1. Pulse Check for 2022
Family offices “need to find operational efficiencies at a time of economic headwinds.”
Over the last two years, now more than ever, the entire world has become more reliant on technology to run business operations and organise our daily lives.
This increased reliance has also raised expectations of what solutions can and should be able to do. To amplify this, as the next generation steps into their family offices, they are pushing them to up their game and have answers on-demand and at their fingertips.
The big question though is whether tech has kept up with these expectations.
In some cases, tech vendors can leverage their client relationships through strong partnerships, to fuel their development and fund their roadmap while delivering a great and valuable solution to a customer.
But to ensure smooth partnerships, tech providers need to manage expectations. Most family offices have never had to buy solutions and because of that, they rely on the vendor to lead and offer the right information about what their product can and can’t do. For this entire ecosystem to understand what is and isn’t possible, starting with a clear overview is key.
While the market continues to evolve, family office technology can be divided into three broad categories, roughly related to the tasks family offices need to be done. Whether it’s data, aggregation and consolidation; management, collaboration and operational or reporting and insights, these all speak of an industry that’s still in high-growth mode.
In the third edition of this review, we want to build even more transparency, and insight into the changes happening. More importantly, we want to help family offices see themselves and discover new questions to ask or needs that they might have.
Building a curated tech stack remains the way for family offices to meet their bespoke needs. Our 2022 family office software and technology review surveyed leading service providers to capture the latest developments and track current trends in this market.
2. Family Office Technology Shifts
The digital transformation currently underway throughout society and generational transitions within families are converging to drive broader adoption of software and technology in family offices. On the digital front, automation, reporting, CRM, and unified dashboards to provide wealth managers and beneficial owners the tools to make forward-looking decisions are essential. Compliance requirements are also well suited to efficient digital solutions. Secure digitisation and APIs that seamlessly connect family offices to their service providers are one of the clearest value-adding propositions for them. Technology providers are well-positioned to meet the spectrum of family offices’ bespoke goals and ambitions with their product offerings.
“Succession to a younger generation with a high demand for digital services.”
Generational transitions bring with them changes beyond estate planning and new points of contact between family offices and service providers. The next generation has a digital-first mindset, reinforcing the broader trend. They also want more than just financial returns, changing what wealth means and what they seek to do with it. Equity and impact are moving to the front of family office missions, supported by new outlooks and technologies. Incorporating ESG metrics into investing activities is one way that next-gen family offices are aligning their outlooks with their wealth. Technology firms are playing a vital role in facilitating this shift through ESG metric algorithms and by connecting the vast amounts of sustainability data to reporting software that provides a global overview to assist wealth management.
“Family offices are becoming more institutional in nature and composition and therefore are now requiring more data, information and intelligence on their portfolios and deals with better access and frequency.”
Digitisation and generational transformations are also increasing the professionalisation of family offices. Family office software and technology services support refining these operations.
Family Office Operations
Investment management, reporting, and managing wealth transfers.
Business advice, strategic estate planning, succession planning and educational planning.
While financial management may be the primary function of family offices, handling contracts with service providers, accounting, as well as philanthropic management are also crucial for most family offices.
Additional to the other domains are advisory services where family offices provide tax, legal, compliance, and regulatory advice alongside support on risk management.
Family professional services
Trusts, estate, succession, and next-gen planning.
When we asked software and technology service providers to evaluate the changes they see among family offices, the themes of the next-gen, digital transition, a stronger focus on ESG investing metrics, and the need to onboard new asset types were top of mind in our current economic climate.
“Family offices are facing pressures from multiple directions.”
Another trend has roots in the changing wealth landscape over the past decade and presents a growth opportunity for multi-family offices and their supporting technology:
“Multi-family offices will look to capitalise on the historic growth of wealthy individuals and gain more business.”
Some respondents viewed family offices as starting to take on more characteristics of institutional investors, which is driving the need to understand best practices, benchmarking, and formalising internal processes.
“Family offices are trying to standardise their operations to lower security risks and better access their data.”
Family offices reported increasing their reliance on technology and budgeting accordingly, but many family offices have yet to incorporate family office specific software into their tech stacks.
