The TV critic of the NY Times, James Poniewozik, described Netflix as “breathtakingly broad and microscopically niche at the same time” and this is the essence of its success.  How do you achieve this in Wealth Management?

As a “Netflix” Wealth Manager you must have a way to have all the “content” in one accessible place, that can then be combined and delivered in a way that makes sense to the client.  In the wealth world content=transactions, ones that can be grouped, consolidated, analyzed and reported on.  You need the transaction information at the most granular level because various elements of it drive functionality around analysis, tax, financial planning, etc.  A “Netflix” Wealth Manager must also have access to tools that can transform and deliver the transaction content to the client in any way (such as interactive reports, projections, etc.) or channel (browser, phone, etc.).

Like Netflix, content is the key to success for the wealth manager.  In the wealth world the more sophisticated the client is, the broader the content a wealth manager needs to meet their expectations.  For the Ultra High Net Worth (UHNW) client it’s not enough to gather data from Custodians and Banks about the outcome of transactions.  These sophisticated clients also have transactions that are being created through hedge funds, private equity, real estate and other investments.  These generate transactions such as capital calls, disbursements, bill-pay and the like and typically these are recorded in both an investment ledger and a general ledger.

A “Netflix” Wealth Manager, especially for the UHNW, needs an operational platform that has capability that is “breathtakingly broad and microscopically niche at the same time”.  Broad enough to be able to provide aggregation to a Net Worth Statement, yet granular enough to allow drill-down from that consolidated view to the underlying transactions that make-up any line item.

When you take into consideration the range of possible transactions in the wealth management space it is no wonder that up until now wealth management technology vendors have focused on particular functions and their associated transactions (such as portfolio reporting, CRM, etc.).

Netflix has several proprietary elements, like it’s recommendation algorithm, that set it apart.  When you look at Eton Solutions, it is things like the underlying data model that allow it to be both “broad” and “niche” at the same time.

• Integrated enterprise management system for wealth management
• Full suite of CRM, data aggregation, trade capture, investment ledger, general ledger, performance reporting, partnership accounting/reporting, trust accounting/reporting, cash management, risk management, compliance, document management, client reporting, client portal, payment processing and transaction initiation
• Proprietary process and role-based workflow functionality
• Cradle-to-grave transactional processing without touching the data

Eton Solutions is the premier Wealth Management Platform for the 21st Century.

It’s an obvious goal, to manage your wealth in the most effective way.  You built a successful enterprise before and sold it, now your next enterprise is your professional family office.

As the Family Office Exchange put it, the family office in its best form provides a structure that helps preserve the family enterprise by supporting four dimensions of the family:

• Business Legacy – where the wealth originates, and for some, the cornerstone for the Family Enterprise
• Financial Legacy – where financial security and management of the wealth are maintained
• Family Legacy – where the family comes from and where they are heading together
• Philanthropic Legacy – where the lasting contribution for the family resides, by giving back in a meaningful manner

What makes family wealth preservation so complex are the dynamics of the family in tandem with the shared ownership of assets.

©2014 Family Office Exchange

The family looks to the family office to have the resources to be:

• A Risk Manager – asset protection
• A Financial Integrator – centralized coordination of financial and personal services
• An Investment Strategist – goals-based investing
• A Financial Reporter – consolidated information for decision-making
• An Educator and Mentor – financial training for owners
• A Transition Coordinator – preparation for life’s changes

Here is another way that FOX have summarized this:

When you look at this graphic, the foundation for supporting an enterprise family is information management and reporting.  Any effective planning, management and giving is totally reliant upon it.  The office is there especially to add-value in this area and it’s an obvious goal.

In the real-world the problem is how to get the information an office needs to manage the family wealth so that it becomes part of a seamless ecosystem? The office should have the best tools available to do this so that they remain on-task and produce actionable intelligence across all the enterprise disciplines.

