Family offices are entities established for, or by, wealthy families to manage their financial affairs, investments, and other aspects of their wealth. Their broad scope of action and central role as a modern and efficient one-spit stop for clients requires them to embrace the constantly transforming technology.
For family offices, technology plays a significant role, and they have recognized the need to move away from outdated systems and operate on integrated digital platforms to effectively serve clients and their growing expectations. They are increasingly adopting and embracing new technologies through improvements that impact operational effectiveness, communication with clients, and data security. At the same time, these technologies present risks and challenges that require specific skills and increased cybersecurity vigilance to prevent unwanted information sharing.
Why would family offices need to integrate tech into their operations and what are the benefits?
While there are some commonalities amongst family offices there is also a diverse set of needs and structures, meaning they often require complex and personalized tech solutions.
The most common driver across all family offices is the need for advanced data analytics that can help drive investment decisions. New systems and software enable the automation, aggregation, and optimization of data, which can help with transparency, investment intelligence, and better data security. Not only can technology provide access to real-time data, but family offices can track overall wealth and generate predictive analysis. It also offers more agility to family offices that can free up resources and contain costs to focus on their growth.
Increasing regulations across the financial sector also create a growing need for technology solutions to support compliance requests. Differing tax requirements and regulations encourage the demand for technology facilitating effective process management, easy access to data, and safe sharing of documentation.
What are the most common systems that add value to a family office?
- A PORTFOLIO MANAGEMENT & CONSOLIDATED REPORTING SYSTEM
Family offices manage large portfolios that contain all types of assets. They can include stocks, fixed income, private equity, real estate, cryptocurrencies, hedge funds, etc. This diversity could make the investment management process prone to complications and complexities. A portfolio management system (PMS) supports asset monitoring by providing powerful analytics and fully integrated reporting. It allows family offices to gain total control of investments.
To ensure trust and transparency, family offices must also have the possibility to provide detailed information and performance reporting for clients. Consolidated reporting systems automate data aggregation from different sources, prepare reports, and offer on-demand reporting solutions with efficient security and audit trails.
- CUSTOMER RELATIONSHIP MANAGEMENT SYSTEM
The family office’s client structure can be complex. Keeping tabs on the multiple relationships that span over generations is challenging. A Customer Relationship Management (CRM) system reduces dissension when managing client relationships. It handles in one location all information related to stakeholders, as well as deal opportunities and historical data. Family offices use CRM systems to manage client relationships and pair them with client communication tools.
- ACCOUNTING SYSTEM
Family offices must provide accurate and timely information on accounting and performance reports to comply with laws and requirements and for clients’ review. However, this becomes difficult with diversified portfolios, traditional reporting, and stringent tax regulatory criteria. With accounting systems, family offices can consolidate all activities across tax and compliance reporting, net worth, and asset exposure.
Increased digitization has shifted not only how family offices operate but also brought accessibility to private markets, facilitating more direct investments, and a host of new investment tools aligned with a fintech industry shift of power to investors. Each family office must strike a balance between the sophistication and complexity of new technology platforms and its needs, expectations, and capabilities. One central challenge is to address both, the near-term requirements, and the future trends of a constantly evolving sector, to make the right decisions.
- https://www2.deloitte.com/content/dam/Deloitte/no/Documents/deloitte-private/Family-Offi c e-Unlocking-the-value_v1.pdf
- https://www.hubbis.com/article/managing-technology-challenges-for-family-offices-vendor-selection-implementation-and-cybers e curity-considerations