Family office trendsHow to evaluate family office technology solutions

Key things to know

  • Technology can help a family office run more smoothly, mitigate risk and increase investment opportunities.

  • Identifying the work that gets done, as well as the pain points, can help narrow down the right technology mix for your office.

  • Outsourcing your technology decisions to a knowledgeable third party can help you invest in only the software and systems you need.

For family offices and businesses, technology is a key component of the smooth management of resources, providing a way to aggregate family office data, create reports and maintain assets. Technology can also boost transparency and ease decision-making—two essential goals for a family office managing a sophisticated portfolio.

“Family enterprises closely resemble business enterprises,” says Ben Ollendick, regional managing director Ascent Private Capital Management of U.S. Bank. “They’re rising to the same level of complexity; therefore, they have similar information management needs.”

Yet, many family offices rely on outdated legacy systems, which are often not much more than a spreadsheet. “Excel is a great program and has some good functionality, but it’s not meant to be a scalable digital system,” Ollendick says. “It begins to break down quickly. Family offices need a bridge from the legacy system to a modern architecture.”

In some cases, family offices may not be aware of the limitations or security issues with the technology they rely on, says Tim Crenshaw, managing director and CFO services lead for Ascent.

“It’s important to understand the risks that might not be top of mind,” he says. “The biggest are security, operational efficiency and redundancy. Tech can help family offices solve for these.”

Three steps to determine your family office technology needs

The range of financial technology products on the market today can be overwhelming, especially for family offices that haven’t recently considered new solutions. It can be hard to know where to start and where you have pain points to solve for, says Crenshaw. 

“If the family office isn’t connected to peer groups, they may not know what kind of software is out there and the functions it can serve,” he says. “Another issue is pure cost. Family offices run thin, and expenses are a major part of planning. Fintech can be expensive.”

Software, whether it’s an administration platform or a system to manage trust accounts, must offer productivity that exceeds its cost and creates value for the family office.

“Designing the best suite of tools doesn’t start with the technology; it starts with identifying the work that gets done in the family office and figuring out what your pain points are,” Crenshaw says. “Don’t start with a solution and get dazzled by a vendor. Start with a high-level set of needs, then identify and compare potential solutions against each other or in tandem.”

These three steps can help you assess what type of family office technology may be right for your needs.

  1. Ask members of the family office team to describe what they’re working on and how long those tasks take to complete. “For example, when someone is creating a net worth statement, how many places do they need to go to find information?” Crenshaw says. “What information is not available? And how long does it take to create the report?”

  2. Learn how much time people spend doing repetitive family office duties. “Look for tasks that are repeatable and predictable,” Crenshaw says. “If work requires a significant amount of human consideration and decisions, it’s not a good place for tech to solve.”

  3. Identify areas where family office data would provide insights and enhance decision making. “For example, when you’re managing investment assets, if you cannot aggregate custodial data, you can’t see the entirety of the portfolio,” Ollendick says. “You can’t easily determine what Manager A is doing versus Manager B and Manager C. It creates missed opportunities and risk largely unknown until the time when you can aggregate.”

How to evaluate family office software

Once you know your family office technology pain points, it’s time to start looking at what’s available. “You’ll likely need a number of solutions,” Ollendick says. “No single system does everything well.” 

For example, some of Ascent’s clients use software platforms to help with office administration, investment and expense reporting, trust accounting and cash management. Integrating these varied systems into a cohesive IT eco-system is the ultimate goal, since most solutions are not turnkey and must be configured to specific needs. And with multiple solutions available, the technology will need to be administered by somebody who is familiar with the requirements of the family office. “They need to understand the bigger vision of what the family office is trying to achieve,” Crenshaw says. 

The technologies in this space are constantly changing and improving, and it can be hard for a single-family office to keep up with the dynamic landscape and leaps in digital capabilities. Outsourcing this work can be an effective way of staying current and, importantly, only investing in technologies and software that will suit the family’s needs. 

“We advocate partnering and outsourcing to a multi-client family office like Ascent,” Ollendick says. “We’re knowledgeable about a family office’s needs and the variety of technology available to fulfill those needs. We can configure a unified platform that has your interests in mind. This allows the family office to outsource a series of decisions and processes to a knowledgeable third party and instantly achieve scale. Acquiring technology on your own is not only a cost outlay; it’s a time and effort outlay as you configure the software properly and transition from your legacy system.” 

Moving family office technology into the future

It can be tempting to take an approach based on the adage “If it ain’t broke, don’t fix it.” Crenshaw says he has seen many family offices establish procedures and processes that, over time, become outdated. 

“We see executives putting into place systems they had in their last family office without investigating alternatives,” he says, “but solutions change and technology advances. It’s important to look at your options instead of just what you know. Otherwise, it’s limiting.” 

New technology systems can create more transparency, efficiency and better internal controls, including the separation of duties and automatic tracking of user activity. And as the increasingly digital savvy rising generation takes a bigger role in the family office, they’ll be looking for it to be up to date with technology as they consider its future.

Choosing the right family office technology solution ultimately comes down to its bottom line. “Technology creates insights,” Ollendick says. “A lot of the thrust is to make processes more efficient, but part of its value proposition is that it can help families mitigate risk and increase their investment opportunities.”

Learn how Ascent Private Capital Management can help support or enhance your single family office.

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