90% of family offices still use Microsoft Excel, an accounting software package like QuickBooks and maybe some type of portfolio management software. So, the typical family office is stuck in the silo approach to technology and the outcome is a difficult life for office staff and many efficiency pain points, for example:

• Many Systems of Record – including Excel!
• Disparate systems – no integration
• Users required to learn multiple different user interfaces and operating methods
• Data – complex and from multiple sources in multiple formats
• Inability to maintain data integrity due to lack of control
• Inability to integrate structured data with related documentation
• Lack of documented procedures – no way to embed risk management, data security and operational knowledge
• Totally dependent on key individuals

What does a family office need to do to support an effective professional approach?  To be that foundation.

These are the elements that need a solution:

• Operational Challenges
  • Complexity – Minimized through Best Practice Business Process and Workflows
  • Costs – Process management provides costs reductions
  • Risk – Best Practice Business Process and Workflows provide checks/balances and transparency
  • Family Expectations – Move from data entry to focusing on client needs
  • Delivery – Faster and more accurate
  • Staffing/Training – Move knowledge to a system and out of people’s heads
• Technology as an Operations Enabler
  • Going beyond disparate systems – An integrated key family office application product covering all key functionality, built upon a single database, incorporating best practice business rules, business processes, workflow, audit trail and compliance
• Define the Target Operating Model for the family office
  • Effectiveness – Serve the family in a consistent, high-value way
  • Seamlessness – Data entered once can be used wherever is needed
  • Cost Management – Reduced IT costs, efficient staffing and simplified training
  • Managing Risk through Process – Minimized through Best Practice Business Process and Workflows and the associated approval audit and transparency

Here is the technology platform that provides the solution:

Family Office Exchange has defined best practice regarding technology for a Family Office in their 2015 white paper – Technology in the Family Office – Navigating New Solutions.  Such a platform needs to start with the creation of best practice business rules, processes and workflows needed to operate the business.

With this as the foundation, the required functionality needs to be built on single database to create a fully integrated, end-to-end platform.  All of this delivered in a SaaS way to provide the business continuity, disaster recovery and security that a professional 21stC Family Office needs.

 

To understand a Single Family Office (SF) you really have to know what happens inside the office and know how the staff spend their time working.

If you click this link (SFO Services) the chart maps a typical SFO.  They are averages though and you have to remember that the work of a SFO is directed by the goals of its owners and this can change the mix shown here dramatically!

ETON SOLUTIONS a fully integrated, end-to-end platform for a SFO that supports the staff in the office in whichever way the family wants to go.  It provides the efficiency, risk management and transparency the 21st century SFO needs.

Why?

From the outside looking in, many RIA’s see the multi-family office model as one they wish they had. To have just a few clients with higher profit margins is the dream.

However, it is not easy to be successful in this space.  It is all about maximizing a holistic business model that solidifies the relationship, to be the hero and make it easy to do as much as possible.  Although it often looks like any financial advisor can create and manage a multifamily office practice, the key to success is providing services and products that are not the core expertise of the RIA by outsourcing to other professionals and providers.  This is easily said, but needs serious planning and management to implement well.

A MFO’s clients typically have an average of $50 million AUM, but it can range from a minimum of $10 million to multi-billions.  Because the MFO evolved from the family office model, (where all services are centered and customized around the needs of the owner), there is a need to replicate much of that experience within the MFO. That means responding to clients in creative ways with customized services, capabilities and best-in-class product solutions.

The total client experience, with you and the different specialists, needs to be seamless.  The financial advisor must have visibility over all the various professionals and other providers so they can provide the integrated view that is necessary.

To be successful with ultra-wealthy clients an MFO must meet a lot of client needs.  The Quarterback analogy is often used when describing the MFO and we all know the number of people, and technology, it takes to support a QB in a football team.  An MFO needs something similar, a way a team of talented individuals can work together using the same playbook, communicate seamlessly and deliver to the client’s expectations.

