What To Consider Before Selecting A Family Office Provider

01 Strategic Thinking

Before choosing a technology solution, it is important to consider the technology strategy. It should cover a variety of requirements, like technology infrastructure, capabilities, and reporting expectations. Another important consideration to keep in mind is resourcing capacity. Do you plan to run the technology internally or partner with a third party to run the technology on your behalf?

02 In-House Technology

Today’s in-house technology is typically web-based software applications that are run by the FO staff. The in-house team will be responsible for validating and reconciling the final data piped into technology as well as the ultimate reporting output. This model offers maximum flexibility and gives the ability to create a custom technology ecosystem since many FOs choose to bolt multiple tools together, like external APIs connected to their own data warehouse or other complementary systems.

03 Outsourced FO Services

Outsourcing is becoming increasingly popular among single FOs. In this model, FOs partner with teams of highly-specialised accounting, investment, and operations professionals to provide a full suite of FO administration services, i.e., portfolio reconciliation, bill payment, partnership accounting, and client investment reporting. The fact is that many single FOs outsource this kind of monotonous, data-focused task in order to focus on strategic things like estate planning, investment strategies, and financial literacy amongst family members. By choosing this kind of FO service, the focus is on accuracy, efficiency, and transparency.

04 Hybrid Solutions

For many FOs, technology is core to their operations. Many of them need an elevated level of support to make sure that their daily objectives can be met. The hybrid technology model allows the family office to perform a selected set of operations while leveraging an outsourced service partner to perform other tasks. It might be an ideal cocktail of in-house technology utilisation and outsourced services. For example, if accounting is an area of inefficiency, FO can choose to perform the bookkeeping for a subset of entities while offloading the accounting work for more complex entities. Or the volume of work to prepare client reports is beyond the FO staff’s capacity. Many family offices employ these types of relationships on an as-needed basis.

05 Unconventional Circumstances in Mind

When looking for a provider, one key capability the FO should be looking for is whether the provider is prepared to address stress conditions, imperfect situations, and edge cases. While vendors typically focus on their strengths and impressive features, it is essential to prioritise real-world and unique scenarios that align with the FO requirements.

It is imperative to request tangible evidence and specific details regarding integrations and connectivity to validate a system’s functionality. This approach can help ensure that the system is thoroughly tested and enables the FO to make an informed decision based on the right technology fit.

06 Focusing on Strategy and Key Questions

It is not uncommon to be distracted and overwhelmed by the range of technology available and the sheer pace of change. Not every technology is relevant to your business, and not every vendor is right for your business. Before choosing the FO provider, crucial questions about strategy and ways to achieve it have to be answered. Also, the questions about our own capabilities are important, as technology is not meant to hinder us but to help us.

Technology generally cannot fix poor data or broken processes by itself. Addressing behaviours and data quality up front can save time and resources, as can having an honest discussion with third parties about what will need to be done differently in the future.