Family offices offer an advantage over traditional wealth managers in that they can quickly pivot when circumstances, trends and technology change. Yet, the very factors that help family offices remain nimble—serving the interests of single-family or multiple family offices—may be blinding them to the benefits of gathering and analyzing big data.
What is Big Data?
Big data is information that comes in quickly, from a variety of sources, and in significant volumes. Once this data has been analyzed its true value shines through as a much greater level of complexity is communicated by the data. Imagine going from having an overview of data provided by 300 people to data provided by hundreds of thousands—all in a few short minutes. Suddenly, the conclusions you make, the forecasts you draw and the trends you spot become far more sophisticated, nuanced and accurate.
Analyzing Big Data
Gaining a massive amount of data very quickly is pretty useless unless you have the capacity to analyze the data. While a human might be able to glance at the data from a few hundred people and see some trends emerging, it takes a more sophisticated algorithm to analyze large amounts of data. That’s where artificial intelligence (AI) comes in.
AI is primarily a learning mechanism that leverages machines to conduct analyses. With AI, algorithms are developed rapidly to parse data and draw conclusions, forecasts and trends that a human scanning the data could never do.
Big Data in the Family Office
Big data can influence a wide range of decisions in a family office. The AI behind big data can analyze information and quickly—yet thoroughly—vet different investments. Using it will allow your office to better understand risk exposure and asset allocation issues while facilitating expanded performance forecasting to more accurately anticipate reallocation needs.
The impact of analyzing large amounts of data spans further than investing. It also helps your firm isolate the true, underlying needs of your clients and their descendants, thus helping develop essential guidance on various life decisions. The ability to gather and analyze previously siloed data also allows family offices to create more meaningful reports and improve overall efficiency by reducing communication issues between departments. This type of data even provides a higher level of transparency, so your office can easily identify potential wash sales and tax discrepancies.
Big data has the power to usher in an entirely new era of accuracy, effectiveness and efficiency for your office. With the right technological support behind it, the difference can be enjoyed by each generation of the family while giving your office yet another tool to effectively guide the family’s wealth and success through increasingly turbulent times.