The 5-Minute Guide To Family Office Software

A brief guide to the growing world of family office software

Family offices are changing the way they operate.

The days of relying on the patriarch for oversight and managing investments in Excel are coming to an end.

Today, Single Family Offices hold a complex assortment of assets, held across various jurisdictions and in multiple currencies. 

Large Multi-Family Offices have evolved into outright institutions themselves.

The level of involvement and complexity has increased everywhere: family offices need to actively manage investments and consistently support family needs.

And as the next generation gets involved, they expect real-time information at their fingertips.

With more diverse portfolios, an increasingly global footprint and higher expectations from owners, new software solutions are vital.

Powerful software solutions are available, but with often overlapping features, the family office software industry can be confusing.

Today it’s a brief overview to help make sense of things:

• what’s driving the need for tech

• the risks of implementing new tech

• the risks of not implementing new tech

• some market-leading software providers

• how to choose the right tech

What’s driving the demand for technology

Financial management and reporting

Family offices spread their investments across asset classes, with global family office reports noting alternatives now make up approximately 45% of family office investments.

Collecting and aggregating this data from multiple sources is both time-consuming and complex, and done manually leaves room for error and poor decisions made from incorrect data.

Manually compiling practical reports from live and historical data is itself a big challenge that requires resources.

Accounting and compliance

Nowhere is accuracy more important than accounting, and with complex portfolios there is an added time burden of manually processing transactions.

Adding regulatory compliance across multiple jurisdictions just intensifies the challenge.

Having access to a real-time unified general ledger can be a strategic tool for family offices, but it isn’t possible without modern software.

Governance

As the recent 5-Minute Guide To Family Office Governance noted, this isn’t the most exciting aspect of family offices but it’s one of the most important. 

Effective governance ensures accountability and transparency for family offices, and enables better decision-making. 

And with succession planning a critical element to long-term wealth preservation, having the right structures and documentation in place and made accessible to the right people makes all the difference.

Just ask those families where Bitcoin private keys worth millions went to the grave.

Risk management 

As family offices gain more influence and new transparency laws come into play, the industry is stepping into the spotlight.

With this comes the risk of criminal elements looking to take advantage: from old school burglary to sophisticated cyber attacks and ransom.

The risks extend beyond financial too, with reputation damage through leaked information another concern. 

Risks of implementing new tech

Business disruption

Implementing new technology can be time-consuming and distract teams from their core objectives, particularly if it becomes a drawn-out process.

Add to this the risk of incorrect implementation, which can lead to financial loss.

Family offices often have unique software needs, and there’s a risk of selecting and implementing solutions that don’t fully align with their business requirements.

Change resistance 

Family office teams need to be involved early, prepared in advance and given a thorough onboarding process, or lack of commitment and disinterest will derail the implementation. Buy in from all key stakeholders is key.

Cost spirals

Software fees can be based on fixed monthly or annual costs, variable costs based on AUM, number of users, or even data requirements depending on the complexity of the family office.

Unless correctly planned and budgeted for, new software operating costs together with maintenance unexpected upgrades can lead to costs spiraling out of control.

This is particularly a risk when pursuing customized software solutions. 

Risks of not implementing new tech 

Business and investment risk

It’s no secret that family offices mostly run on spreadsheets and manual data entry, despite known prevalence of human error. 

Bad data can lead to poor decisions, and bad investments.

Cybersecurity 

The recent Dentons survey showed 25% of family offices surveyed suffered a cyberattack in the last year. 

Protection from data hacks, ransomware and financial blackmail are just a few reasons to consider a more robust technology framework. 

Reputational 

Family offices are unique in their direct relationship to wealth owners, and the human risk is ever present. 

Personal disagreements, family feuds and contested legal contracts are common, making the governance capabilities of new technology more appealing.

Missed opportunities

Not having real-time visibility on assets and financial performance can mean losing the ability to exploit opportunities that present themselves. 

Costs

Simply put, certain software solutions can do the work of multiple employees at a fraction of the cost.