This from RIABiz on July1 2018 sets out another driver to transform.  “The RIA business is about 30 years old, has 28,000 firms, and very few of them are owned by anyone other than the founder. Mark Tibergien, CEO of Pershing Advisor Solutions said. “It’s a one-generation business, and very few make it to the second generation.”  Also, very few firms make it to critical mass; only about 650 firms manage more than $1 billion. That’s fewer than the number of RIAs founded in 2017 — 750.  That said, demographics and economics are coming to bear. “Consolidation is starting to take root,” he says. Since 2008, the industry has declined by 1,400 broker-dealers and 40,000 financial advisors.”

So, an MFO could also be a way to build a more saleable business, with succession and continuity built into the business model. The SEC regulator has also issued a proposed rule that would require regulated firms to adopt and implement transition plans.

What?

The inherent service orientation of an MFO means that it is relationship-intensive and requires a personal approach by advisors to gain an understanding of how to best serve the client.  The challenge is how to deliver the services listed below in a consistent and efficient way.

Most successful MFOs feature the following:

1. Objective Financial Advice with conflicts of interest.
2. Creative Solutions to Financial Problems. The MFO teams must be knowledgeable about a broad array of sophisticated strategies to ensure the best solutions for the financial problems of their clients. This means that the MFO team must have access to skilled professionals with experience across many technical disciplines including tax, legal, investment, and risk management.
3. Consistent Delivery of Complex Services. The MFO must have the ability to deliver a high quality of service in a consistent manner to a growing number of clients. This requires the team to work together to solve these unique, complex issues for the client. It also means there must be a sophisticated system that can keep track of details and report.
4. Long-Term View of Relationship Building. Most financial firms realize that working with clients in a comprehensive manner leads to deeper relationships and lower attrition rates.

The MFO array of services goes well beyond what an RIA offers and below is a bit of a laundry list:

• Financial Review
  • Debt Management
  • Guardian / Conservatorship
  • Financing
  • Personalized Cash Reporting and Budgeting Analysis
  • Retirement Planning
• Estate Planning and Wealth Transfer
  • Family Foundations
  • Family Governance and Legacy Planning
  • Marital Agreements
  • Multi-Generational Planning
  • Trust, Wills, Powers of Attorney, Medical Directives, etc.
• Investment Advisory Services
  • Account/Statement Review
  • Asset Allocation Strategy
  • Capital Markets Strategy
  • Investment Manager / Custodian Contracts
  • Investment Policy Design
  • Investment Review and Analysis
  • Manager Selection and Monitoring
  • Non-Traditional Investments
  • Performance Measurement
  • Private Equity
• Trust Administration
  • Beneficiary Education
  • Distributions
  • Fiduciary Best Practices
  • Report and Notice Requirements
  • Trustee Services
  • Trustee Succession
• Individualized Counseling and Education
  • Client advocate
  • Family Group
  • Individual
• Document Storage and Management
  • Record Inventory
• Family Communication
  • Custodian of Family Legacy and Institutional Memory
  • Family Meetings
• Administrative (Reporting and Recordkeeping)
  • Act as Financial Reference and/or Agent for Clients
  • Annual Activity Summary and Analysis
  • Accounting Administration
  • Bookkeeping
  • Consolidated Reporting
  • Medical Records and Expenses
  • Partnership and LLC Administration
  • Senior Care Facilitation
• Philanthropic Services
  • Donor Advised Funds
  • Foundation Management and Compliance
  • Non-Profit Evaluations
  • Personal Giving
  • Strategic Philanthropy
• Risk Management
  • Conflict of Interest Avoidance
  • Credit Report / Identity Theft Remediation
  • Emergency and Crisis Management
  • Insurance Review and Management
  • International Resident Issues
  • Security and Background Checks
• Billing Management
  • Accountants
  • Custodians
  • Insurance Agents
  • Investment Managers
  • Lawyers
  • Other Third-Party Providers
• Business Consulting
  • Business Strategy
  • Business Transition Planning
  • Merger and Acquisition Strategy
  • Shareholder Value Creation
• Business / Family Meetings
  • External and Internal Investment Reviews
  • Meetings with Other Outside Providers at Client Request
  • Minutes and Formal Recordkeeping
  • Scheduling, Coordination, Preparation and Facilitation
  • Service Provider Summits
  • Trustee
• Cash Management
  • Annual Exclusion Gifts
  • Annual Minimum IRA Distributions
  • Annual Withdrawals
  • Balance Management
  • Bill Paying
  • Capital Calls
  • Check Requests
  • Deposit Processing
  • Investment Manager Fees
  • Income Distributions
• Services Co-ordination
  • Business Agreements
  • General Legal Review
  • Real Estate Transactions
  • Property Management
  • Aircraft / Yacht
  • Collectibles Inventory and Management
  • Second Home / Ranch / Farm
  • Staff Management
• Coordination of Taxes (outsourced)
  • Annual Tax Planning
  • Filing and Payments
  • Personal, Trust, Real Estate, Gift, Foundation, Estate
  • Recordkeeping
• Concierge / Client Specific Projects

