Family Office

EXCLUSIVE: What Family Offices Want From Technology - New York Conference

Tom Burroughes Group Editor April 24, 2017


Issues ranging from how to use tech to help family offices become more efficient through to what to do in the event of cyber crime attacks were discussed by industry figures at a recent FWR summit in New York.

The role of technology in powering family offices, the threat of cybercrime and how to fight it and the best ways to find the right vendors were just some of the topics discussed by prominent industry figures at the conference organized recently by this publication in New York City.

The Second New York Family Office Fintech Summit, held at the Convene Center in Manhattan’s Mid-town district, saw delegates and conference panellists wrestle with the kind of forces driving family offices and other wealth managers towards the digital world, while raising some of the risks and challenges professionals and clients continue to face. (To see a link also about this event, see here.)

The sponsors for the summit were Archway; Addepar; Crystal & Company; EY; FundCount; iPaladin; Mercury Capital Advisors; Mirador; Oakbrook Solutions; PKF O’Connor Davies; ProFundCom; smartKYC; SS&C.

Jason Brown, who is the chief executive of Archway Technology Partners – and founder of that business – started proceedings by giving a talk, Do you have to be disruptive to be innovative? As the title suggested, he challenged the idea that disruptive tech is necessarily a force for progress, giving examples of where change can lead to worse, or less effective, products and services. Disruption per se is not what is required, but change for the better, he said. Clients, he said, often seek incremental improvements in a service and product. He also suggested that certain “barriers to entry” – possibly caused by regulations and the factors – could be actual spurs to innovation, because a market in which access was easy might not force entrepreneurs to be so creative. “Hard work translates into a certain respect for what got you there…..Many innovators in today’s world are chasing after buzzwords that don’t necessarily translate into innovations that add value,” Brown continued.

“It seems that a lot of people are chasing what I would call quick and easy steps to reach a valuation goal,” he said. “It is hard not to want to be a disruptive innovator because there’s a clamor for it,” he said. 

Panel 1
The first panel discussion of the day was on the theme of Right First Time: Best Practices for Vendor Selection and Implementing Technology. Speakers on this panel were Chris Martinez, managing director, Oakbrook Solutions’ Family Office Practice; Mike Slemmer, chief operating officer, Americas, for FundCount; Hugh Bagatelle, founding partner, Windward Advisory Group, and Marcella Odum, who is chief financial officer, The Lupton Company.

The first challenge in bringing in a new technology system is to understand that it is never likely to be as easy as one thinks, Odum, who said her business has been “paperless” for about 20 years, said. “It is very important to have an office that operates in the way that you operate,” she continued. 

At the outset, family offices must be “crystal clear” about what problems they want to have solved, and be aware that vendors have developed solutions from different perspectives.  Martinez said. This means FOs must communicate who they are, what they do, what they want to achieve, and focus on solutions developed for a similar client base. In talking to advisors and vendors, they must ask for references, and he noted that family office peer group organizations can be useful sources of such information. It is also important to check an advisor’s or vendor’s longevity, including their track record in development and service, financial strength, commitment to the market, and product roadmap. “You really want a partner that can grow with you and be there for you,” Martinez continued.

Slemmer said that clients must be strict with themselves in working out what their top- and low-order priorities are and be able to articulate these clearly. It is also necessary to distinguish the difference in such conversations between “price” and “cost”, he said.

“Price is a one-time thing but cost goes on forever,” he said. A vendor should have a formal method for implementing technology; have a repeatable process and enough people to cover all of an implementation, Slemmer continued. Another issue, he said, is the risk of “creeping elegance” – adding features going beyond what was originally agreed.

An important issue to consider is that some forms of tech and business innovation increase rather than reduce risks, Bagatelle told the audience. “I’m struggling to think of areas where innovation, however, when thought through carefully, increases risk. 

Bagatelle said a useful test is for clients, in the early stages prior to implementation, to give a vendor real-world data so they can see what a new solution might actually look like.

Martinez advocated pre-implementation assessments, because that helps to frame expectations and identify potential gaps in expertise. They can also help vendors explain to clients potential tradeoffs and key decisions they will need to prepare for during an implementation. 

“Be very clear as to how you define success,” Slemmer added. 

Martinez said that contract term lengths in tech implementations have shrunk in recent years as the pace of technology innovation has accelerated and concerns around technology that may be “good enough” today not addressing the challenges tomorrow brings. About 20 years’ ago, a ten-year contract was the norm; now, a five-year term is quite long.  Family offices should take a mid-term view and expect to see results and ROI within 3-5 years, so they should have the flexibility to make a change if needed.

Odum addressed the issue of the pros and cons of outsourcing tech and doing work in-house. One potential approach is “co-sourcing”, which involves dividing responsibilities, helping to curb costs and educate both sides at the same time, she said. 

Panel 2
In the second panel, discussion focused on the theme of “Making the Digital Family Office a Reality – The Challenges, Benefits & Risks To Be Managed. This panel was sponsored by iPaladin. Panalists were Linda Bourn, executive managing director, Family Enterprise Risk Practice, Crystal & Company; Jill Creager, founder and CEO, iPaladin; Paul McKibbin, executive director, Private Client Services, Family Office, at EY, and Donald Kozuski. Partner, Kuzusko Harris Duncan. He also chaired this panel.

People in family offices spend a significant amount of time on administrative tasks, Bourn told delegates, when asked about some of the tasks that the sector has to deal with and how this affects advice to clients. “Family offices oversee the management and administration of a growing number of family-owned entities. A digital platform could both reduce overall costs and free up time to focus on qualitative work – which is the focus of the family office,” she said. Innovations in a digital direction do not necessarily mean looking for reasons to shed staff, she continued.

It is important to look at the digital platforms that exist that are being rolled out and introduced in the wealth sector, Creager said. In today’s sector, there are too many cases of “executives herding cats and not spending time in growing a business”, she said. With younger clients, they assume straight off the bat that an advisor will pull up their details on a digital platform. With an older client, typically that sort of process has to be asked for, she said.

Bourn said she was interested to know how much data is in files [at family offices] and how much of it resides in emails. McKibbin responded: “We’re trying to build platforms for all such information. Email is a critical part and it has to be in there.”

An important issue to consider around efficiency, Bourn said, is that “time is a perishable resource….once something’s done, you cannot buy it back”. A significant issue for digital family offices is managing expectations. “Family offices are memorializing what will be provided to clients,” she said. 

Turning to security issues in digital family offices, McKibbin talked about the enormous number today of digital photos and digital content generally. “It’s a huge issue for family offices,” he said. 

Asked how long a digital family office requires to show that investment is paying off, Creager responded that with many systems up in the cloud, there are already many efficiencies and economies of scale among vendors. McKibbin added: “In some quarters the returns will be very quick.” Other developments around digital family offices may take longer to bear fruit, he said.

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