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3. Software and Technology Archetypes
This review provides insight into the current state of the family office software and technology sector. At Simple, we continue to believe that family office software and technology are best viewed through user journeys that break down the key market segments.
Startup Family Office
Newly established family offices with the freedom to create agile organisations at their point of origin.
Family offices that have fulfilled their mission with success and diligence for decades, perhaps lagging behind in their use of technology.
Best in Class
An elite selection of family offices is leading the way in organisational efficiency, management structure, and reach.
Single to Multi-family Office
These are single family offices joining forces to increase efficiency and effectiveness.
Banker to Multi-family Office
When a banker steps clear of their prior wealth management work to start a new multi-family office.
Commercial Multi-family Office
High staff-to-client ratios are the norm as meeting the bespoke needs of clients takes top priority.
For full descriptions refer to the Family Office Archetypes section at the end of this review.
4. Software Categories
Software products for family offices broadly fall within the following six categories. While some overlap in functionality and services occurs, these divisions should prove helpful to understand the breadth of available solutions and their target market segments.
Administrative Software for Family Members: Software that falls within this category is designed to facilitate communication, organisation, and asset management in a secure digital application. They combine operational and management features by creating a central repository of information with collaborative decision-making tools. Some products in this category create a traceable communication record through blockchain technology to permanently capture adviser and family knowledge. Other products create organograms to help users visualise their assets while including a centralised document archive and task manager. All provide the ability to have contextualised conversations in a secure environment.
Wealth Management Platforms for Single Family Offices: Software in this category consolidates and enriches information on complex assets in a single application. They combine the functions of portfolio administration to better facilitate risk management and reporting. Some of the providers in this category prioritise bespoke services and have their own backend developers on staff to see this through for clients with particularly complex needs. The key purpose of this software is seamless data integration to allow single family offices to concentrate on strategy and vision.
Administrative Service Software for Single Family Offices: Administrative service software combines accounting, consolidated reporting, and asset aggregation into a readily understandable format. Services in this category tend to be bespoke and focus on a single portfolio. This provides for the inclusion of a more expansive range of assets away from market-listed investing. For example, venture capital activities, private equity, capital calls, and even the active management of real estate investments and holdings can be brought within a single solution to maximise clarity for decision-makers.
Wealth Management Platforms for Multi-Family Offices and Advisors: This category of software separates itself from comparable applications designed for single family offices through the addition of CRM capabilities. They simultaneously consolidate information on complex assets and integrate contact information and interactions between managers and clients into a single solution. Approaches to CRM and other functionality vary, with some platforms providing seamless integration with other CRM providers and others including it natively within their platforms. Some providers choose to base their services on the cloud, while others prefer local storage.
Administrative Software for Multi-Family Offices: This category is populated by a small number of applications that provide the highest level of service integration including, but not limited to, accounting, operations, consolidated reporting, CRM, and payments. This could be built on a single platform or take the form of an integrated technology stack. Through automation and creating standardising processes, these applications increase efficiency and the ability to manage risk.
Niche Products: Service providers are introducing innovative systems to the family office space that fall outside traditional capabilities. There is a focus on easing the burden of due diligence on funds, investments, or before a large private equity deal such as during a merger and acquisition transaction. Other niches include incorporating AI into family office software, enhancing the social efficiency of capital allocation, building out specific VC and payment tools, and allowing investing in cutting-edge asset classes.
5. Family Office Challenges
Data security, succession planning, and challenging macroeconomic conditions rose to the top of current challenges faced by family offices across the board. These obstacles can be interrelated.
“High growth is no longer a given, geopolitical disturbances make for volatile markets” and it also makes the “transfer of wealth process more challenging.”
At least one respondent noted that digitalisation may bring with it increased risk without proper due diligence of the service providers that family offices choose to partner with: “As investors shift their sensitive data from (highly secured) bank environment towards a (poorly managed) family office technology startups ecosystem, it may eventually create a few high-profile data leaks. The industry needs new players/services who are able to address this issue.”
Multi-family offices face challenges similar to and distinct from single family offices. The goal, albeit a difficult one to meet, for all family offices is
“the growing need for information at the frequency the family members are expecting.”
