Our US correspondent reports on the main discussion points to emerge from this news service's annual fintech forum in New York. One of the themes that jumps out is that the family offices' sector still suffers from outdated processes – and needs to get its act together.

The need to bring family offices’ tech capabilities up to speed, cybersecurity, artificial intelligence, and the merits of having tech done in-house versus outsourcing dominated discussion at Family Wealth Report’s annual fintech summit in New York last week.

Excel spreadsheets were cited by a number of speakers as a prime culprit for family offices' reluctance to embrace new technology. Many offices have been using Excel for a long time and have become so accustomed to the program that they view change as too disruptive, some speakers said.

“Family offices were using Excel 20 years ago and I was very dismayed to hear so many are still relying on Excel when there are so many other secure and reliable alternatives out there,” said consultant Carol Kaufman, CEO of Alternatives TLC.

The problem for family offices using Excel is that the program is “a spreadsheet, not a database,” said panelist Rick Higgins, CEO of Risclarity. “It’s not compatible with systems family offices will need to use.”

(Editor's note: The comments coincided with the release of this news service's 12th annual Tech and Ops Trends in Wealth Management study, which uncovers the actual progress made in wealth management in a number of countries overall, based on survey data. One main finding is that compared with 2023, respondents to the survey said progress in digitalization has advanced overall, and significantly, although there remain differences among companies of varying sizes, and their digital journey.) Also, here is an overview of all the panel sessions, speakers and firms involved in the summit.

Family offices don’t have proper management information systems, asserted panelist Adam Cleland, CEO of software platform Asora. “Many still operate with a patchwork of Excel spreadsheets they use as a database and siloed tools,” Cleland said, “making it time-consuming and prone to error when pulling together financial data.”

To make matters worse, Cleland added, family offices won’t be able to build artificial intelligence capabilities on top of their Excel spreadsheets. “In the coming AI age that's like fighting with one hand tied behind your back, if not two,” he said. 

Cyber spotlight
Not surprisingly, cybersecurity issues attracted a lot of attention at the conference.

The biggest security threat to family offices and financial services firms was email phishing, said panelist Allen Blount, national cyber product and technology leader for Risk Strategies. Failure to patch software vulnerabilities and claims attached to a third party were among the greatest drivers of insurance claims, Blount added. 

The biggest misconception about cybersecurity, he said, was that if your data is stored somewhere else, you are not responsible for securing it. That’s why Blount said he strongly recommended that all firms and family offices hire a neutral third party to conduct a thorough risk assessment of their data storage.

Buying cyber insurance was also worthwhile, Blount maintained. A good policy may cost $5,000 to $10,000, but if something goes wrong, hiring lawyers and outside vendors to fix the problem could cost over $500 an hour, he pointed out.

ABCs of AI
As for artificial intelligence, the new technology will increasingly become more critical to family office accounting and finance functions, said industry experts on the AI panel.

AI will be most useful for mitigating mundane, repetitious tasks, said Andrew Thomas, strategic account executive for Bill, while Alex Lee, CEO of Truewind, said the new technology’s greatest value  would come from  improving and automating workflows.

The ability of artificial intelligence to recognize patterns will prove to be invaluable, said Sophia Loh, partner in the family office division of accounting firm Frank, Rimerman + Co. “It’s changing the way we look at data,” Loh said. “It helps us see patterns we wouldn’t have otherwise because  we’re now more removed.”

AI’s capacity to easily and quickly search and summarize documents is already one of the leading use cases for family offices, Bill Wyman said in an interview with FWR. Presenting AI with a financial statement or portfolio and then asking what the impact of a ‘what if’ scenario such as China attacking Taiwan would be is another valuable use case said Wyman, president of Family Office Services for Summitas.

Get with it
For all the detailed discussion of fintech topics, getting family offices up to speed overall was still the overriding issue.

Panelists cited recent surveys showing that while most family offices are aware of the need to upgrade, less than 20 per cent actually have plans to do so. The high cost of paying for fintech talent and continually updating the software, which can run as high as $10 million annually for a large family office, was cited as one reason for the lag.

Ultimately, ever increasing workflow in family offices will drive adoption, said Risclarity’s Higgins. However, one of the biggest mistakes a family office can make is to “solve one problem by replacing entire systems,” Higgins said.

The long-running debate about whether to outsource fintech or have it done in-house usually boils down to saving money using a third party or keeping control by staying in house, the tech executives said.

And when changes are made, no matter the source, family offices must have buy-in from both the C-suite and the rank and file. “User adoption,” said Kristina Conner, advisory director for BPM, “is key.”