How?

A typical way for an RIA to move to be an MFO is to internally use more people, often senior people, to meet the client needs.  Why? – to guarantee proficiency and maintain consistency.  This may work on one level, but it is not an approach that will increase margins, there is no single source of data for analysis and reporting, no way to build a firm-wide embedded knowledge-base, or make it easy to do as much as possible for the client.

The second typical problem is what was mentioned earlier where advisors and their clients rely on advice and information that is drawn from multiple sources.  You need the QB approach that is based upon People+Platform and this approach will allow you to:

• Be proactive in a client relationship, not reactive, and anticipate needs
• Offer custom solutions to complex problems
• Make the implementation of custom solutions simpler to deal with by having a 360-degree view of the client
• Empower operations by using a platform with automated process and workflow to systemize/imbed what is repeatable
• Have senior people focus on the relationship and adding value, not checking if the data is correct or collating spreadsheets, by having a ‘single source of the truth’
• Maximize the client experience you provide to drive revenue and referrals

Investing in such a Platform allows the MFO to standardize operational processes and apply automation to core business functions and controls. This is key to reducing costs and operating risk, as well as enabling the business to scale.

• Linked to this is the use of this technology approach to aid and ensure best practices among financial advisors. It allows you to tie best practices to your value proposition, your brand positioning and ensuring advisor, middle and back-office efficiency
• Streamline the number of vendor relationships to improve cost efficiency and reduce operational risk
• Look at maintaining the quality and consistency of advice through more control and centralization. This positively impacts the potential for the business to scale, as well as compliance

The People+Platform strategy is where business processes, workflows are used to make core functions, (such as client on-boarding, CRM, portfolio management, etc., through to client report production, etc.) become very efficient, easily repeatable tasks that move out of people’s heads and become part of the “value” of the business.

This all goes back to the “Why?” section above, “… it is not easy to be successful in this space.  It is all about maximizing a holistic business model that solidifies the relationship, to be the hero and make it easy to do as much as possible. “

A fully integrated platform from Eton Solutions (www.eton-solutions.com) can provide an RIA with the process and technology needed to move to an MFO.

 

 

At the FOX Family Office Forum this month, Danielle Valkner (Partner, Advisory Services, PwC) gave a very interesting presentation called “Key Considerations for Technology Selection and Application in a Family Office”. In the presentation she spoke about the trends to apply Natural Language Generation (NLG), automation BOTS and Artificial Intelligence (AI) tools to business needs and how that might impact the family office world.

According to a study by Accenture, the healthcare industry is leading in the application of these tools and they are followed by financial services. The application of this type of technology is all about increasing efficiency and accuracy in everyday work. They also work best in businesses that are deadline driven. This means that the faster tasks are done, the more things are accomplished, and management can concentrate on strategic activities, rather than day–to–day operational tasks.