Generational transitions present distinct opportunities for multi-family offices. One service provider noted, “In 2022, the great wealth transfer is well underway. Recognising the risk of client attrition if they do not engage with future generations, family offices are already putting strategies in place to ensure that they retain the business of families.” It follows that the family office tech industry must provide the tools for multi-family offices to “treat the next generation as if they are clients whose business they are trying to win. The future generation is digital natives, and family offices must have a platform that provides the up-to-date information and instant communications families are accustomed to in all areas of life.”
A final challenge to note is mounting operational costs: “Family offices are having to spend increasing amounts on staff, systems, and cybersecurity. To counteract these rising costs, family offices are placing their focus on what they do best, managing family portfolios and risk, and increasingly looking for third-party providers to automate or outsource non-core functions. There has been a trend towards family offices looking at technological solutions for accounting and reporting to either free up staff time to focus on their core competencies or outsourcing the function entirely to save on overheads.”
The efficiencies gained through digitisation notwithstanding, key staff retain their importance. One respondent noted: “The main challenge that family offices will face in the next 1-3 years is the acquisition of talented resources. Talented human capital has become harder to locate, specifically in the Family Office area. While the use of technology is becoming more commonplace, having talented people use the technology is just as important as selecting the correct technology partner.”
The combined forces shaping family offices are “culminating in an increasing number of family offices reviewing their tech stack to ensure that they can take command of complex data, achieve operational alpha through greater efficiency, and redefine the reporting experience for today’s tech-savvy families.”
6. Family Office Investing
“Continue to adapt to market changes and disruptions while having the right set of skills to take forward-thinking decisions.”
The technology stack of forward-thinking family offices needs to keep pace with the latest trends in investing. Family offices are reviewing their strategic asset allocation, but in their latest review, UBS found allocations remained predominantly stable with a rise in private equity. Denton’s noted an increasing shift to private markets in their recent survey of family offices. One respondent to our survey noted: “Against a backdrop of rampant inflation and interest rate rises, family offices are reviewing their asset allocations as traditional equities and fixed income performance trends downwards. As family offices look for uncorrelated returns, they are increasingly turning to private equity, real estate and private debt, as well as exploring other possibilities such as derivatives.”
Shifting allocations toward alternative investment classes require technology to keep pace. Private equity investments may be accompanied by future capital calls that need to be tracked. Given the lack of trading on listed exchanges, valuation is more difficult to determine and requires flexible and novel solutions. Tools are needed to compile data on alternative investment strategies to map possible approaches.
A further challenge is that partners report on different frequencies and formats, and the information is often locked into documents that need to be integrated. Recognising that documents and information arrive from different sources, some software solutions connect to email inboxes, social media feeds, or other information streams. Products that work within an extract, transform, and load (ETL) computing framework are needed to help compile this data. Software needs to facilitate the workflows of professional asset managers, including anything from calculating fees to CRM.
One service provider placed importance on proactive risk management through technology: “As family offices go in the pursuit of higher risk-adjusted returns, they are increasingly willing to push themselves out along the risk curve. But to account for the additional data and analytics they need whilst managing riskier and more complex investments, they are seeking the help of third-party providers to enable them to develop their risk function and monitor risk effectively. Family offices are increasingly incorporating exposures, risk contributions, and liquidity analysis into their portfolio analysis.”
The addition of these asset classes is placing an increasing burden on data management and reporting processes. Many alternative assets are non-custodial, which means family offices need to develop new, scalable solutions to account for this information. In sum, this is contributing to the increasing complexity of wealth structure. The broadening of the “spectrum of asset classes of investments brings with it higher complexity to reconcile and report.”
7. Taking Stock and Tracking Trends: Family Office Software and Technology in 2022
“Align technology strategy with business strategy.”
Assessing the Sector
Three-quarters of the service providers view the family office tech industry as growing and all of our respondents reported adding clients in 2022. This should be a reassuring sign for all parties as the health of the business of the service providers is an important component of client trust.
In which direction do you think the family office technology industry is headed?
How many new clients did you onboard over this year?
