Many employees of family offices know to write their upcoming schedule in pencil instead of ink. They might have a plan for the day—but then a family member calls, and the plan suddenly requires an eraser and urgent rewrite. Larger family offices are no exception, either. Personnel, time and energy are finite resources.
“Rarely have I gone to a family office where employees were not grossly overwhelmed with tasks,” says Christina Churchill, consulting principal for family offices at RSM US.
Fortunately, technology has advanced to where it can relieve some of the strain. Customizable automated systems for financial reporting, bill payment, document storage, mobile device management and human resources are improving the timeliness of information and the thoroughness of reports while reducing risk.
Better yet, implementing those systems does not require a family to compromise its loyalty to office staff and advisors. Technology is not replacing people in the family office—it is supporting them.
“Technology creates quality of life on both sides of the equation,” Churchill says. “It gives the family a lot more freedom to be where they want to be and still have control. And on the employees’ side, technology allows them to get the repetitive processes off of their plates and focus on the family’s immediate needs.”
Those tedious and manual processes are not only a time-suck, but they also introduce a likelihood of human error. Technology, on the other hand, improves efficiency, accuracy, transparency and controls. That, in turn, enables staff and advisors to be more strategic and add value to the business.
“[TECHNOLOGY] GIVES THE FAMILY A LOT MORE FREEDOM TO BE WHERE THEY WANT TO BE AND STILL HAVE CONTROL. AND ON THE EMPLOYEES’ SIDE, TECHNOLOGY ALLOWS THEM TO GET THE REPETITIVE PROCESSES OFF OF THEIR PLATES AND FOCUS ON THE FAMILY’S IMMEDIATE NEEDS.”
Consulting Principal for Family Offices, RSM US LLP
As Churchill puts it, adding something new, like a software system, does not necessarily mean getting rid of what’s old. Instead, think of it as a family office face-lift, upgrading the business for the next generation. And as the technologies co-exist with people, benefits are evident throughout the family office.
Microsoft Excel is engrained in businesses partly because users appreciate its vast capabilities—and understand its limitations.
“Accounting people, we love Excel,” Churchill says. “And it’s hard for us to let it go. But Excel is not a database.”
Generating financial reports using Excel commonly requires manual steps to input formulas and tweak data. That takes time and is susceptible to errors, both of which could undermine a family’s or CFO’s trust in the timeliness and accuracy of reporting.
On the other hand, corporate performance management (CPM) software programs—such as Prophix, Adaptive and BI360, to name a few—can pull data from disparate sources in real time. They incorporate controls to create customizable reports on whatever schedule the user establishes. And the programs can be scaled to the complexity of the family office.
“Every time a family member or CFO wants the report, they would be able to see it at a moment’s notice,” Churchill says. “They have access to pull it, manipulate it, scenario-plan and filter—a lot more flexibility than waiting for somebody to download and creating a view in Excel.”
Churchill clearly recalls the day her phone rang, and on the other end was a family member from a family office. He was standing on a golf course in Scotland.
This family member was responsible for signing paper checks to pay bills, a practice that remains common among family offices and small businesses. For that control, he sacrificed mobility—until his international golf trip brought the problem to light.
Does nothing get paid for a month? Does he give someone else rights to sign on behalf of the family office? What, specifically, would they be allowed to sign?
The other extreme is a family member who wants nothing to do with paying bills. They leave it to an accountant who has created the vendor in the office system and is signing the check, undermining controls.
Automated bill-pay software enables remote approvals within a set of controls established by the family. Controls could center on types of vendors, amounts or variance in contracts.
ADDING SOMETHING NEW, LIKE A SOFTWARE SYSTEM, DOES NOT NECESSARILY MEAN GETTING RID OF WHAT’S OLD. INSTEAD, THINK OF IT AS A FAMILY OFFICE FACE-LIFT, UPGRADING THE BUSINESS FOR THE NEXT GENERATION.
Now, the family member can approve bill payments from the tee box, and office employees can move on to their next task.
Information technology and mobile device management
Of course, transactions made from paradise must be secure. The same goes for the virtual office and everywhere in between.
Consider how much of a family office’s email and text message traffic contains sensitive information. Then consider that 42% of companies with annual revenue between $50 million and $1 billion experienced a data breach in 2020, according to the RSM US Middle Market Business Index survey. That percentage has increased each year, up from 4% in 2014 in the inaugural survey and up from 29% in 2019.
Protecting those lines of communication and the devices that utilize them reduces risks while enabling mobility for family members and office employees.
Solutions include encrypted email, mobile device management, virtual private networks (VPN) and dual-factor authentication for transactions.
A VPN secures connections and protects data, an especially valuable safeguard given how the pandemic accelerated the transition to working remotely. Dual-factor authentication is more secure than entering only one password, especially if the secondary authentication involves a separate device.
Document storage and retention
Transition to a virtual office is prompting family offices to examine how they store and retain financial records.
Maintaining an inventory of papers in a filing cabinet is rife with risks, and it requires personal attention that employees and advisors could better spend elsewhere.
Instead, a cloud-based storage solution is easier to access remotely, faster to search and more capable of protecting and backing up documents. Programs such as Microsoft SharePoint, OneDrive, TeamDocs and Collaborate can create controls for storing documents, accessing records and sharing data with different generations of the family and various third parties serving the family office.
Human capital management
Human resources are commonly under-resourced in family offices, and shortcomings can result in administrative and compliance problems.
Human resource information system technology can automate payroll processes, for example. Even if a family office is not so complex that it needs automated solutions for performance management or recruiting and onboarding employees, the efficiencies gained by eliminating transactions on paper could be valuable enough for a small staff shouldering a big to-do list.
Man’s best friend
Technology supports people within family offices by creating efficiencies and reducing risk. From investing to accounting to compliance, digital solutions are now able to improve each of a family office’s operational components.
“Most of the family office employees I speak with are devoted to making the family happy, but they don’t have the people, the systems or the know-how to do it,” Churchill says. “They’re often in a position where they can’t be successful, as they don’t have the tools to evolve with the family. That’s the challenge.”
Fortunately, it’s not an insurmountable one.