In previous decades, many family offices shied away from custom IT investments simply because they couldn’t justify the expense or implementation hassles. Today, however, more providers are tailoring affordable technology solutions customized to the needs of family offices. This article will look at some of the latest family office trends to update you on the possibilities.
A Pandemic-Fueled Move to More Automation
Not surprisingly, the pandemic has accelerated the increase of automation in family offices (and, of course, in most other industries). With people forced to work from home on short notice, teams quickly looked for automation that could improve productivity and increase team collaboration.
Today, we can look back and see just how rapidly that change occurred. Now, most family offices are comfortable with remote working and video conferencing. Cloud-based applications and software-as-a-service are also gaining popularity to provide instant scalability, reduce IT team needs, and increase data security and disaster recovery capabilities.
Given this fast transformation, what’s on the horizon next?
Automate Repetitive Family Office Tasks with RPA
By making use of today’s more sophisticated technologies, IT leaders are inventing new and better ways to eliminate repetitive tasks in business. Family offices are already putting this technology, generally termed Robotic Process Automation or RPA, to work, minimizing human effort while increasing accuracy.
RPA can be used in many applications to avoid transferring data from one application to another. Today, this timesaving technology can be used for bill payments, invoicing, financial closing, investment accounting and other everyday tasks.
Because most family offices prioritize efficiency, RPA presents a particularly good opportunity for helping your organization do more with less.
Family Office Meets Artificial Intelligence
Until recently, Artificial Intelligence (AI) seemed more the domain of science fiction movies than something we’d encounter in our everyday lives. However, today it’s gaining widespread traction in many industries. It’s even getting rolled out now in family offices.
AI is fueled by data. With the large quantities of data tracked in finance, AI has made tremendous gains in helping financial professionals with more practical applications.
According to a recent article by EY, AI can be employed most easily when family offices leverage the existing capabilities of their financial services partners. This can help organizations put AI to work in many ways, such as investment research. By utilizing some of these large partner firms’ previous investments, implementing these systems in a family office is within reach financially.
AI goes beyond common automation (such as RPA) since it has the capability to learn from and adapt to new situations. That means the AI software can address obstacles and solve challenges without help from its human counterparts. This sophistication allows AI not just match but exceed human programming in terms of speed.
One example of AI being utilized today in family offices is with the processing and management of Schedule K-1s. AI systems can scan and analyze K-1 information much faster than a human can. Instead of your team suffering through piles of forms, AI handles almost every aspect of this routine processing.
Another way AI is used today is to collect and review financial statements. In previous years family office staff would manually search the Internet for balance sheets and income statements. Sometimes the documents located would be out of date, requiring further manual research. Finally, the documents needed to be read and analyzed when the latest versions were found. AI is capable of doing all that without human intervention. This can take the time to complete these tasks down from weeks to literally minutes.
Leveraging the Power of the Blockchain
Danielle Valkner, Family Office Leader for PwC US, believes blockchain will be a technology that serves many family offices in the not too distant future. While this would be a big transition, Ms. Valkner believes the potential benefits are worth pursuing. Blockchain is a distributed ledger that is, in theory, tamper-proof. Blockchain should minimize or outright eliminate the need for intermediaries, saving costs, speeding up transactions and offering better transparency. Since family offices exchange information with many partners, including custodians, banks, advisers and investment managers, having a blockchain-based solution could serve these organizations well by increasing efficiency and security. While some blockchain solutions exist now, many are still in the early stages of approaching the market. As more providers enter, Ms. Valkner believes prices will fall, making this technology more affordable for family offices of all sizes.
Reducing Cybersecurity Risks in Family Offices
One area that continues to warrant attention is cybersecurity. Systems and tools that help secure the organization’s data and resources continue to be in the spotlight. According to a survey by Boston Private, cyberattacks have already impacted almost 25% of family offices.
The same survey found that smaller family offices tended to be more at risk while, at the same time, tended to underestimate their exposure.
Threats from cyberattacks are also growing more sophisticated. One family office reported that a hacker posed as one of the principals and requested a bank transfer to an overseas account. The e-mail appeared to come directly from a principal’s e-mail account. Fortunately, multiple check systems detected the attack and prevented the transfer from being complete. However, these threats are growing more sophisticated and difficult to detect with every passing year.
Fortunately, many family offices now prioritize cybersecurity as a top focus for 2022. A Campden Report showed that North American family offices are prioritizing cybersecurity over succession planning for the first time recently.
So organizations would be wise to put cybersecurity high on the list of priorities to help maintain adequate controls in 2022.
Putting Technology to Better Use for Your Family Office
In today’s digital world, investments in technology can pay off in many ways. For family offices of all sizes, more information usually equates to better decision-making and can help your organization better manage risk on all fronts.