When you look at these technologies, their impact in the family office will probably be around operations and they need a certain approach to be the most effective. They need good business processes and workflows to provide the necessary basis that make things happen when they should.

Automating business processes and workflows removes much of the human element from the equation and provides transparency. It creates a reliable process that cut costs where it matters the most. The associated tracking can allow a staff member to instantly check the status of the item.

I would suggest that once you have this in place you can then use the new technology:
• NLG to automatically generate text from a data set
• BOTS to “learn” repetitive tasks and process them
• AI to identify problems, bottlenecks and monitor end-to-end performance

The goal of business process and workflow automation, NLG, BOTS or AI isn’t to replace employees. Instead, it is to enhance work tasks and allow to add value where it really matters. To have business processes run with minimal, or no effort from a team. To automatically handle tasks, send alerts and trigger processes. The potential is there for these technologies to support and enhance businesses like a family office.

The idea has been around for a while and while the concept is great the execution is what let it down. A VFO needs to be able to provide “control, customization, confidentiality, coordination and integration of services” to quote a recent FOX presentation. I would add that to achieve this you need transparency.

The Quarterback analogy is often used when describing the Virtual Family Office and we all know the number of people, and technology, it takes to support a QB in a football team. So, a Virtual Family Office needs something similar, a way a team of talented individuals can work together using the same playbook, communicate seamlessly and deliver to the client’s expectations.

A key problem all family offices face, as well as many wealth managers, is to have a single system of record.  Up until now that has been nigh impossible even with a data warehouse approach, because that does not give you transparency into the underlying transactional systems.

Often a family member coordinates the functions of a VFO and then outsources the services to independent outside advisors/providers.  The reasoning for a VFO and the theory around its benefits are clear, but what does this look like in practice in most cases? All they get are reports.

1. The family member coordinator is using his home computer and using Microsoft Excel as the ‘family system-of-record’
2. One or more brokerage/custodial companies are providing investment reports, without any easy way of consolidating the data
3. The accountant is using a combination of people, Microsoft Excel and an accounting package like QuickBooks to provide the financial picture at the various entity levels (companies, partnerships, family members, etc.) This is for on-going reporting and usually for tax preparation
4. A lawyer or trust company is managing and reporting on the trust activities. They have a trust accounting software package as a system of record
5. A fiduciary advisor is helping various family members with estate planning, using one of the many planning software packages, and is reliant on the integrity of the data provided from all the other advisors involved, as well as the family members

This demonstrates the susceptibility to poor practices, bad/missing data and the potential for accounting and compliance problems.  It is also not a sustainable way of working to support a family of wealth because of the complexity.  All the knowledge is distributed and is in people’s heads.

What should VFO look like?

1. The family, or one of the family’s advisors, provides an integrated software platform that provides the functionality of CRM, Investment, Accounting, Trust Accounting, Partnership Accounting, Reporting, Estate Planning, Client Portal and Document Management/Storage
   • One ‘system of record’ where the use of Microsoft Excel is used for the job it was designed for – analysis
2. All of the family and advisors can log-in to the provided platform and what they can see and do if defined by the assignment of a system role and responsibility
   • A family member QB gets transparency and can see all related to the family, but say a tax accountant can only see the tax related data and documents for the clients they represent
3. The platform has a data aggregation/normalization/exception management functionality to provide consistent and good data. This facilitates cash management, estate planning, etc.
4. The platform provides consolidated reporting at all levels of entities, family members, partnerships, trusts, etc.
5. The platform has embedded business rules, processes and workflow to systemize knowledge
6. All users can access the system wherever they are, 24/7/365, in a secure way and with full disaster recovery and business continuity
7. Full KPI analysis and service level monitoring

Who can provide this platform for a VFO approach?  Visit www.eton-solutions.com

 

Report to the Nations 2018 – Association of Certified Fraud Examiners

A family office is a business that is open to fraud just like any other.  “A longtime employee of Michigan family office EDP Management Company has agreed to plead guilty to swindling its matriarch out of $16 million through money laundering and wire fraud. Robert Allen Haveman was charged with two felonies at the US District Court in Grand Rapids and faces a 20-year sentence on the fraud charge and 10 years for the money laundering charge. Haveman, who had worked for EDP since 1999, has signed a plea agreement to plead guilty to the charges.

