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