Behind the statement of growth, however, is a significant nuance about the character of growth and the direction of change. We asked leading software and technology services providers to assess the changes in the market from their vantage points. One respondent identified the connection between digitisation and technology upgrades with the issue of cybersecurity. They continued: Many family offices are “actively reviewing their tech stack to ensure that they can take command of complex data, achieve operational alpha through greater efficiency, and redefine the reporting experience for today’s tech-savvy families.”
Family office software and technology is a competitive landscape and firms must meet the needs of their clients. Other respondents view an increase in demand for consolidated reporting and tools that provide a global portfolio overview including private equity investments and commitments. Family offices are more technology eager than ever with a need to consolidate front, mid, and back office operations as well as connect to trusted partners.
Some service providers wrote of a trend moving from proprietary solutions to open industry standards. These standards will be facilitated by APIs, an area that custodians are gradually accepting more broadly. Respondents strongly advocated that software should be able to link with a family office’s other systems through APIs, which will allow more processes to be automated, saving costs for all stakeholders.
“If you already operate with other reporting and accounting systems, a platform built on open architecture can allow you to access this data and seamlessly feed it back into other internal systems, to ensure you are operating from a single source of truth across the business.”
Further, a trend toward software built on open architecture will provide greater flexibility to tailor functionality to meet each family office’s needs and rapidly deploy fully customisable views and reports for a diverse range of end users. Another respondent noted that “Family offices have adopted the idea of outsourcing their data aggregation, reporting, back office business units to third-party vendors over the recent years.”
Another respondent identified the front end of a trend pushed by digitisation:
“There is a structural shift of who owns and manages investors’ data. There is disintegration from banks towards independent specialised companies. Eventually, investors will gain full independence from banks and full control over their own data.”
All parties in the family office space will be tracking the progress of this development.
“We are continuously adding new features to bring more customers into our universe.”
What are the top 5 demands from your clients?
The direction in which the family office technology sector is headed largely reflects the demands of end users.
Meeting client demands:
- “Clients want more features such as a full breadth of risk analytics, which we now have.”
- “We have clients on 5 continents and there are always more requests for multilingual features.”
- “Some clients request that their data remain outside the U.S.”
- “Clients demand automated solutions to support their decisions as well as easy integrations to accounting systems.”
- “One of the key drivers for our clients to choose us is our pain-free quick onboarding process.”
- Family offices “expect a highly secure system that can generate efficiencies through integrations, and in many cases customisations to meet unique needs.”
It is in the interest of service providers to allow the integrations that family offices demand and it is encouraging that the needle is moving to open throughout the ecosystem.
One service provider wrote: “We integrate with any service provider who is able to generate a structured data feed with pre-selected field parameters and securely transfer this information to our platform. All types of asset classes and all kinds of financial products. The solution enables directly with accounting systems and is very flexible.”
“Through our API gateway, we are able to integrate with any third-party provider.”
Examples of current API integrations include a large number of services including market and price sources, custodian and private bank services, alternative data providers and data aggregators.
Adaptation and Growth
Software and technology providers are making changes in their offices, in their offerings, and in their market geography to best serve their family office clients.
Were there any major changes in your Company?
Many of our respondents noted bringing on new team members to keep pace with their company’s growth. The new employees filled positions in many locations given the global nature of the sector.
Some firms raised capital through external fundraising rounds. This is notable and a testament to the strength of their businesses given the headwinds facing the global economy and against the backdrop of investments in the related fintech sector falling. Those that raised funds noted the centrality of their client base of family offices in meeting their investment goals.
Other key changes include expanding product offerings, often with innovative new technologies such as AI, opening services to new geographical areas, user interface updates, and streamlining their functionality.
ESG and SFDR
The approach to ESG and SFDR of software and technology service providers that we surveyed fall into two categories. The first are solutions providing advanced ESG metrics and SFDR data solutions for decision-makers. The second is family office software packages that have a much broader functionality that can be connected to the solutions in the first category through their APIs. One further consideration is the ESG practices of the firms themselves.
An example of best practices in the industry is creating a platform for end users to meet their commitments:
“With our flexible tool for documenting the clients’ needs, wealth managers can easily build their own documentation forms featuring any SFDR or ESG questions. With our flexible classification structure, wealth managers can easily create rules to follow up on the documented client preferences.”
