The global Covid-19 pandemic has tested the resilience of both single and multi-family offices (MFOs), especially in their ability to sustain client communication and confidence. Without the benefit of in-person meetings or social contact, firms have had to be creative in finding ways to stay connected. They have also faced a similar challenge internally to maintain a sense of culture and collaboration among staff working virtually.

No surprise then that the pandemic favored firms that had already invested in digital communications tools, such as interactive client portals or mobile access apps. Happily, before the pandemic, many family offices had begun looking to technology to help reinforce client relationships while also serving clients more efficiently. In this respect, the pandemic has simply underscored the importance of having a robust digital presence. Individuals and families have become more reliant on, and comfortable with, interactive technology in nearly every realm of their personal lives. For example, videoconferencing, a staple of the business world for over two decades, has become a fixture in family households.

Many experts are saying changes wrought by the pandemic, mainly those increasing convenience for the client and efficiency for businesses, are here to stay. So as the industry prepares for a post-pandemic world, it’s a fair question to ask: has the pendulum swung too far? Does digitization pose the risk of diluting the personal equity family offices have built with their clients over the years, or even over generations? How do firms strike the right balance between ‘white-glove’ service and digital self-service appropriate to each client’s personal preferences?

Technology’s evolving role
Historically, wealth management is a relationship business, especially for firms serving ultra-high net worth families. Personal trust with clients is a firm’s brand promise. Equally important is building rapport, the ability to show clients you understand and empathize with their values, life choices, and views about wealth. Until recently, technology largely stayed in the background, enabling firms to serve clients efficiently and deliver error-free reporting, but for the most part, invisible to clients.

Today, however, technology has become integral to the client relationship. Impeccable operations and multi-channel interaction are virtually essential for MFOs who wish to stay relevant in their clients’ lives. Some traditional investors may welcome the quarterly in-person portfolio presentation (or video chat), while others want to check their performance daily online. Firms must be prepared to accommodate a wide range of highly individual interaction preferences.

Bridging the generational divide
Family offices have the added challenge of preserving and strengthening relationships across generations. These days, younger family members are likely digital natives who have grown up with always-on smartphones and tablets in their hands. They may even prefer digital over human interaction in their financial affairs, and be sceptical of seasoned professional advice when they can get a range of expert opinions instantly online.

Technology is key to bridging this generational divide within the context of a holistic family or household relationship. But it must be a compliment, rather than a substitute, for cultivating trust and a rapport with all family members. A firm that can show clients its best interests at heart while simultaneously delivering a modern digital access experience wins. In addition, family offices have a better chance of sustaining relationships as wealth is transferred from one generation to the next.

Technology as a service differentiator
Firms leveraging a high level of automation and integration in their operations are in the best position to deliver the personalized service to set them apart. Freed from laborious administrative tasks, managers can focus more proactively on family clients and their life goals. Instead of processing data, they can spend more time reviewing and analyzing data to make better-informed recommendations and decisions on their clients’ behalf. They have the information they need at their fingertips to drive meaningful and productive conversations with clients. Success favors firms deploying technology effectively in the service of users, not the other way around — empowering people with greater flexibility to meet their clients’ needs rather than locking them into rigid processes.

So how can firms quickly achieve the technological agility to adapt to changing client expectations and support a superior service model? The question has many family offices rethinking their technology strategies from the ground up. Building viable technology infrastructure for the long term can be likened to building a house — it requires a strong foundation and thoughtful planning. Missteps at the planning stage may constrain your ability to add enhancements in the future.

Rebuild or outsource?
Technology is constantly advancing and evolving, so many firms have turned to out-sourcing to reduce the risk of falling behind. Outsourcing doesn’t have to be the one size fits all proposition it used to be. Under today’s co-sourcing arrangements, family offices have the flexibility to outsource some or all of their core investment management technology, as well as operational and compliance workflows, while retaining certain activities in-house.

Reducing operational overhead is undoubtedly a critical factor in outsourcing, but it is no longer the most compelling reason. Firms today choose to outsource to drive greater efficiency, leverage better user experiences, achieve scalability and reduce operational risk. Outsourcing typically allows firms to implement new solutions faster than an onsite installation and stay current on technology with regular upgrades included in their service. And as many firms have discovered under work-from-home orders, offsite technology hosting makes business continuity planning much more straightforward.

Outsourcing may enable firms to achieve the optimal balance between technology and talent. With outsourcing, firms offer clients a modern digital experience while making the best use of their human capital, freeing people from operational drudgery to focus on building lasting connections with clients.

This article is from The Wealth Mosaic’s GFO WealthTech Landscape Report 2022. Access the full report here.