He is charged with transferring money intended for billionaire matriarch Elsa Prince-Broekhuizen and her family trust to his own accounts, creating fake entries in company records to disguise his theft ….Haveman was president of the investment entity with responsibility for private equity deals. He had joined the family office after a decade-long period of service at the family business, Prince Corporation, where he had been secretary and treasurer.” Campden FB March 2016.

Fraud in a family office is not often in the news and for most offices the best approach is to deal with it privately. As family offices serve as investment managers and bill payers, this gives employees proximity to cash and other assets. In addition, they are often small organizations, where a single employee can have significant control over finances and be the sole person handling all communications to family members.

Law360 (April 24, 2018, 4:59 PM EDT) — The multimillionaire former CEO of an Illinois bank holding company sued the chief financial officer of his family office and JPMorgan Chase Bank NA in Illinois state court on Monday, claiming the CFO embezzled and lost more than $100 million of his family’s money under the bank’s nose.

In a lawsuit filed in Cook County, Illinois Circuit Court on Monday, Roger Weston, the former CEO of GreatBanc Inc., claims CFO Sultan Issa transferred millions out of the family’s accounts, pledged family assets and forged signatures to...”

The key to combatting fraud is of course protecting ‘where the money is” and invariably in a family office that is in the accounting department.  It is here you need real controls, transparency and risk management. The key elements to this are the business rules, processes and workflow that provide:

• Segregation of duties (enforced roles and responsibilities)
• Single point of data entry with maker/checker process for data integrity
• Automated bank/custody reconciliations with audited exception management
• Daily reconciliations
• Automation of transaction-based GL journals
• Operationally enforced payments limit and authorizations
• Maker/checker workflow for manual GL journals
• Automated reporting (no spreadsheets!)
• On-demand audit trail

This graphic shows why operational risk management is an imperative for family offices.

 Report to the Nations 2018 – Association of Certified Fraud Examiners

The right operational structure and technology is the easiest way to combat fraud.  The “we have always done it this way” approach, where disparate software applications are used as systems of record (with a series of spreadsheets as the consolidator and report creator!), can never provide the controls that are needed.  A family office working in this way is not providing the fiduciary framework needed for the family they serve.

THE FRAUD TREE 

 Report to the Nations 2018 – Association of Certified Fraud Examiners

 

 

 

An opportunity for real integration of technology and operations in the SFO and MFO world can be revolutionary and can positively impact the family office business model. It can make the complex simple.

Technology no longer needs to reside in its own silo and it’s potential to impact operations can be exponential when the right tool is used. It can be a critical lever for supporting operations staff and in adding value and in increasing quality.  The impact of technology can be employed across nearly all operational functions, providing the opportunity to manage family office complexity and costs.

What does it look like and how can family offices rapidly implement a technology that can really make an impact?

The office needs technology and operational help to answer these questions that really matter to family members;

• What do I own?
• How has it changed?
• What do I need to do about that?

The family also looks to the office to have the resources to be:

• A Risk Manager – asset protection
• A Financial Integrator – centralized coordination of financial and personal services
• An Investment Strategist – goals-based investing
• A Financial Reporter – consolidated information for decision-making
• An Educator and Mentor – financial training for owners
• A Transition Coordinator – preparation for life’s changes

The typical family office is still stuck in the silo approach to technology and those silos are often Microsoft Excel and QuickBooks!  The outcome is a difficult life for operations staff and it creates many efficiency pain points, for example:

• Many Systems of Record – including Excel!
• Disparate systems – no integration
• Users required to learn multiple different user interfaces and operating methods
• Data – complex and from multiple sources in multiple formats
• Inability to maintain data integrity due to lack of control
• Inability to integrate structured data with related documentation
• Lack of documented procedures – no way to embed risk management, data security and operational knowledge
• Totally dependent on key individuals

As Fidelity says in their paper on the “Evolving the Family Office”, 2018:

“Family offices on the whole may be somewhat behind the curve when it comes to the sophistication of their IT estates, but most now recognize what it means for their future survival — and some are firmly embedding IT innovation into their ethos.