Other firms have proprietary tools that tie into industry-leading providers of ESG data that can be used to create “custom dashboards and reports to support your ESG impact and progress reporting for your constituents.”
All family office software and technology vendors place a premium on security. Approaches vary. One firm characterised the state of play for family offices around this crucial issue: “The threat of a cyberattack is a very real concern for family offices, posing a critical risk to the business. To keep critical family information safe there has been a growing trend towards better safeguards around the privacy of information, securing access on a need-to-know basis. Firms are turning towards hosting data on the cloud instead of server-based systems and hard copy documents, to ensure that all data is secure and best protected from a cyber-attack. Cloud-based software solutions employ security measures beyond the affordability of most businesses.”
Industry best practices consolidate around technological solutions with multiple layers to create enterprise-grade security. Encryption, multi-factor authentication, and other measures are the starting point for secure service. Some firms take the step of regularly engaging “professional ethical hackers to try, and break into our infrastructure and assess all security aspects.”
“An essential part of our policy is to minimise the investors’ data risks by ensuring that we work only with anonymised and curated information.”
Of note, at least one firm emphasised the importance of performing background checks and vetting all employees that have access to sensitive data. So there is a human element within firms that must also be accounted for.
“We take digital security seriously in terms of policies, procedures, practice and monitoring and we review and update our strategy quarterly.”
Even the family offices with the most global of outlooks have clear local requirements when it comes to choosing software and financial services. Family offices are faced with a complex mosaic of legal requirements for data storage and financial regulation. The European Union’s GDPR and the Swiss DPA are two rule frameworks among regional and national corollaries around the world.
Onboarding is a time-consuming process that most firms are working to improve. Measures include technological solutions such as some firms relying on external electronic KYC systems to smooth that part of the process. Other firms take a more hands-on approach by dedicating staff members to get families up and running in the shortest time possible.
One firm mentioned a shift in their internal processes for onboarding new clients: “All our clients’ onboarding process has recently been moved to Microsoft DevOps. This provides us and the client a modern framework that we use throughout the implementation including project delivery swimlanes and change control.”
Other firms reported streamlining and centralising their document handling processes and employing “a dedicated customer success team that is responsible for onboarding the clients and keeping them happy on a steady basis.” Here is a selection of responses:
“We have taken steps to increase the speed with which we can set up data sourcing automation”
“We introduced a more personal onboarding process and support sessions.”
“We constantly work on making the onboarding process better and shorter.”
We have “a formal implementation approach and supporting team for the implementation/conversion of large clients. This group works in conjunction with operations and technology implementation specialists, as well as the client service team who will support the relationship post-implementation.”
A recent wealth management industry report argued that “the next decade will be about the transformation to a scalable and modular wealth management proposition. Facilitated by technology, wealth managers can make superior financial advice and investments accessible to a more diverse client base at lower, differentiated costs to serve.” Family office software and technology are pushing the envelope of financial and operations management through cross-platform interoperability and the ability to provide the right information for decision-makers at the speed they demand.
At Simple, we continue to believe that family office software and technology are best viewed through archetypes.
Startup Family Office: Newly established family offices have the freedom to create an agile organisation at their point of origin. Today, many family offices are seen as a new beginning by their beneficial owners, possibly after successfully exiting a technology firm, a vantage point to the world and business that prioritises innovative thinking. Many bring their drive for creative disruption to their startup family offices. This approach extends from organisational structure to setting investment priorities. These offices might favour impact investing, with a focus on social issues and environmental sustainability, and alternative investments. The principal is often the beneficial owner who remains highly engaged in the family office’s strategies and is closely involved in day-to-day operations. Startup family offices may be organised into an operational business with a small team around a chairperson. They could also include artistic and nonprofit activities alongside venture capital interests. The keyword here is synergy in investing and operations.
Startup family offices often draw from the agile thinking of the tech world in creating their own technology stack. The dynamism of startup family offices makes clear that their future needs remain unknown and they have become accustomed to changing technology products. They value systems that provide them with open access to their data and that facilitate extending or migrating to other solutions at a later date. For this reason, they might be quicker to make an initial decision on off-the-shelf tools if it meets these requirements, while planning to further refine their tech stack in the future to create a data mesh and single source of truth.
