Is your family office portfolio management solution optimal?

Portfolio management is a crucial but time-consuming task for family offices. This article discusses its significance and explores how software can improve efficiency and reduce workload so family offices have more time to focus on their investment strategy and vision.
portfolio management system family offices

What you need to know

  • Family offices need effective portfolio management, which includes preserving capital, planning for taxes and estates, and maintaining liquidity.
  • Family offices face unique investment challenges, making finding the right portfolio management software crucial.
  • A family office’s wealth management platform needs a unified data source, easy collaboration, institutional integration, precise AI insights, and data security.
Investments Updated on January 19, 2024

Family offices face a unique challenge as they manage some of the world’s most valuable and highly sensitive portfolios. Although they require careful oversight, most family offices often do not have excessive staffing like large investment banks or hedge funds. And in some cases, even if they do, this might not be the best use of their resources. Therefore, finding the right portfolio management software solutions to streamline operations and save time is advantageous.

Why is portfolio management so important?

According to the Campden Wealth 2022 Report, family offices are at the centre of a multi-trillion-dollar transition between generations. The entrance of millennials is not only speeding up digitisation but also transforming the nature of wealthy family’s investment portfolios. Now, more than ever, family wealth is flowing into alternative assets such as private equity and impact investing. Legacy software is lagging in keeping up with new asset classes. And amid all these changes, offices have to ensure the following:

Capital preservation and appreciation: Family offices must focus on preserving and growing their capital. This requires taking on high-risk private equity and venture capital deals to outperform the stagnant equities market. Additionally, investments must generate a higher yield than inflation to maintain profitability.

Tax and estate planning: In passing down assets to the next generation, offices must exercise effective tax and estate planning. With the younger generation showing a greater interest in philanthropy and impact investing, they must set up legal structures to maximise tax benefits while supporting charitable causes.

Liquidity: Finally, in addition to generating returns and creating a positive impact, family offices must maintain a healthy ratio of liquid and illiquid assets for emergency access to wealth.

Needless to say, portfolio management for family offices is a complex task that requires balancing many components. Finding the right wealth management software can effectively lift the heavy load. Modern software can consolidate complex assets and assist in making better investment decisions. It can also perform audits and report the portfolio’s performance to family members in an easily understandable way.

What your wealth management platform should enable

While an off-the-shelf portfolio management solution may suffice for traditional financial institutions, single-family and multi-family offices require unique solutions that incorporate the following:

Single data source

Affluent families own many valuables spanning across different asset classes. The ideal portfolio management system should offer a bird’s eye view of the entire portfolio – including alternative and non-bankable assets. In other words, a family member should be able to view their net worth holistically from one dashboard.

A good example is Altoo, a wealth management platform that provides a clearer picture of the family’s accumulated wealth so they can benefit from a single data source. Altoo consolidates every asset class in one place, enabling the family to understand their wealth better and safeguard it for future generations.

Easy collaboration

A 2023 Dentons Survey on direct investments found that family members are heavily involved in important investment decisions. In fact, the survey found that a third of respondents say that investment decisions are made by family office staff in collaboration with family members.

Since family office investors must collaborate with multiple parties, including family members, when exploring investment opportunities, the ideal portfolio management system should allow them to share information easily. A solution that does this well is Wealth Passport by Northern Trust. It allows family members to perform transaction approvals, deposit checks and view account summaries all on a mobile device.

Seamless integration

For a great portfolio management system, seamless integration is critical. Your wealth management platform should be able to integrate your family office systems with its institutional partners.

For example, KeeSystem is a portfolio management software that allows family offices to connect and communicate with key players such as custodian banks, regulators, auditors and clients.

Accurate insights and accessibility

With the advancement of AI tech and cloud computing, your portfolio management solutions should provide valuable insight and greater accessibility. AI unlocks insights through advanced analytics, helping your office optimise its portfolio, mitigate risks, and maximise returns.

A cloud-based portfolio management platform ensures reliable real-time data. This means your dashboard and reports should always be up to date and accessible 24/7 on mobile devices. For instance, AFO by Eton Solution leverages AI to analyse transactions to detect and fix anomalies and inconsistencies. And their easy to use mobile app provides families with access to information and reports.

Data security

Finally, investments made by the ultra-wealthy are extremely sensitive. As a result, family office portfolios must remain confidential no matter what. When selecting a wealth management software solution, choosing one that incorporates the latest cyber technology to guarantee data privacy on every level is crucial.

A practical illustration is WealthArc, which uses two-factor authentication, powered by Microsoft, to boost security. Every time a user logs in, the platform sends a unique access code to their registered mobile number. Furthermore, it uses geolocation technology to limit access. Family offices can restrict access to specific IP addresses, such as your office and employees’ home WiFi network.

To sum it up

Family offices require sophisticated portfolio management software solutions to effectively manage vast and complex wealth portfolios in a rapidly evolving financial landscape. As the Campden Wealth 2022 Report highlights, offices face unique challenges in generational wealth transfer, reshaping investment priorities, and a growing emphasis on alternative assets.

To thrive in this evolving landscape, family offices must invest in technology solutions that streamline operations and empower them to manage their portfolios effectively. An optimal portfolio management solution can help family offices meet their wealth preservation and growth objectives, diversify into new asset classes, and position themselves for success in the years to come.