The challenges with selecting technology are even more substantial for single family offices that do not have shareholders or clients to report to. While financial institutions and fund managers usually have specific departmental needs, and strict, clearly defined governance requirements, single family offices need to rely on their own frameworks and internal regulation. This can affect their response to – and possible avoidance of – technological adoption and improving investment infrastructure which can lead to an inability to keep up with the advancement in wealth management space.
Through various conversations with family office software and technology advisors, we compiled a list of top issues and challenges family offices run into and how to overcome them.
Don’t rush the selection process
Technology solution selections can be complex and time- and resource-intensive. When going through this, make sure you don’t rush it and go for the option solely based on a shorter selection process. If you only look at the big cornerstones of the solution, this can lead to big disappointments or project termination. This is where things can get ugly and expensive.
To overcome this challenge, try not to take shortcuts or try to bypass the request for proposal process. Instead, time and resources should be invested in in-depth solution requirement analysis. As far as possible, during this analysis, families should examine their long-term tech needs to help identify the infrastructure required to serve the family office in the future.
Find software that fits your actual – not your perceived – needs
One significant challenge around implementing the right tech is finding a solution that fits your purpose and integrates with incumbent systems. Oftentimes, family offices also expect the tools to support their way of working rather than adjusting their processes to the tools.
To overcome this challenge, family offices should define their actual, rather than perceived, needs and priorities. Keeping an open mind is also vital here.
It might also be worth reaching out to an experienced team of professionals that can identify the technologies available for a particular stage, perform due diligence, and manage the implementation process. If you need help choosing software for your family office, someone from our expert network might be able to assist you.
How to evaluate in-house vs outsourced solutions
As the scale of family office investments expands and families aim for more diversified portfolios, they will need to consider putting technology in place to support this – including comprehensive portfolio management systems, accounting software and reporting platforms. Given the pace at which technology advances, family offices must constantly review these systems to ensure they don’t fall behind or outgrow this capacity too soon. The variety of vendors and their offerings adds another layer of confusion to this thought process.
Because of this, family offices must assess whether it makes sense to own and maintain their own technology infrastructure in-house or find a dedicated family office technology provider to facilitate this for them. Outsourcing can offer cost savings compared to traditional software licensing, implementation, training, maintenance, and upgrading when it comes to technology. If done well, outsourcing can reduce headcount while increasing efficiency.
When selecting an outsourcing provider, family offices should look for characteristics such as state-of-the-art technology, commitment to continual innovation, dedicated service and support, comprehensive accounting and reporting, flexible report delivery options, advanced security, comprehensive operational services, customisable co-sourcing options and complementary expertise.
Implement security beyond technology
Security remains a critical challenge for family offices. The 2021 Deloitte family office survey found that 38% of European family offices had experienced a cyber attack in the past year. In addition to the challenge of keeping up with new technologies like cloud storage and transacting over the internet, it can also be difficult to feel protected against threats when using these outsourced solutions. Although most family offices have realised how crucial protection is, there is still a gap between this and putting active measures in place.
Overcoming this challenge at the most basic level often requires help from experienced professionals to implement the latest technologies and cyber security measures. Additionally, both family members and employees should undergo security training and surveillance protocols should be in place. Although technology has advanced, it is still prone to human error-causing breaches. Therefore, regular security reviews and upgrades must become part of family office operations.
Bridging the generation gap
One of the biggest generational differences is how people of varied ages prefer to receive information. Older generations traditionally prefer hard copies of periodic reports, whereas younger generations have grown accustomed to having real-time information and interactive capabilities on demand. When there is an overlap in generations, families have to find solutions that can deliver information in various formats which adds another dimension of needs and expectations for family office software selection.
As the next generation takes over, they will likely drive innovation. They will increasingly demand better tools, access to data and transparency, similar to their peers that are working with traditional wealth firms or multi-family offices enjoy.
When it comes to family office technology, there are still many challenges to overcome. However, investing in planning, due diligence and family office advisory can help families overcome these challenges while saving time and resources.