Make Technology Decisions that Facilitate Growth in Your Family or Multi-family Office

When is the right time to invest more in technology? Predicting when to invest in new technology platforms or hire a dedicated Chief Technology Officer (CTO) is an area where we see many family offices and multi-family offices struggle. It’s understandable—implementing new systems or committing to a position that’s non-revenue generating is a big step and you want to time it right.

The simple fact is that waiting too long can be dangerous for your business. The growth between $500 million and $1 billion occurs very quickly. Family offices and multi-family offices need to put themselves in the position where the front of the house can always say yes because the back of the house processes are scalable.

Firms that are proactive and not reactive to their technology needs often come out on top, which is why a CTO role can make sense. There is an amazing amount of value-add that a CTO can bring to your firm. Many of these people have been ingrained in the operations and technology for years, many having grown up through one or more firms doing it. They have seen what works, what doesn’t, what is appropriate spend for a small firm, what the most efficient way is for a large firm. In addition, keeping up with a constantly changing technology universe is a full-time job, let alone evaluating each new entry to determine if it might be a good fit.

Generally, most firms are not spending the appropriate amount on their technology. F2 Strategy recommends three to six percent of revenues or approximately 15 percent of operating budget as a good benchmark for technology spend in 2022. There are two primary areas where family offices and multifamily offices should spend on technology first.

Eliminating the “Spreadsheet Mentality”

Shared files are a liability. They create huge risks for data breaches and human errors. In addition, they involve labor intensive processes that are inefficient, impede growth and can lead to burnout among team members. When determining where and how to make changes do not just take management’s word on how processes work. Ask the people doing this work in order to truly understand how it’s being accomplished, determine if there’s a better way and make critical technology investments to improve security and efficiency. Investing in this area first accomplishes two goals, reducing risk and improving efficiency and morale.

Acting On Client Feedback

Don’t assume you know what clients want from their experience with you. Soliciting, understanding and acting on feedback is important for creating sticky relationships. Listening to your client will help you determine what kind of technology investments you need to make in order to provide strong client experiences and meet or even exceed their expectations. For example, multi-generational firms can establish good relationships with the client’s children by knowing what they want (Hint: it’s usually not what their parents had.)

Getting Started is Easy!

Evaluate the size and scale of all of your technology vendors and explore new tools. While it was the right fit at the time of implementation, as you scale, you’ll likely outgrow some smaller CRM or document management systems. When exploring new tools or vendors answer the questions: what are the other capabilities available? What else could you be doing that you are not doing now? And, will it scale with you as you grow?

Interview all of the key stakeholders who interact with specific technology or processes you are focused on to identify needs. Using an independent third party can help you interview the team and navigate internal personalities and get to the real root of your firm’s needs.

Finally, identify low hanging fruit and start making changes. Immediate fixes make a big difference in employees’ workloads and build confidence among the members of the management team  as well as other team members, paving the road for easier buy-in on future larger-scale technology implementations and investments.

Remember, outgrowing your technology is ultimately a good thing! It can be hard for those who put the spreadsheet, software or process in place to hear that it needs to change. They may get defensive or upset about it; however, family offices and multi-family offices can’t risk having outdated systems because one large prospective client walking through the door can change everything instantly. Technology must be a proactive investment, not a reactive expense. By understanding client expectations and having a realistic view of your current technology capabilities compared to what is available on the market, you can position your family office or multi-family office for smooth transitions as you scale.

Be prepared for your biggest client to walk in the door at any moment, get in touch to learn how we help firms make smart technology investments.

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