Craig Iskowitz, a writer who runs a consultancy advising family offices, recently attended FWR's fintech summit in New York. Here is his account of the discussions.
The following article is by Craig Iskowitz, who is founder and
chief executive of Ezra Group. Ezra Group,
is a boutique consulting firm providing technology strategy
advice to small- to mid-sized family offices, UHNW RIAs and
private client divisions at large wealth management firms. Craig
has over twenty years of experience helping clients make sound
technology decisions that activate growth opportunities and
deliver elegant client experiences. Craig attended the recent
4th New York Family Office Fintech Summit 2019 hosted by
Family Wealth Report. He is the publisher of the Wealth
Management Today Blog (wmtoday.com), which provides in-depth
analysis, interviews with industry leaders and unbiased product
When it comes to multi-family offices, single family offices, and ultra-high net worth divisions of large wealth management organizations, they tend to be torn between two questions: "Should we innovate?" and "Should we not innovate?" If they choose not to innovate, they risk going the way of Sears or Blockbuster. How can the next generation of family wealth organizations succeed?
A panel of experts shared their experiences answering these questions for their private wealth clients at the 4th New York Family Office Fintech Summit 2019 run by Family Wealth Report.
The sluggishness of technological change in the private wealth industry is legendary. It's moving so fast in the rest of the world that we might see drones dropping off a burrito at a client's house at the same time a Fedex driver hands them an overnight envelope from their family office, joked Doug Fritz, president of consulting firm F2 Strategy. Wealthy clients are demanding innovation and the industry must move in that direction, he insisted.
The vast majority of firms that Fritz is working with are still struggling with the basics. It's impossible for them to leverage artificial intelligence since they haven't yet moved away from paper-based processes, he explained.
Will single family offices go out of style?
In general, single family offices are often slower to adopt digital technology than multi-family offices since they consider it more of an expense, Fritz noted. This is especially true for those that are still controlled by first or second-generation family members. If they do not change, they risk losing the more technically adept third generation to the MFO down the street that offers a more modern client experience.
A recent survey of 103 family offices showed that while the average company age was 17 years, they ranged up to 88 years. Over many decades, a family’s wealth will cascade over increasingly large and diverse generations which generate more entities and increased accounting complexity.
SFOs are more likely to select advanced technology for its ability to increase communication with their family members, while MFOs are looking for technology that can help them scale, stated Seth Brotman, CEO of artificial intelligence software provider Canoe Intelligence.
Brotman, who formerly worked for a venture capital firm, insisted that SFOs will not go the way of Blockbuster or Sears, because wealthy families will always need the type of personalized services that they offer. However, their integration and implementation of new technology solutions will continue to evolve.
Each generation in a family has different needs and unique problems that the SFO must address, observed Tricia Haskins who is VP of Digital Strategy & Platform Consulting at Fidelity Institutional. This is why the SFO won't go away even if the later generations demand better technology. These firms will continue to provide value via their deep understanding of their family members as well as their ability to apply technology to all parts of the business, she stated.
Providing a frictionless experience
According to Darren Berkowicz, managing director, SS&C GlobeOp Fund Services, they reduce friction by providing things such as straight-through processing for marketable securities, daily book pricing on a T+1 basis, and leveraging artificial intelligence to reduce the effort needed for reconciliation.
There is a tremendous amount of friction around manually extracting and populating all the necessary data sources, especially related to alternative investments, noted Brotman. Their software can significantly cut down manual work by systematically ingesting, categorizing, extracting, and validating data that is then fed into all of the firm's output such as capital account statements, call notices, and reports, he said.