When it comes to multifamily 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 organization succeed?
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 off of paper-based processes, he explained.
Will single family offices go out of style?
In general, single family offices (SFO's) are often slower to adopt digital technology than multi-family offices (MFO's) 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 third generation who are more technically adept to the MFO down the street that offers a modern digital client experience.
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, categorising, 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.
Deeper ESG engagement
ESG (Environmental, Social, and Governance) Investing is a term that is often used synonymously with sustainable investing, socially responsible investing, mission-related investing, or screening. ESG has become more accepted in the UHNW/HNW world and has moved into the current Zeitgeist, according to Doug Fritz from F2 Strategy.