If you think your family office is spending too much time on manual tasks for accounting and reporting, you’re probably right. But you’re not alone. According to a new study by Family Wealth Report and sponsored by FundCount, family offices spend an average of 20 percent of working hours per week on manual tasks. The number of hours can be even greater for larger offices – up to 40 percent – due to more complex investments, allocations, and entities.

These findings and others are meticulously researched and reported in Family Office Focus: Efficiency in Accounting and Investment Analysis. This comprehensive study is based on a detailed survey of 44 single and multi-family offices globally and 20 in-depth interviews with senior executives.

Technological and Operational Challenges

The prevalence of manual processes was far and away the top operational challenge facing family offices. However, survey respondents also reported an over-reliance on QuickBooks and Excel, and the inability to account for, analyze, and report on all investments in a single system as key weaknesses of their current systems.

Addressing these challenges is made more difficult by outdated technology and the widespread use of software that is not aligned to the specific needs of a family office. In fact, the majority of family offices surveyed rely on general-purpose software (i.e., QuickBooks, Excel) and systems geared toward the broad investment management sector rather than specialized accounting and reporting solutions like FundCount.

Complexity Across Legal Entities and Investments

Managing a firm’s partnerships, corporations, companies, and trusts across multiple entities is a significant pain point, especially for firms using general-purpose systems. According to the study, nearly 65 percent of single-family offices (SFOs) hold their clients’ assets in 26 or more legal entities — and the number of entities increases exponentially with multi-family offices (MFOs), which can have several thousand entities.

In spite of their pervasive use, general-purpose systems are ill-equipped to handle the number and range of holding structures found in family offices. They do not offer look-through reporting to drill down into the nested entities. This means that if you’re using a general-purpose system, you probably have a hard time compiling an accurate picture of the family’s or an individual’s finances to determine net worth, particularly as the number of entities grows.

Challenges with Alternative Investments

Accounting for alternative investments poses a similar challenge. Family offices included in this study had an aggregate 53% exposure to alternatives, including private equity, hedge funds, and direct investments such as real estate companies. Managing these investments is more complicated when using broad accounting systems versus specialized systems that easily handle the complexities, allocations, and tax reporting requirements of alternative investments. Processing a capital call, for example, can be manually intensive without a system that knows the percentage ownership for each person to efficiently make the accounting entries and send investor notifications.

Running Lean

Of the family offices surveyed, 80 percent have fewer than 20 full-time employees. Minimizing manual work so that the small and typically well-compensated staff can focus on higher-value tasks makes achieving operational efficiency particularly critical to a family office.

The Need for Specialized Solutions

FundCount is a purpose-built system that handles the highly sophisticated requirements of portfolio and partnership accounting and reporting through a real-time, integrated general ledger. With comprehensive support for traditional and alternative investments on a single platform, FundCount improves efficiency and arms family offices with accurate, timely information and investment insight.

Future Trends in Family Office Technology

Looking ahead, the adoption of advanced technologies such as artificial intelligence (AI) and machine learning (ML) is expected to transform family office operations further. These technologies can automate complex processes, predict investment outcomes, and provide deeper insights through data analytics. Integrating AI and ML into family office systems will likely reduce the reliance on manual tasks even further, allowing staff to focus on strategic decision-making and personalized client service.

Additionally, blockchain technology could offer significant advantages for family offices by providing a secure, transparent, and immutable ledger for tracking investments and transactions. This can enhance the integrity of financial records and simplify the auditing process, ensuring greater trust and accountability in managing family wealth.

The prevalence of manual processes was far and away the top operational challenge facing family offices

Expanding the scope of cybersecurity measures is also crucial. As family offices increasingly adopt digital solutions, the risk of cyber threats grows. Implementing robust cybersecurity protocols and regularly updating them will be vital to protecting sensitive financial data and maintaining the trust of family office clients.

While the challenges identified in the study highlight significant areas for improvement, they also present opportunities for family offices to enhance their operations through the adoption of specialized technology solutions. By addressing inefficiencies and leveraging advanced technologies, family offices can better manage complex investment structures, improve reporting accuracy, and ultimately, achieve greater operational efficiency.