Managing Data Complexities within Family Offices with Technology

Most family offices recognize the value of data, as well as the complexity and time associated with tracking their wealth across diversified portfolios, trusts, multiple legal entities, and jurisdictions. The data is often difficult to access, integrate and organize in an efficient and timely manner. These ultra-high net worth (UHNW) investors typically have many different types of alternative assets like real estate, yachts, planes, art and even family businesses that add layers to their portfolio management. It also brings in many different third parties who need access to pieces of the portfolio and must operate at varying security levels.

To date, getting the total picture of wealth—one that includes investment data from all of the disparate sources—and managing portfolios at this level of intensity effectively requires combining different technology platforms and services. Fortunately, more and more technological solutions have come to market in recent years that cater specifically to the needs of family offices. Keeping up with the new options, their capabilities and understanding how they can support a family office’s unique asset mix can be a full-time job.

F2 Strategy has a dedicated family office team who regularly conducts due diligence on the latest product developments, issues RFPs, negotiates contracts, implements and configures the technology on behalf of its clients. It helps clients sift through the options and select the tools that will be most effective for their needs. In addition to addressing data complexity, we regularly address three additional areas through technology:

  1. Cybersecurity—While there is a heightened awareness of cybersecurity and protecting clients’ PII at every wealth management firm, there are few different challenges family offices commonly face. They include putting appropriately robust security measures in place, ensuring all employees and third parties are following company-issued device protocols and eliminating use of personal email accounts to send sensitive information by employees and family members themselves. In addition, insurance companies are driving particular cybersecurity requirements for family offices. Even if you’re connected or not trying to keep abreast of everything related to technology, it's coming your way, and a cybersecurity assessment is one way to stay on top of the risks.
  2. Scaling and Operational Efficiency—Many family offices have found they have outgrown their current complex operating model, and the lack of technology hasn't adapted to the growth, scale and risk profile. A common example is the G/L where a good rule of thumb is if you have more than 50 entities, there is an opportunity to graduate to the next generation of general ledger software. In addition, there is much more opportunity to use the advanced WealthTech solutions to modernize your technology stack and operating model and ask “What can we do better? What can we do more efficiently?”
  3. Succession Planning—Too often, succession planning is last on the list of family office considerations. In 2023, the great wealth transfer is well underway. Family offices should treat the next generation as if they are clients whose business they’re trying to win. The future generation is digitally savvy, and family offices must have a WealthTech platform that provides real-time information and the type of instantaneous communications that families are accustomed to in all facets of life. Putting strategies in place to retain the business of families through generations is critical for addressing the risk of attrition.

    In addition, succession planning should also include the family office employees, who have intimate knowledge of a family’s complete portfolio and third-party access. Family offices need to prepare for the potential departure of key staff members.

Establishing technology strategies and solutions for family offices will never be one-size-fits-all. Handling these and other areas of concern in ways that support the unique cultures of family offices can help them thrive today and prepare for the next generation of family members to play a more prominent role in the future.

Get in touch to learn more about our family office support team.

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