Over the past five years, as Simple has conducted the annual family office software review, one consistent finding is that number of new family office software solutions are on the rise and the number of service providers continues to increase. While the use of Excel spreadsheets persists, technological advancement and shifts in intergenerational culture are accelerating the move to family office digitisation. This insight explores growth drivers, legacy players, and new innovators, offering guidance on partnering with software providers for family offices.
New family office technology: Understanding the drivers of growth
Three major factors are driving the growth of software providers in the industry. The first is cloud computing. It has made software development faster and more affordable, allowing new entrants to enter the space. It has also enabled family offices to benefit by digitising their operations quickly. Instead of creating custom family office software from scratch, offices can now lease Software as a Service (SaaS) platforms from providers and pay for them on a subscription basis.
Secondly, generative AI is playing a significant role in driving growth. When McKinsey estimated that AI would add $13T to the global economy in the next decade, most companies jumped at the opportunity, switching from data-driven to AI-driven to remain competitive. This year, Simple’s 2023 Family Office Software review report found that 80% of providers have implemented AI functionality or plan to do so in their products or services.
Thirdly, the entrance of millennials into family office operations is ushering in a new era in investments. The younger generation is driving demand for socially responsible wealth management and tech solutions, prioritising impact investing and sustainability.
Key players and legacy systems
Before the push to create innovative family office reporting software, offices spent significant time and resources manually entering accounting data and creating investment reports. They also struggled to track the performance of wealthy families’ asset classes. In the past decade, wealth tech solutions for family offices have tackled these challenges.
For instance, Eton Solutions, founded by family office professionals, created the first fully integrated wealth management platform where the investment ledger, performance reporting, general ledger, and tax ledger all use the same transaction-level data. Similarly, Ledgex developed a comprehensive portfolio management and family office accounting platform. Their services include a general ledger, portfolio management and private investment tracking.
Finally, Addepar, on a mission to transform the financial technology industry, which is still heavily dependent on Excel, created a portfolio management system and personalised reports for family offices. While the platform serves a broader audience, the company places a strong emphasis on meeting the specific needs of both single family offices and multi-family offices. Its software offers real-time updates and can reduce manual data entry by up to 50%.
Innovators in early-stage technology
As the family office technology ecosystem continues to evolve, newer startups are niching down to build solutions far beyond simply creating the next best family office accounting software. Leveraging the latest tech, they are enhancing client relations, automating alternative assets, and driving social impact in investment management.
For example, Affinity is using AI to drive relationship intelligence. It syncs all emails and calendar data, creating a directory of all the organisations and individuals to which the family office is connected. With the rise of private equity and venture capital investments, offices can use Affinity to simplify their deal management processes and deliver comprehensive insights to family members. Another AI software provider is DployAI, which helps family offices streamline their workflows, manage investment risks, and get insights that unlock new growth opportunities.
Then there is Canoe, which is on a quest to redefine the future of alternative investments with cloud-based and machine-learning technology. Canoe uses proprietary tech to automate document collection and data extraction for bankable and non-bankable assets. Its latest partnership with Apliqo also ensures robust aggregation, analysis, and reporting of alternative investments.
Finally, there’s Ethic, a sustainable investment platform which has built technology that helps wealth advisors and family offices to demystify the world of sustainable investing in public markets. Basically, Ethic allows family offices to personalise a portion of their passive portfolio so that they invest in alignment with their values and measure the impact they are having on the planet.
Renovating old business models
While new technology drives breakthrough solutions, other providers innovate on traditional business models. For example, Albertine, a concierge app, is aiming for the uberfication of luxe experiences. Led by former Uber and Quintessentially executives, the invite-only membership app wants to make booking high-end travel and adventures as easy as sending a chat message.
On a related note, a cybersecurity firm called Concierge Cyber caters to high-net-worth individuals and provides a business model that resembles a roadside assistance program. The company offers a low-cost annual subscription fee to family offices to ensure a swift response to cyberattacks, business email compromise, or data breaches.
Balancing tradition and innovation
Compared to five years ago, offices have a wider range of software providers to choose from. However, this abundance of options can lead to decision paralysis. So, if you are looking to partner with a service provider, where should you begin?
It’s important first to identify which workflow processes are taking up all your time. Once you have a clear understanding of this, you can then determine what technology to implement to enhance your family office’s operational efficiency. It is crucial to note that while technology can streamline workflow and professionalise operations, it is not a substitute for building client relationships.