(Based on a discussion recorded live at our Nov 2023 conference)
The cloud computing revolution has enabled tailored tech solutions for a range of services, but adoption varies due to hurdles multi family offices face in adopting new tech. This conversation runs across the key themes of how the tech landscape is changing in MFOs to enable scale, speed and intimacy while meeting client expectations. The conversation, moderated by Jamie McLaughlin, brought perspectives from experienced multi-family office leaders - Danielle Roseman and Rocio Ortega - and Joe Larizza, CEO & President at Mirador, a fast-growing aggregation, reporting and consulting provider to family offices.
What are the key challenges for MFOs?
Integrating systems: Finding the right tech fit and syncing various best-in-class tools without increasing workload, costs, or duplication is a major challenge. It’s only growing as the number of tools increases.
- Data management: The focus has shifted from organizing data to making better use of it for decision-making support leveraging emerging tech. Some examples of predictive tools include optimising structuring, cash flow forecasting, investment due diligence, etc. Normalization of vast data quantities remains a challenge.
- Workflows around alternative investments: Management and reporting on illiquid assets remains a significant hurdle due to large volumes of unstructured data, requiring manual review.
- Competing priorities: MFOs are in a unique position in that, as commercially-minded enterprises, they have to balance three dimensions: complex client needs, advisor support, and business operations.
Should business operations precede client needs in determining technology choices?
This is where an interesting discussion unfolds, with different perspectives depending, quite understandably, on who answers and their role in the business.
Clients first: One approach is to prioritize unique and complex client needs in shaping tech strategy, then, working backwards from there, empower advisors with the right tools to meet the needs of the clients and the business.
Strategy first: An alternative approach to designing systems is to prioritize strategy and the needs of the business over client demands. This approach usually focuses operations and technology around golden sources of data - such as entity and account masters - to streamline operations and reduce reconciliations. This can ultimately lead to a better client experience.
- Outsourcing vs reinventing the wheel? A strategy-first approach encourages firms to shift focus from managing practices to smartly managing businesses and focusing on core activities: gathering assets, managing relationships and investing well. It advocates for wealth management firms to outsource technology and operations to experts.
The holy grail of consolidated reporting
This discussion wouldn't be complete if it didn't highlight the challenges around alternative investments. Management and reporting on illiquid assets remains a huge pain for all family offices with large and often growing allocations in this space.
AI, machine learning and OCR tools: There's been a proliferation of tech tools aimed at streamlining operations, but they’re only advanced band-aids rather than the comprehensive, well-integrated solutions needed for seamless reporting.
LPs call for standardization: There's a real call to make life easier, but not much leadership or hope that GPs and fund admins will change their ways anytime soon. This leaves the investors in a bit of a tough spot, swimming against the current..