As an example, one New York-based office states that one of its key operational goals is “to do as little work as possible”. A flippant remark perhaps, but the point is a serious one: the office is committed to automating processes and re-engineering inefficient systems to ensure they are as lean as possible. Staff are actively encouraged to create and invest in new solutions to increase operational efficiency. And this is not an isolated case: another Chicago-based office is making significant investments in workflow automation to achieve the same outcome.

Transferring human workloads to machines will be key to securing the future sustainability of the family office because it provides more time to tend to the needs of the family. “

The Family Office Exchange makes the same point:

This is graphic really highlights where an office needs to start:

• Operational Challenges
  • Complexity–Minimized through Best Practice Business Process and Workflows
  • Costs–Process management provides costs reductions
  • Risk– Best Practice Business Process and Workflows provide checks/balances and transparency
  • Family Expectations–Move from data entry to focusing on client needs
  • Delivery–Faster and more accurate
  • Staffing/Training–Move knowledge to a system and out of people’s heads
• Technology as an Operations Enabler
  • Going beyond disparate systems –An integrated key family office application product covering all key functionality, built upon a single database, incorporating best practice business rules, business processes, workflow, audit trail and compliance
• What is the Target Operating Model for a FO?
  • Effectiveness–Serve the family in a consistent, high-value way
  • Seamlessness–Data entered once can be used wherever is needed
  • Cost Management –Reduced IT costs, efficient staffing and simplified training
  • Managing Risk through Process –Minimized through Best Practice Business Process and Workflows and the associated approval audit and transparency

 

 

 

“Should be easy, right? I built a successful business before and now my next successful one can be managing my wealth.

I did all sorts of internet searches, I talked to people I know, I talked to my banks, I talked to my lawyer, I joined a family office group and I bought at least 6 books. I was looking for a tried and true plan about what my family office should look like, who I should employ, what should these people do, what tools do they need and what services are key?

The family office is a complex business and all I researched confirmed that. There are many players and relationships, lots of inputs and lots of outputs. So, I had to think hard about exactly what it is I wanted. The family office will be a cost center in my new business of managing my wealth and needs to be effective but lean. Do I just take my CFO from my old business and get them to create the office structure? My wealth is a different business and I shouldn’t be guessing, I need to learn from others at not make the same mistakes.

I found that there are two large disconnects:
1. The existing family offices I talked to had smart people in them but didn’t have the structure or tools to really add value. From the outside the image is one of proper controls and risk management, but on the inside it’s a patchwork, with band-aids and people making heroic efforts to fill the gaps
2. There is no manual, how-to guide or “dummy” book about what a family office should look like and what are best practice operations. There are several great books and resources, like the Family Office Exchange and Family Office Association, where you can get guidance on the “family” side but nothing really about the nut-and-bolts of the office itself

I’m a logical, process person and my family office needs that. My company sold for so much because of the intellectual capital embedded in how it was structured and how it was run. It didn’t really need me to operate!

I wanted the office to provide these services:
1. Investment Strategy and Implementation
2. Wealth Transfer Planning
3. Lifestyle Support/Management
4. Integrated Financial Strategies
5. Trustee Services
6. Recordkeeping and Reporting
7. Cash Flow Planning and Management
8. Coordinating Advisors (e.g. attorneys, CPAs, insurance brokers, etc.)
9. Liability and Risk Management
10. Strategic Philanthropy
11. Family Education
12. Family Continuity

Knowing this gave me a good idea about the skill-set of the people I needed to help me manage my family office. Now, apart from general office tools, what did they specifically need so that I could run a lean office?

