Does Your Family Office Infrastructure Need a Makeover?

You know the adage “the shoemaker’s children go barefoot,” referring to experts who are so invested in helping others that their own house goes unattended? As a family office CFO, do you feel like this applies to your situation? You’re working for individuals who were masters at building private wealth, but they don’t know how to efficiently oversee what they have today.

Families may not change quickly, but technology and business practices evolve at a speed that makes it hard to keep up. While wealth owners trust you to grow and protect their assets, prioritize business matters and manage risk, they might be mired in antiquated thinking that could be hindering your progress.

Recognize the Red Flags

Consider some common challenges:

• Do you have the resources you need to respond swiftly to opportunities and risks, or are there gaps in your team?
• Are you trying to make decisions, but your investment, expense and budget data is a mess?
• Are routine tasks like entering data in payroll, asset management and expense tracking systems full of errors or taking too long?

These roadblocks are warning signs that it’s time to rethink your infrastructure. Here’s a look at what you might need to overcome to create a future-ready family office that helps you succeed in your role and solve the unique problems wealthy families face.

Is Your Family Office Org Chart Broken?

Many family offices have weak organizational structures, which can hinder progress for you and your team. In our consulting work, we often see common threads that indicate it’s time for an org chart adjustment to help drive needed change:

• The decision-maker isn’t an expert. Big decisions like technology purchases often bubble up to the wealth owner, as opposed to for-profit businesses that would have a chief information officer or procurement manager decide what to do. This lack of expertise can slow down decision-making.
• You already have someone on the team who “does that.” Hiring new talent is expensive, and you may not need technology expertise all the time. Most family offices would rather work with who they have — and that may be a relative or childhood friend of the wealth owner or someone else who is not fully equipped to make major purchases like an enterprise resource planning (ERP) system.
• Your staff isn’t allocated correctly. Responding swiftly to opportunities and risks requires a new look at how you use your family office talent. If you’re struggling to move quickly, it might be time to review your staff to ensure you have the right people in the right roles. For example, maybe your controller is overwhelmed by the AP process, which impacts you, the rest of the accounting team and your timeliness in getting the books closed. Yes, the volume is a factor, but the diverse set of payors and payment types is a compounding issue.

What’s Keeping Your Wealth Owners From Making Changes?

Generational changes are looming, but traditional family office leadership and process changes are slow. You face the demands of up-and-coming wealth owners who are far more technologically sophisticated than their parents and grandparents. They expect better technology and want agile leadership to bring efficiency and order to the organization, especially as the transfer of wealth gets more complex.

Modern investments, compliance and estate plans require more sophisticated technology and systems for speed, accuracy and efficiency. However, many family offices are still using old tools, like QuickBooks or Excel, sometimes mixed with some newer software to help with tasks like portfolio management. This reliance on outdated tools and piecemeal products is hampering decision-making, accuracy and efficiency.

While these may be obvious roadblocks, they’re not always enough to convince your family office leadership to modernize. Two main obstacles keep wealth owners from embracing needed change:

1. Fear of the unknown. They don’t know how to use the technology or even what kind they need. When you’re used to QuickBooks and Excel, moving to a modern ERP system can seem intimidating. Tack on investment management and accounts payable tools, and it can become downright terrifying.
2. Limited understanding of long-term ROI. Modern financial tools can overwhelm wealth owners. They may not see the deeper costs associated with legacy systems: more time and money spent on manual tasks, patchwork fixes and workarounds.

The Dangers of the Status Quo for Your Family Office

Working with outdated, on-premises accounting solutions and poor-quality data can open your family office to cybersecurity threats and fraud, as well as accounting, investment and tax mistakes:

• Cyberattacks. Your family office is a lucrative target for criminals. A 2024 survey of family offices by the law firm Dentons found that 25% of North American family offices had suffered a cyberattack in the past 12 months, and 51% say they know other family offices that have been attacked. Aging legacy systems are susceptible to ransomware attacks and data breaches, potentially giving hackers access to family members’ personal information. You’ve got to make sure your data is distributed and protected in such a way that the family won’t be compromised.
• Poor data. The family offices that need to modernize the most usually don't have reliable data. Are you using data that might be outdated, inconsistent or prone to manual errors, possibly coming from disparate systems? If you’re not using a system that brings together transparency, speed and access to real-time data and analytics to guide decision-making, you’re operating by intuition. And that could cost you dearly.
• Fraud. Family offices are susceptible to financial fraud, especially when the owners have delegated too much authority to an employee without the proper internal controls. Common places fraud can show up include excessive charges to accounts payable records, unusual invoice amounts or bills from unfamiliar vendors.
• Taxes. You know how complex taxes are for wealth owners. Relying on an antiquated tech stack means your family office could be missing out on the newest rules and changes in the tax code that can offer significant tax advantages. Modern accounting platforms and tax software, which incorporate time-saving AI and RPA, can help you keep up with regulatory changes and simplify on-time tax prep to prevent filing for multiple extensions.

3 Ways to Start Driving Change

Here are some initial considerations as you build a modern family office:

Rethink the org chart

With a more structured office, you may need to hire for executive roles, such as your CIO, operations manager and legal counsel. These leaders can help you provide strategy, perform value-driven tasks and oversee employees. For more complex, specialized or seasonal functions, such as accounting, human resources and fund administration, outsourcing is another smart option to consider.

Start with small changes to build buy-in

Embrace the opportunity to present fresh, innovative approaches to running your family office. Start small with a tool or process that shows immediate value. A perfect example: Show your wealth owners how robotic process automation (RPA) can speed up reconciliations.

You may have hundreds of bank accounts that need to be reconciled on a daily or weekly basis. On average, this takes a person about 30 minutes per account, but an accounting bot can do the same task in 90 seconds. That can add up to a lot of hours per week saved by RPA. Seeing that kind of speed and efficiency typically moves the needle on change.

Map risk to drive action

Family data, such as financial records, could be stolen if you don’t have proper data security measures in place. Now is a great time to identify where you might have weaknesses in your technology, processes and training.

Outdated systems can expose your family office to unnecessary risk. Ensure your systems such as accounting and financial planning software secure data. Many modern tools also flag discrepancies and data errors in bank reconciliations, further protecting your wealth owners’ assets and identities.

Is Your Family Office Stuck in the Past?

If you’re fighting a losing battle with outdated technology, org structure gaps and data security vulnerabilities, it’s time to consider a makeover. Find out how our family office experts can help you build and execute a smart people and technology strategy that makes your team more effective and efficient.