Here’s a summary of insights from a November 2023 podcast conversation between Mark Tepsich, family office design and governance strategist at UBS and Tania Neild, owner and CTO at InfoGrate, in the UBS on Air: Conversations series. We found the discussion highly valuable and wanted to share it with you. You can listen to the discussion on Apple Podcasts.
Key Insights:
- Tech Infrastructure Design: The Puzzle Box Approach
- Designing a tech stack for a family office is like assembling a puzzle; you need a clear picture of the destination before starting a journey. Key steps include defining the end-state architecture (the "top of the puzzle box"), ensuring you're comparing similar technologies (apples to apples), understanding all costs involved—including integration, staffing and maintenance—and making strategic decisions about what to bring in-house versus outsourcing. It is advised to minimize the amount of legacy data and processes you carry into the new system, as doing so can add unnecessary cost and complexity.
- Evolving Paradigm: The Shift from Centralized to Distributed Systems
- The shift from centralized servers to distributed systems, accelerated by the pandemic, has transformed the tech landscape for family offices. Traditional security models no longer suffice, requiring new tools like Security Operations Centers (SOCs), Endpoint Detection and Response (EDR) systems, and Security Information and Event Management (SIEM) tools to manage the dispersed and dynamic environment. Adapting to this change involves not just adopting new technologies, but rethinking how security is managed in a decentralized world.
- Market Challenges: Navigating the Family Office Tech Landscape
- The family office market poses distinct challenges for technology providers due to its complexity, high service demands, and relatively low profit margins. Unlike standardized industries, family offices require bespoke solutions for multi-generational wealth management and complex tax strategies, making them less attractive to large-scale tech vendors. As a result, family offices often turn to adjacent markets—such as private equity, hedge funds, or foundations—for adaptable tech solutions. This scarcity of dedicated, scalable tools forces family offices to be creative and resourceful, relying on specialized resellers to tailor broader industry solutions to their specific needs.
- Value of Resellers: The Critical Link in Tech Implementation
- Resellers play a pivotal role in the success of technology implementations in family offices. While software selection is important, the effectiveness of a tech solution often hinges on how well it is customized and integrated by the reseller. The difference between a successful and a failed implementation can often be traced back to the quality of the reseller's work. Thoroughly vetting resellers for technical expertise, experience in the family office sector and their ability to provide ongoing support is crucial.
- Integration Caution: Balancing Simplicity and Complexity in Tech Stacks
- Integrating multiple systems in a family office’s tech stack requires careful planning to avoid unnecessary complexity and potential failures, especially when multiple accounting systems or reporting tools are involved. Starting with a "minimal acceptable launch" allows for a controlled process, reducing risks and allowing for process refinement before scaling up. A hub-and-spoke data model, where all systems feed into a central data repository (akin to a central airport like O’Hare), can simplify integration, avoiding the pitfalls of complex bi-directional data flows.
- Data Management: The Backbone of Effective Technology Management
- In family office technology, effective data management is crucial. While software gets most of the attention, the real success lies in how data is handled—stored, protected, and moved across systems. Family offices manage diverse data, from entities and bank accounts to investments and properties. Keeping this data accurate, secure, and well-managed is key to smooth operations. Without rigorous data quality control, even the best technology can fail. Ultimately, the effectiveness of any tech solution depends more on the quality of the data it processes than on the software itself.
- Future of Tech: The Role of AI and the Growing Importance of Task Management
- AI is poised to reshape family office technology, with AI-enhanced tools streamlining workflows and improving data management, and enhancing decision-making processes. While family offices may not develop AI algorithms, they will increasingly rely on AI-driven features within task management and other tools. As AI becomes more embedded in software like Microsoft’s Co-Pilot or Dropbox’s search tools, family offices will need to become more adept at leveraging these capabilities. The challenge will be to integrate these AI capabilities into existing workflows in a way that enhances, rather than disrupts, established processes. The future success of family offices will depend on how well they incorporate AI into their broader tech strategies.