Family Office

Family Offices Re-evaluate Tech To Tap UHNW Growth

Nicole Eberhardt August 25, 2022

Family Offices Re-evaluate Tech To Tap UHNW Growth

There remains great potential in the UHNW wealth segment, but family offices need the technology tools and understanding to make the most of it, argues the author of this article.

This news service has looked at the technology demands confronting single- and multi-family offices. It is clear that this is a major focus for the FO industry, with difficult areas to tackle such as cybersecurity, managing complex private market investments, and how to allow family members to communicate well. (See an example of some of the issues here.)

In this article, Nicole Eberhardt (pictured), chief strategy officer at Ledgex, goes into some of the technology choices and considerations that family offices face. The editors of this news service are pleased to share these views. Please jump into the conversation! The usual editorial disclaimers apply. Email

Family offices are at a crossroads. 

The number of ultra-high net worth individuals who rely on them for alternative investing has continually climbed in recent years and, if anything, it’s now accelerating. The 2020 Capgemini World Wealth Report noted that the body of UHNW individuals had swollen to 19.6 million. Just two years later, its 2022 edition reported even more impressive numbers. In North America alone, which already boasted the most UHNW individuals, the population had increased 13.2 per cent and their individual wealth by 13.8 per cent.

Make no mistake, the promise of this market is very good news, but only if a family office is supported by purpose-built technology that enables them to take on greater portfolio volume. If not, their lack of capabilities will limit success, particularly due to a lack of timely reporting and inability to turn valuable information around quickly. Processing data takes time, and with staff at family offices typically spread too thinly to begin with, firms could put themselves in a hole from which they can’t climb out. 

That said, these next few years will determine whether a family office has a bright future or whether they’re unable to service family needs properly, putting wealth preservation and growth in jeopardy. 

It’s all in the timing
Family offices are hesitant to take on amalgamated portfolios. That’s because they can’t manage data across views and lack confidence in the quality of their investment streams. It’s also a struggle to understand the timing and reliability of reporting – and that’s a problem that’ll become more complex with added portfolio volume.

For instance, an alternative investment such as property is valued using model estimates. Unfortunately, data is available only weekly under the best circumstances and deemed indicative, which is a more pleasant way of saying a “rough guess.” There might be more precise estimates for hedge funds and private equity, but those follow the end of a month or quarter and, all the while, revisions continue to roll in and muddy the waters.

That’s the reason why many family offices use multiple, separate accounting systems, including at least one for interim reporting and another for official accounting books of records. The problem is, different systems use different formats, and that means additional processing time and a drain on staff. And this is occurring as family offices attempt to leverage reported data to make more reliable, timely decisions. 

Calculating confidence
A new class of technology is changing the game, giving family offices the resources to do more with less – and better. It comes down to building data confidence into the solution. By working with characteristics found in investment data, emerging technology can now measure, calculate and identify what’s reliable, eliminating the need for more research. 

Take investment type, for example. We all know that the month-end share of a stock like Amazon will be accurate and available on a set schedule. The valuation of a property, on the other hand, could be neither. Another data characteristic could be time elapsed between valuations and how market dynamics have changed. And if you really want to drill down, you could even do things like measure the impact of the individual investment manager. 

You can then assess a weight to each characteristic, and after merging them, data is presented in new ways. Some solutions add in machine learning (ML) and advanced algorithms to yield even better data quality which can be tagged with a confidence level. You could even integrate these into a heatmap to provide immediate and easy understanding of data. 

In this way, the time, effort and hours spent questioning data can be dramatically reduced. Add in the ability to automate functions and unearth performance-enhancing data, and family offices who take advantage of the technology could be making the strongest investment possible in their future.

A mission and moment
A new generation of data engines can now record data once and deliver the information to the correct downstream system. This facilitates general ledger, tracking, analytics, modeling and performance. With the previously-mentioned data confidence tools, and heatmap of entities and beneficial owners, a family office can then pinpoint tasks and data that require daily attention. Some solutions even merge accounting and investment books of records to bolster workflows, cull the most relevant information and gain time to effectively oversee assets.

Other interesting features of newer offerings include pacing modelers that improve flow forecasting via flexible capital call, distribution scheduling and simulation. Some solutions have report libraries to simplify management and performance tracking. This can lead to advanced modeling of private investments, hedge funds and stocks, encompassing liquidity, terms and lockups. Knowledge date reporting and audit control can further help family offices rise to the challenges ahead. 

Family offices are on a mission, and this is their make or break moment. They may be at a crossroads, but by investing in technology that empowers their people to do more with less, they’ll make the right choice during a critical time and ensure that their firms are moving in the right direction.   

About the author

Nicole Eberhardt is chief strategy officer for Ledgex. The company provides a multi-asset class portfolio accounting solution for alternative investment firms.

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