Challenges facing family offices in the digital age

Consolidated reporting is an increasingly central component of the family office proposition. With digitalisation infiltrating every aspect of our lives, families have come to expect a rich flow of comprehensive, timely information that gives an aggregated picture of their allocations, performance and risks across the entire asset portfolio. This is one of the conclusions of the report Family offices in the digital age: Data and the reporting challenge from Landytech.

Many family offices become bogged down in manually sourcing the data and consolidating it in spreadsheets. They may have to navigate complex banking portals or deal with multiple relationship managers. The resulting data usually contains errors and won’t be completely up to date.

Capturing the disparate data, then having the tools to configure and represent it in an intelligible way to the family office and end family clients is one of the biggest challenges the industry faces, noted Niall Husbands, Director with management consultancy InDecision Limited.

"Families want deeper insights into their portfolio performance, but every family will be interested in different datasets. Some may want a deep dive into property; others are more interested in their business investments. Vast quantities of data therefore need to be interpreted into a few defined key metrics tailored to the specific interests of each client", said Husbands.

The key is to strike a balance between the immense quantity of data now available and what families need/want to see.

“We must be careful we don’t just churn out data and pictures for the sake of it. We have to deliver what clients want, which is about listening to them. And it’s bringing the data to life and making it more interactive", points out Simon Russell, Chief Executive Officer of London-based Panthera Private Office.

Automation can also enhance business resilience by removing the ‘silo effect’ and the key person risk it engenders, a vulnerability made more pronounced by the Covid-19 pandemic. 

“The danger to the business is you get one expert with a little cottage industry in the corner of your office who knows every aspect of, say, a particular private equity fund but they go off sick for three months. You then have much bigger satisfaction problems with the rest of your team as they try to work out what was going on. Automation really helps with that", points out Russell.

Family offices have three main options for delivering the data they need. They can:

• Recruit a team of IT engineers and financial quants to develop and manage a full data solution in-house
• Use a consultant
• Leverage an external platform

Software develops fast. Family offices that don’t stay at the cutting edge risk suffering a rapid
decline in competitiveness and the quality of service they can provide to clients. Keeping current with the latest technologies though takes expertise and serious investment.

Consolidating data by setting up automated workflows and integrating systems is the cornerstone of delivering scalable growth for family offices. But it needs to be done right. So what key qualities should you look for in an outsourcing provider? As Russell pointed out, each family is different, therefore each family office’s reporting needs to be different. “Logically, a plug-and-play product will not work,” he said. For Russell, the number one attribute is a partner provider that listens and is knowledgeable. As well as technical skills, the team needs people with a financial background who understand the investment concepts, who know how to handle the full spectrum of assets and what matters to the user.

A full, integrated data and reporting suite is also vital. Some providers can only service the
data management; others the reporting side. Sophisticated analytics are another prerequisite. Comprehensive performance and risk analysis is crucial to any investment reporting platform.

Robust security must be a given. Client data security should be at the heart of any software platform. Ensuring data storage centres and pipelines meet ISO standards helps provide the security assurances families seek today.

By getting bogged down in data sourcing and consolidation in spreadsheets, the danger is that family offices become distracted from their core purpose of meeting their clients’ needs, and end up creating internal cottage industries and additional cost.

So what should family offices do? “Stay true to the purpose of your business and recognise that sometimes you do need to get expertise in to help you,” said Niall Husbands.