Legacy Organisations: Many family offices have fulfilled their mission with success and diligence for decades. One of their hallmarks is direct investing, but this type of family office may diverge on their desire for discretion in their investing, operations, and personal lives. The size and scale of operations vary greatly in this category, running the range from a modest single family office to a large corporate conglomerate controlled by the interests of a single family.
Operations are well-established and routine but could use some modernisation. Perhaps, they are planning for a new generation to take the helm and have the desire to do things differently. Their technology use probably revolves around the broad use of Excel. When combined with a limited number of people holding crucial knowledge of the organisation, it creates a major operational and key-person risk. The opportunity is ripe to update practices that are currently not best-in-class and onboarding family office technology products for the first time can advance their interests. Accountants or tax consultants will likely take the lead in this transition within a longstanding organisation. Systemising investment management in a portfolio management system can help reduce risks as the staff are forced to track, manage, and report in structures that can be transferred to others in the future.
Best in Class: An elite selection of family offices is leading the way in organisational efficiency, management structure, and reach. They currently make use of technology to effectively manage their holdings and activities across a broad range of interests. Immediate business priorities often combine managing property and business ownership, the continuing investment of private wealth, seeking venture investing opportunities, and social and artistic concerns. These activities are organised around a set of guiding principles that seek to generate clear social benefits from their activities. Across the board, they are civic and economic leaders through their practices.
Technological advancements create an opportunity for further operational refinement. Better data could be used to benchmark operations against other family offices more effectively. Expanding the use of ESG data could further their broader mission. Technology is available to better structure and encourage collaboration in the organisation. It can also display the breadth of portfolios and generate reports to continue preserving the family legacy for future generations while facilitating the desired social impact.
Single to Multi-family Office: It is often said that a successful single family office begets a multi-family office. Processes and motivations vary. Some families combine their resources under a shared vision to maximise their impact, while other families wish to avoid the startup phase by joining an efficiently managed multi-family office. In both examples, joining forces brings together a wealth of knowledge. Expanding a single family office into a multi-family office requires scaling up operations and capacity that, if done effectively, can increase efficiency and productivity.
Technology that worked for a single family office needs to be returned and recalibrated to accommodate more key operators and partners with a broader range of interests and holdings. When families combine assets, it increases the potential for greater impact, but it also increases the number of stakeholders requiring timely information, accounting documents, and to include in decision-making.
From Banker to Multi-family Office: A new multi-family office is commonly created when a person with years of experience in managing private wealth within a bank steps clear, by themselves or with similarly experienced colleagues, to establish an independent family office. These experts sit at the top of the new private office’s organisational structure and might focus on niche services to meet market opportunities identified in their prior positions. They might combine their primary offerings with additional management solutions such as legal counsel or other bespoke services, but essentially they create clear value for their clients by simplifying their lives.
The technological case for this type of multi-family office requires bringing together accounting and coordination across a range of services to a broad set of clients. Technology should encourage better service to clients, making effective customer relationship management (CRM) of the utmost importance.
Commercial Multi-family Office: Commercial multi-family offices have a clear business incentive to attract new clients. High staff-to-client ratios are the norm and the quality of service is personal and bespoke. They offer a comprehensive range of offerings that often target the lower end of the ultra-wealthy management segment. Some large multi-family offices continue to grow, while others are acquired and merged with other multi-family offices.
Technology opportunities at commercial multi-family offices include prioritising CRM to maximise the effectiveness of relationships and operations. The largest multi-family offices require technology to streamline interactions with families while improving accounting and reporting for staff and advisors.
This review was made possible because of expert input. Simple wishes to thank the following service providers for taking the time to share their knowledge and expertise in technology and software.
Northern Trust Family Office Technology
Copia Wealth Studios
Venn by Two Sigma
Private Wealth Systems
SEI – Archway Platform
SS&C Family Office Services
Global Asset+ by Lombard Odier
IQ-EQ – Cosmos
WIZE by TeamWork
eXeer by Point Group
Family Office Software & Technology Review 2021
For family offices of all shapes and sizes, configurations, needs, and regions -- there's a software stack for you and...
Family Office Software Review 2020
Private wealth owners around the globe are busy retooling their operations using family office technology. At Simple,...