By Hugh Stacey, Executive Director, Asset Owner Solutions
The Family Office Software & Technology Report 2024, published recently by &Simple, has revealed that while legacy tools such as Word and Excel remain prevalent within the family office industry today, there is a growing demand for more advanced tech solutions. According to &Simple, more than 70% of family offices are currently making investments in technology. So, what are some of the key factors driving this trend and what are the challenges facing family offices in this space?
The power of AI
Across the corporate world today, firms are looking to streamline processes with technology and it’s no different in the family office sphere. With costs continually rising, firms are keen to explore new artificial intelligence (AI)-driven solutions that can automate repetitive back-office tasks and increase efficiency. At the same time, family offices are looking at how AI can be used to improve portfolio management and other front office activities. With the right platform, firms can use the technology to analyse financial data and identify trends, create personalised investment strategies, manage risk, and more.
It’s worth noting that it’s possible for family offices to develop their own AI models using solutions from AI platform providers such as Google Cloud AI Platform, Amazon SageMaker, and Microsoft Azure Machine Learning. However, this can be time consuming and costly as firms need to train the technology and continuously monitor the accuracy of results. More often than not, family offices need more than just the tech; they require a specialised service provider that understands their unique operations and can add value. A technology enabled service provider brings the expertise and resources to develop and deploy AI solutions efficiently and cost-effectively, while also handling ongoing maintenance and updates. This frees up internal resources to focus on other strategic priorities.
The need for more sophisticated reporting tools
In recent years, family offices have increasingly turned to alternative assets to diversify their portfolios. A JP Morgan Private Bank Global Family Office Report, for example, showed that large family offices now allocate nearly half of their portfolios to private markets and alternative assets. As a result of this shift in asset allocation, firms are looking for performance reporting tools that can handle a range of asset classes including private markets and traditional as well as digital assets. Ultimately, legacy reporting solutions that can only handle traditional assets such as equities and bonds are becoming obsolete. Tools that integrate environmental, social and governance (ESG) metrics are also growing in demand. Today, many family offices are looking to align their investments with family values and sustainability goals.
If a family office is interested in using advanced portfolio monitoring tools, the first step is to establish a solid data foundation. To accurately track the performance of a range of asset classes and ensure compliance, underlying data must be captured, cleansed and interrogated. It is this data cleansing exercise that is imperative to the success of such tools and means that the old adage of “garbage in, garbage out” still stands true. In summary, advanced reporting tools are only useful if the data feeding into them is accurate.
The desire for integration and customisation
&Simple’s survey revealed that within the family office world today, technology solutions are often operating in isolation. This is not efficient. So, it’s no surprise platforms that support integration with custodians, service providers and third-party vendors are in high demand at present. By integrating various systems and data sources, firms can enhance their portfolio management, risk assessment and reporting processes.
Platforms that allow for customisation are also seeing high demand. Family offices typically have diverse portfolios and complex structures, often involving multiple generations, asset classes and jurisdictions. Off-the-shelf solutions or technology providers without experience in family offices may struggle to manage these complexities. A technology provider or tech enabled service provider that can provide customisable solutions will allow family offices to build flexibility and scalability to accommodate future growth and evolving investment strategies.
Family offices need more than a technology provider; they require a specialised service provider
As the family office industry continues its technological transformation, the middle office is going to be a major area of focus for firms. Looking ahead, integrated platforms are the key to enhancing portfolio management processes, streamlining operations, and strengthening risk management. If a firm lacks expertise in this area, a middle office service provider can potentially add significant value. A reputable provider will be able to help with data accuracy and create customisable solutions that allow for scalability as firms grow over time.
How can IQ-EQ help?
At IQ-EQ, we offer specialised back and middle office solutions (ABOR and IBOR) tailored to the unique needs of family offices. Our end-to-end service offering, combined with expert support for data collection and aggregation at the asset level, enables seamless dashboard configuration and efficient document management. Through our reporting platform IQ-EQ Cosmos, you can access your firm’s entire investment portfolio from any device, anytime.