This is only increasing with the influence of artificial intelligence, which almost all family office software solutions are integrating.

Notable Software Solutions

There are numerous areas where new technology can enhance family office functionality.

Software can support areas as diverse as health, well-being and philanthropy through to investment and real estate management. 

This guide gives an overview of current family office software solutions solving challenges in key areas.

This is based on individual discussions, independent research and polls and industry reports. Note that this is by no means a comprehensive guide!

Investment reporting and portfolio management 

These can be broadly categorized under the popular term of “wealth management platforms.”

This is software that allows family offices to aggregate data, publish custom reports and manage investment portfolios with real-time analysis capabilities.

Put simply, they allow family offices a single point of view on all their assets regardless of type, custodian or jurisdiction, and at any point in time.

Many of these are built to be operated by family offices in conjunction with advisors and wealth managers, and can play a valuable CRM role for certain family offices.

As artificial intelligence is increasingly incorporated, their ability to collect, ingest and integrate data accurately and then deliver insights becomes increasingly powerful.

Notable solutions for family offices include Addepar, Altoo, Black Diamond, FundCount, Masttro as well as Wealth Passport from Northern Trust.

Accounting

Family offices can manage multiple companies, trusts and foundations, along with complex investment portfolios and in different jurisdictions with different regulatory requirements. 

Accounting can be a significant challenge, made easier by intuitive software that helps with everything from spend management and tax planning to bill paying, and seamlessly connects with institutions and other platforms.

The right integrated accounting software solution can become a key strategic element for both Single Family Offices and Multi-Family Offices.

Notable accounting solutions include AgilLink, FundCount, KnowLedger, LemonEdge and Sage Intacct.

Governance and risk management

Cybersecurity concerns go beyond financial and investment risks: consider the sensitivity of medical data, as well as real estate and even travel information.

Governance software can protect data through secure encryption, while simultaneously making it available to family members on-demand.

The balance of transparency and privacy is particularly important when it comes to legacy planning.

Notable governance solutions include ORCA, Trusted Family and Trustworthy.

Choosing the right software

The hesitation of short-term disruption can prevent families from implementing new technology that would benefit them in the long term.

Yet to ensure long-term success, family offices shouldn’t rush into choosing and implementing new software.

To approach it correctly, the first step is identifying what the biggest challenges are. In other words, to understand the why.

Next, family offices should consider what solutions are focused on solving the challenges identified.

Most software providers offer demos or will happily arrange this via an online meeting. This is a vital step to ensure an optimal user experience.

Once a solution is chosen, it’s important to get buy-in from everyone involved including family members, and follow a structured onboarding process.

And lastly, before live implementation, there should be a thorough testing phase, not just to check all integrations are correct and data is accurate, but to ensure the software actually solves all the challenges required.

Family offices can lean on external advisors and third-party resources throughout this process.

Family Office Software - a Game Changer

Considering how much of the world’s wealth is controlled by family offices, it’s concerning that so many rely almost entirely on spreadsheets for reporting and decision-making. 

This is set to change with new technology becoming increasingly important as the next generation starts to oversee the vast amounts of family wealth.

While this guide highlights a handful of companies providing tech solutions, there is a wide array of family office software solutions on the market.

With so much wealth at stake, shifting from spreadsheets to specialized software should be a priority for all family offices.

This newsletter is sponsored by FundCount

FundCount is the pathway to less time consuming, more effective Family Office operations.

Delivering a unified Portfolio Management, Partnership/Ownership Management, Data Aggregation, Reporting, Tax and General Ledger tool sat on a single software, FundCount generates tangible benefits: from a +95% reduction in General Ledger entries; a +98% reduction in account reconciliation effort and time; a +60% reduction in reporting times; and a 100% improvement in productivity, all according to FundCount clients.

Serving Family Offices in thirty countries for over twenty years, FundCount’s mature but continuously improving cutting edge technology delivers reliability and future proofing. See fundcount.com for more.

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