Many family offices face challenges managing data, conducting analyses, and creating reports due to their varied asset portfolios. That is a big problem regarding wealth management. It hinders their ability to respond to market events and make the right investment decisions on time. Decisions require data; if it takes weeks and months to collect, reconcile and consolidate, that’s an issue. In other words, if asset managers cannot access their capital at the touch of a button, staying ahead of the curve will be hard. This is where family office benchmarking software can help, but choosing the right tool is vital.
Asset managers constantly re-evaluate their investment strategies in this market environment to protect their capital and grow their wealth. Robust and reliable data management is essential for fast and flexible reporting. Which then drives the decisions to adjust strategies and quickly reallocate assets. However, how most family offices performed in a recent data management survey showed a worrisome trend.
Increase in manual processes
In 2019, the Family Wealth Report by WealthBriefing and FundCount surveyed family office efficiency in accounting and investment analysis. When they updated the report in 2022, results showed that institutions’ manual workload may have worsened significantly.
According to the first report, only 20% of data management tasks were done manually. However, this number has more than doubled within the past three years. The efficiency measure in data management is determined by how much manual work goes into the family office’s operations. The 2022 updated report showed a shocking 42% of processes in family offices still required manual intervention.
According to the survey, family office professionals estimate that they spend 42% of the 40-hour work week on manual processes across all personnel. That is a significant increase from previous estimates, which had put the number at only one-fifth of the week’s working hours.
Increasing complexity
Data management issues seem to arise as family offices continue to diversify their assets. While it’s natural to want to protect wealth by diversifying, it creates more complicated data to process. If not handled well, it can lead to the multiplication of systems and increased manual processing. The report showed evidence of this. The lack of adequate accounting and reporting software meant family offices had to pull out the good-old Excel spreadsheets to record and keep track of new assets.
The survey also revealed that an average regular family office could have more than 26 distinct entities, each requiring financial monitoring and reporting. Although the number might seem overwhelming, what’s even more concerning is that many of them have difficulty using primary accounting or investment systems to produce direct reports.
Measuring operational efficiency
Manipulating data outside of established automated systems can increase the risk of data degradation, errors, and delays. The famous stat that 90% of all Excel spreadsheets contain errors is pretty alarming. These factors can directly impact strategies for protecting and growing wealth.
The best way to measure efficiency in data management is through cost. However, several family offices may not have the necessary tools and KPI measures to monitor the factors that influence costs.
A more effective way of measuring cost is looking at the number of data flows of family office operations. The fewer your data flows, the more you reduce cost and risk. And the faster and more accurately you can report means less risk in wealth protection and more significant growth opportunities, putting your family office ahead of the curve.
The solution: an industry-backed KPI tool
Family members and executives in family offices strive to provide the best possible service. However, unreliable quantitative metrics have always made measuring effectiveness and efficiency subjective. To remedy this, FundCount has created a series of Key Performance Indicators (KPIs) to benchmark the industry. These KPIs assess the effectiveness of a family office in vital areas such as reporting, financial control, and operational excellence. And aim to help family members and asset managers identify improvement areas and track progress.
Why do family offices need this?
Many family offices lack internal KPIs to evaluate the efficiency of their business operations. They have no objective way of measuring their support to families. As the saying goes, ‘If you cannot measure it, then you cannot improve it.’ FundCount’s KPIs provide the family industry with a measurement tool based on data and 20 years of experience. It’s essential to help enhance performance issues and establish industry standards.
How it works
Answering an online questionnaire for just 15 minutes can capture all the essential information needed to evaluate your organisation in two categories: Reporting Excellence and Financial Control. After completing the questionnaire, you will receive a customised report that outlines your family office’s performance metrics. Lower KPI scores indicate areas for improvement in reporting and governance, which can help minimise operational risks. The data is anonymised and distilled into benchmarks, enabling family offices to compare their performance against peers worldwide.
About FundCount FundCount is a unified accounting and investment analysis solution that improves operational efficiency and brings actionable intelligence to investment management professionals. Based on a general ledger, they started in the hedge fund space but today provide fund- and partnership accounting to a wide range of asset- and wealth professionals with offices in Europe, North America, Asia and Australia.