When you go to the next level down and look at how these services will be provided you see the office will be dealing with:
1. Entities of all types
2. Relationships of all types
3. Documents of all types
4. Investment transactions
5. Accounting transactions
6. Project management

The office inputs for all of these are data and documents and the office output are reports.

I didn’t want my family office structure to re-create the people/Microsoft Excel/QuickBooks combination I had seen in so many other offices. These aren’t the tools to manage wealth and the end result is something that relies on key people to sustain it. Like in my previous business I needed tools that:
1. Automated Dealing with the Data – complex and from multiple sources in multiple formats
2. Provided a Single Systems of Record
3. Enabled Risk Management and Data Security
4. Embedded Operational Knowledge
5. Minimized integration

Ideally, I wanted an all-in-one platform for my office, similar to other industries. As I said, I was committed to automating processes and implementing efficient systems to ensure the office was as lean as possible. The office needs operational efficiency because that will be the key to securing the future sustainability of the family office. It provides more time to tend to the needs of the family.

Did I find a tool for my family office that will help me be successful in managing my wealth now, and in the future for my family?

I was in the right place at the right time. A large family office I met and a consultant company I knew both recommended I look at a relatively new software platform built specifically for a family office.

Now, my office is lean, probably with half the staff of comparable offices I saw using Excel/QuickBooks. I get the reports I want when I want them. I have real risk management in the office, with true segregation of duties and a full audit trail. My staff are focused on service and have time for value-add analysis. I know the data and communications are secure and I can access information 24/7/365.

My focus on getting the family office to work the way I want has taken a huge worry off my mind.”

There are two reasons thinking about this is important, the first is that an employee’s time in the office should be about adding value.  But, because the family office market is a niche market, there is also the problem of staff shortages – hence the need to have a conducive work environment and to do more with what you have.

The graphics below from the Family Office Exchange provides a lot of insight into these two factors.

A great deal of family office employee time (45%), and so office overhead, is spent on tasks that allow the office to report back to the family.

What are some of these tasks that take 45% of the time?

• Data aggregation
• Transaction entry
• Data normalization
• Data reconciliation
• Exception management
• Report data consolidation
• Report creation
• Report reconciliation
• Report customization

In terms of staff compensation, the cost to the office is around 36 bps, and of course although this varies by office it indicates a real problem using expensive staff for basic work, especially when you look at the tools many family offices use to perform these tasks – Microsoft Excel and QuickBooks – there must be a better tool!

This approach also severely impacts other key areas such as office efficiency, risk management, job satisfaction, staff recruitment, staff retention, etc.

The route to a solution is fourfold:

• Automate to get the data right first time
• Get a single source of data
• Apply best practice business rules, processes and workflow
• Automate standard and custom report generation

This is where a new tool comes in and the whole process needs to be re-engineered.

The benefit will be increased efficiency, reduced risk and transformation of the work environment into one where staff can add analytical value, rather than spend their time doing data entry and data manipulation.

Family Office Tomorrow

• Complexity made simple
• One integrated source of the truth
• Efficient, timely, accurate reporting to drive improved decision making
• Client 24/7/365 anywhere access to reporting and secure communications
• Automated, enforced, and documented integrated best practices
• Engaged staff providing high value-added work
• Significantly reduced cyber security vulnerability

Just think what highly engaged and efficient staff delivering excellent, timely reporting could do with that with all of that “recovered” time.

Eton Solutions – The New Tool

• Provide the only truly integrated platform for single and multi-family offices
• Revolutionize the management and operation of single and multi-family offices
• Facilitate the implementation of best practice workflows across multiple disciplines

A family office should have enterprise class process, technology, reporting, automation, and client delivery capabilities.  Eton Solutions is a next generation tool for the holistic management and optimization of the efficient family office.