Professionals working in family offices are experiencing significant and increasing complexity. Manual, high-risk work processes such as spreadsheets and point systems erroneously rely on human reconciliation – leading to incomplete, delayed, and inaccurate reporting and the inefficient use of high-value human resources. Moreover, manual calculations inherently lack cybersecurity, disaster recovery, and business continuity processes and skills.
But providing accurate information is the first job of any office, and it directly impacts every other job the office does. An Ultra-High-Net- Worth (UHNW) family wants a family office to provide timely, actionable information and analysis of its affairs for decision-making.
It then expects the office to effectively implement the decisions that are made. The problem is that providing this actionable information and analysis is currently the most time-consuming process in a family office, and it often relies on intensive manual effort.
And most of the information that a family office provides is scheduled and historical, looking backwards and reporting on what has already happened. In addition, even regularly scheduled reports often cannot be completed until weeks, or even months, after a period closes.
The challenge is to stay relevant – retrospective reporting will no longer do - and part of a family office’s challenge is to deliver what the family needs as those needs evolve. For example, one way the family office has evolved is by absorbing more responsibilities; from tax planning to philanthropy to daily bookkeeping, the responsibilities of the modern family office are numerous—and growing. Use of antiquated data tools and limited flexibility puts a family office that is not focused on the future firmly in the past.
Technology is the answer. But until recently, one of the biggest issues is that many existing software solutions were developed for another part of the financial services industry and modified to meet a subset of family office needs. These point solutions were essentially functional silos, each storing data in its own format. There was no integration of data unless you designed and built your own data warehouse. There was still the need to use spreadsheets to reconcile, consolidate, and aggregate data with all the inherent problems spreadsheets bring as an operational tool.
Integrated technology platform
An integrated technology platform built specifically for a family office can make a significant difference. It can capture data effectively, securely, and consistently in a central repository.
Process Management - The Evolution. (Eton Solutions, 2023).
With this single source of data, a platform can reflect the true world the office deals with. All the entities, individuals, assets, liabilities, accounts, and transactions that make up the operational management of the family office are stored centrally.
This means that all the relationships and linkages between the entities, individuals, assets, liabilities, accounts, and transactions that make up the operational management of the family office are also stored centrally.
The data is then stored at the lowest level of granularity. This model allows that data to be associated and known from the transaction level up and where everything is auditable, and everything can be queried.
Key tasks involved in this process include automated data collection and reconciliation, interconnectivity and integration, information access and transparency, enhanced risk management, and data-driven insights and decision-making.
The approach, which is embedded in the platform, focuses on key principles that deliver consistency, accuracy, efficiency, and effectiveness. Risks and weaknesses can be determined to improve processes. This design also ensures the appropriate checks and balances, as well as full transparency, around all the processes and workflows so they can be trusted.
Checkpoints and transparency are accomplished through the segregation of duties and implicit knowledge transfer to embedded business processes. Integral reviews, approvals, and authorisations act as a checkpoint for processes and reporting.
Next-generation technologies
A platform can also include integration with other technological elements, such as BOTS, Artificial Intelligence (AI), and Natural Language Generation (NLG). These next-generation technologies can help further automate processes, facilitate more comprehensive services, and deliver added value in family office services and operations. However, as with a platform, without one consistent, standardised, and normalised data set, the benefits of these tools cannot be maximised.
For example, NLG could be used to provide the family office staff and family members with streamed knowledge delivered to any device - including a mobile phone. NLG could automatically generate text from a data set, while BOTS learn repetitive tasks and process them. AI could drive applied analytics and insights to identify problems and bottlenecks, monitor endto- end performance, enable detailed document search and classification, automate document ingestion and transaction processing, and more.
Another example is that a document, such as an invoice, can be automatically uploaded into the platform and intelligently processed. The invoice is read, and details like vendor, amount, date, and entity name populate a preformed template.
That template has the built-in business knowledge around the relationships of all participants needed to record the data properly. The template creates a workflow where humans review and approve the transaction through to payment. The payment batch is also then automatically processed following final approval. Indeed, when the mundane work done by office staff is replaced by AI technology, like documents being automatically read for processing and posting, then that frees up humans to concentrate on delivering higher-value services, such as analysis, oversight, advice, and approvals.
Thus, an integrated technology platform combined with BOTS, AI, and NLG can change administrative loads and human processing time - propelling family offices into the future.
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