their teams.
The Big Picture
According to the 2025 Morgan Stanley + Botoff Consulting report, 62% of investment-focused family offices now have an LTI plan in place.
That’s up from 54% last cycle.
And if you look at the largest firms (those with more than $1 billion AUM) the figure jumps to 71%.
Why the jump?
In a word: competition.
When everyone’s fishing in the same small talent pool, you can’t fall behind.
LTIs help create stickiness. They keep people engaged for the long haul, not just the next bonus cycle.
As Mirko Tagliabue of family office and executive recruiter Tagliabue & Partners says, it’s all about meeting the expectations of the candidates:
“To secure top talent from outside the family-office sphere, we’re seeing LTI plans evolve into multi-year, performance-vested packages—combining co-investment, carried interest, and tailored ESG milestones—to meet candidate expectations shaped by private equity and hedge-fund norms.”
What Do LTIs Actually Look Like?
The report breaks LTIs into a few core categories.
Co-investment opportunities (57% of family offices with LTIs used these)
Employees can put their own money into specific investments alongside the family.
This is the most popular approach. Sometimes key employees put in their own capital, sometimes they’re offered leverage, with either recourse or non-recourse loans.
Having “skin in the game” aligns incentives without handing over equity in the family office itself.
Co-investments can also act as a useful signal to the family about employees’ confidence in specific investments and portfolios.
Deferred incentive compensation (56%)
This is incentive pay that is earned now but only paid out in the future after vesting periods.
Basically, bonuses that vest over time. These locks people into the family for longer periods.
Carried interest or “phantom carry” (38%)
Carried interest provides a share of investment profits over a hurdle rate, similar to a classic private equity model.
Some family offices set up carry pools, sometimes real, sometimes synthetic, so that top talent gets a cut of any big wins.
Profit-sharing plans (19%)
These plans distribute a portion of annual profits to employees based on predefined formulas. They allow employees to share gains in line with the family office returns.
Operating company equity or phantom equity (8% and 7% respectively)
Employees receive real shares or synthetic equity linked to the value of an operating business.
More common when the family office manages big operating businesses in addition to financial investments.
LTI Plan Prevalence:
Who Gets LTIs?
Nearly 95% of plans include the executives.
About 52% include management-level staff, and 38% even extend to more junior employees.
This is important: family offices are realizing that you can’t just incentivize the CIO and expect everything else to fall in line.
Having a broader incentive structure helps build a culture where everyone rows in the same direction.
How Performance is Measured
There’s no one-size-fits-all approach to LTI metrics, but here’s what investment-focused family offices use most, according to the report:
✅ Overall investment portfolio performance: 69%
✅ Individual performance: 29%
✅ Individual asset performance: 31%
✅ Broader organizational performance: 25%
Some firms also have minimum return hurdles. For example, 52% of investment-focused family offices target an annual portfolio return above 8%.
Interestingly, 36% will still pay out if returns are negative but beat the benchmark.
That nuance is key: it shows how competitive the market for talent has become.
Metrics used in determining LTI rewards:
Co-Investment: More Than Optics
Some key stats from the report:
96% of co-investment plans are optional (rarely mandatory)
48% of firms cap how much employees can put in
35% use special-purpose vehicles or sidecars to structure the investments
27% provide leverage via recourse loans
12% provide leverage via non-recourse loans
23% let participants use incentive compensation to fund their contributions
This creates a blend of real alignment and manageable risk, for both the employee and the family.
Why It Matters Now
In the old days, a big base salary and an annual bonus were enough.
Today, the best professionals expect something more thoughtful.
A compensation package that:
Rewards long-term thinking
Shares in upside
Creates a clear link between effort and reward
Family offices are uniquely positioned to deliver this. Unlike most institutions, they can tailor incentives with remarkable flexibility. Their small teams and flat hierarchies make customization much easier.
This is a huge advantage if you use it well.
A Word of Caution
While LTI plans are great in theory, implementation matters.
Two things often go wrong:
Lack of clarity. If people don’t understand how they get paid, it won’t motivate them.
Lack of documentation. These plans have to be written down. Vague promises or “we’ll figure it out later” approaches usually end in resentment.
If you’re considering introducing (or revising) an LTI plan, take the time to model it properly. Make sure everyone involved understands the expectations, mechanics, and timeframes.
In Closing
Long-term incentives are fast becoming the table stakes.
If you want to keep your best people engaged, and keep your family office competitive, you need to lock your people in.
A well-designed LTI plan is about more than money. It’s about alignment, culture, and staying ahead in a world where talent is the ultimate differentiator.
You can read the full Morgan Stanley / Botoff Consulting report here.
Sponsorship
Reach 50K+ family office community professionals & UHNWIs. Across 𝕏, LinkedIn and the newsletter, Mr Family Office connects with an engaged global family office audience.
