Selection of Family Office Software: The Top Challenges Today - Revisited

Back in 2018, I wrote a blog on the subject of what I believed to be the challenges in selecting software for a Family Office. To sum up, I included these three headings: 

• The challenges created by the regulatory environment  
• The investment strategies adopted by the Family Office 
• The staffing and management of Multi-National Offices 

My suggestion was that the cloud could be a valuable tool in helping to alleviate these "pains" and that its adoption could be of benefit to all Family Offices, irrespective of size. 

Four years later, I'm happy to report that the large majority of software providers include some kind of cloud solution offering in their range of products, if not exclusively concentrating on cloud solutions. Family offices around the world have been adopting cloud-based solutions and there is no doubt that with the successful implementation, this has proved to be of considerable benefit to them, compared to the on-premise choice. 

So I am now revisiting the subject and with 4 more years of experience in listening to our clients and prospects, I will try to summarise some of the feedback we got and hopefully update my guidance.  

The answer: The safety of the Family Office assets and investments 

There is no doubt that the CIOs in Family Offices are facing some of the most challenging issues in recent history. It is not just the search for beta that they are faced with, but increasingly the preservation of wealth and even avoiding the complete extinction of classes of assets. While I have been writing this blog, the Financial Times quoted that “Temasek writes down $275mn ‘misplaced’ FTX investment”. The impact of this for Temasek is of course insubstantial, considering the size of the Singaporean sovereign fund, yet it is emblematic of the risks in the times that we live in. Cryptocurrencies, which were FTX’s domain may not be the most invested asset class of most family offices, yet their management had to be included in software solutions, because of demand. Hopefully, for many family offices, their exposure to this event was minimal. 

The other challenge to portfolio managers is that the interrelationship and correlation of the performance of most investment classes, make it increasingly necessary to search far and wide for financially engineered products, to help them hedge and minimise risks.  

The point that I would like to make here is that any investment management and accounting software worth its money must be capable of managing even the most exotic of products, both manage and report on them in a smart way. Investors looking to diversify and hedge their portfolios may need to turn to them soon. 

The cloud as mentioned above and in the original blog, has proved to be a game changer in this sense for family offices, just like for most other businesses.  

But the search for an increase in productivity does not stop there. Further benefits can now be achieved by enhancing the way systems work, through what is known as Robotic Process Automation. Gartner explains on their website as follows: Robotic process automation (RPA) tools perform "if, then, else" statements on structured data, typically using a combination of user interface (UI) interactions or by connecting to APIs to drive client servers, mainframes or HTML code. An RPA tool operates by mapping a process in the RPA tool language for the software "robot" to follow, with runtime allocated to execute the script by a control dashboard. 

Take away the technical terms and this translates to tools that help to automate repetitive business processes. As the data involved in these processes is removed from human intervention, the security and accuracy of data handling is also enhanced. 

Family offices have many operations which involve data aggregation and reclassification that can benefit from such tools. For anyone who is considering migrating to a new software solution, these tools can reduce the cost and effort of this task, as well as improve the final accuracy of the underlying information. 

The other improvement in operational efficiency we observe, comes from managing data transfer from and to third parties. Integration in family office management solutions to external sources, enables the automation of bank payments, the import of data from banks, custodians and brokers and the updating of non-financial information from websites, such as alternative investment and research, making them all accessible from the same source. 

A family office must look to secure the assets of the beneficiaries and increase the productivity and efficiency of the operations. There will be of course other objectives, depending on the mandate, but these two pronciples will be the cornerstones of the management team’s strategy. 

There is a multitude of choices in family office management and accounting solutions. What ultimately differentiates the leaders from the group and provides a competitive advantage, is the underlying technology and the capability of the products to leverage innovation in technology. It is the main factor over and above the functionality – which of course remains the paramount selection criterion – that a buyer must keep in mind. It provides the assurance to the users that their investment is a long-term one and that they can rely on a partner who can help them to navigate smoothly down the ever-stormier waters of global financial and political volatility. 

Elysys specialises in family office software and has worked for years to understand the challenges faced in this market to be able to build a solution that is tailored completely for family offices and their unique needs. We would be pleased to offer a no-commitment demonstration of what we can do for you.