So often, there is a gap between the end-state of where we wish something to be and the reality of where it is at present. This dichotomy exists in every facet of our life experience including business.

So often, there is a gap between the end-state of where we wish something to be and the reality of where it is at present. This dichotomy exists in every facet of our life experience including business.

For family offices that look after the wealth of large and complex families, there is a disproportional effort between their front-office mandate and the time and effort invested in administrative and back-office activities.

Studies and interviews have shown that family offices cite their biggest challenge to be the timely and efficient management of information required to perform their primary responsibility, that of protecting and building the wealth of the families whom they serve.

Whilst the tendency in the past on the part of family offices was to “make do”, the downside risk of maintaining the status quo going forward is increasing for several reasons.

First, the strong, extended economic cycle of the past few years has resulted in significantly greater aggregate wealth; so ultra high net worth families simply stand to lose (or gain) more in absolute terms as markets move, particularly during volatile cycles.

Secondly, there is an increasing dependency on technology as a critical part of the solution. But family offices are traditionally not staffed or funded to maintain the ongoing commitment to technology that is necessary to remain leading edge.

Thirdly, asset allocation has become ever more complex and diversified, and that places new burdens on the family office executives and family members who carry the responsibility for decision-making and oversight.

Lastly, the demand for instantaneous access to information, that permeates so much of our society today, is only rising as family generations expand and mature. Family offices agree that the requirements and expectations of family members regarding the timeliness and depth of reporting and analysis on total family wealth are escalating across all generations.

When solicited, family office professionals acknowledge that they are challenged by administrative limitations which delay, or worse - inhibit, their ability to perform the investment execution and oversight functions which are of primary importance to their client families. This dilemma extends far beyond providing aggregated reporting to family members at desired frequencies. It also can introduce hurdles in key risk analysis disciplines such as monitoring investment policy and asset mix, market exposures, currency, attribution, etc.

One solution being adopted is the growing partnership between family offices and master global custodians. The unique ability of the master custodian to safekeep eligible family investments, and also to value and recordkeep all other family investments (e.g. private equity, hedge funds, art, property) is a model that family offices are examining with growing interest.

At a minimum, it provides one with an efficient, consistent and immediate snapshot of total family wealth, often through bespoke on-line information delivery. Furthermore, when combined with an integrated performance and analytics capability, the master global custodian can deliver on the promise of providing sophisticated capabilities, tools and rigour without the family office having to sacrifice judgement and the all-important control.

As a solution, this approach satisfies the challenges set out above, especially as it relates to the increasing role and importance of technology. It fundamentally relies on the master global custodian for those services that are within its core competencies, in the same way that a fund manager is looked upon for its competency in selecting stocks. Equally, the family office stands to gain from working with a partner that has experience and exposure to the complex investments of its other clients, which can be reassuring to families as their investment profile evolves.

Most importantly, through reliance on a master global custodian, family offices can make progress in the quest to direct more of their efforts on the front-office services that their client families truly expect and require.