SEI Family Office Services delivers technology and outsourced services that support the accounting, investment management and reporting functions of family offices, private banks, private wealth advisors and alternative asset managers. Designed to help family offices and advisors to wealthy families better serve their ultra-high-net-worth clients, SEI’s award-winning Archway Platform℠ and high-touch outsourced services efficiently handle complex partnership, portfolio and corporate accounting alongside bill payment, investment management and multi-asset class data aggregation.

Today’s family offices have more options than ever when it comes to selecting a technology solution. From integrated wealth management technology that comprehensively handles accounting, investment data aggregation and client reporting to best of breed family office tools that provide specialized, hyper-focused capabilities, private wealth management organizations are inundated with choices.

Now, we have all heard that your technology is only as good as the data going into it, but we seldom talk about how the data is being entered, managed and reported on in the first place.

So before you choose a technology solution, it’s important to consider your overarching technology strategy. It’s worth noting that your technology strategy will cover a variety of requirements, like technology infrastructure, capabilities and reporting expectations.

But another important consideration to keep in mind is your resourcing capacity. Specifically, do you plan to run the technology internally or partner with a third-party organization to run the technology on your behalf?

To help you choose the right technology model for your family office, we’ve put together a brief description of these models alongside some thoughts on what makes them great and what makes them challenging.

In-House Family Office Technology

A far cry from on premise servers, local hard drive installations and CD-ROMs, today’s in-house technology is typically web-based software applications that are run by the family office staff. This model requires family offices to have sufficient staffing—and sufficient staffing capacity—to effectively use the software.

PROS:

• Provides greater flexibility in dictating how the data is managed

Since you and your team will be responsible for validating and reconciling the financial data piped into the technology, as well as the ultimate reporting output, in-house technology offers maximum flexibility in how the data is managed and conveyed to your end-clients.

• Gives family offices the ability to create a custom technology ecosystem

Many family offices choose to bolt multiple tools together. For instance, some family offices elect to take an integrated solution like the Archway Platform and leverage APIs to funnel data into their own data warehouse or other complementary systems like alternative investment data extraction technology, tax preparation tools and trust administration software.

CONS:

• Requires dedicated family office staff to run the technology

While some family office software solutions can easily be managed by an individual or a small group of individuals, more sophisticated technology stacks comprised of multiple systems may require additional volume and expertise.

Helpful Tip: While you can’t magically conjure more staff, you can help mitigate this drawback by thoroughly evaluating your technology strategy from the start so that you understand capacity limitations and resource availability within your family office to avoid overextending your team. Additionally, be sure to review your technology vendor’s product documentation to ensure that your team will have access to the right educational and training materials as they begin leveraging the platform more fully.

Outsourced Family Office Services

Although more commonly seen amongst private banks aiming to enhance their HNW client service quality and establish greater scalability across their solutions, outsourcing is becoming increasingly popular amongst single family offices. In this model, family offices partner with teams of highly-specialized accounting, investment and operations professionals to provide a full suite of family office administration services like portfolio reconciliation, bill payment, partnership accounting and client investment reporting.

Pros:

• Creates scalability and extensibility in your offering

It’s a bit of a misnomer that outsourcing is purely a means of replacing headcount. The reality is, single family offices choose to partner with trusted outsourced service providers so that they can focus on things like estate planning, investment strategies and financial literacy amongst the family members, while their outsourcing partner performs monotonous, data-focused tasks. Additionally, as rising generations become more active in the family’s wealth story, family offices can quickly expand their services to include additional family members and households with little to no disruption amongst their internal staff.

• Provides business continuity in the event of unexpected conditions

Propelled by the winds of a global pandemic and the resulting disruption it caused to routine business processes, family offices are looking to outsourced service providers to help them uphold business-as-usual. Whether your family office faces employee departure, natural disaster or another scenario that puts your operations in limbo, an outsourced service partner can be a constant source of stability amid changing circumstances.

Cons:

• Makes changes to processes and reporting a bit more difficult

While any outsourced service provider worth its salt offers transparency into how they deliver their services, business process outsourcing (BPO) providers are successful because they create predictable, streamlined processes. After all, it’s how they maintain accuracy and efficiency in their service. What may seem like a simple alteration in a procedure or a minor adjustment to your end-client reporting may actually turn out to be a material change to the original Service Level Agreement (SLA), which can subsequently introduce lengthy timelines and challenging change orders.

Helpful Tip: To ensure maximum satisfaction, be sure to carefully discuss SLAs with your outsourced service partner during your due diligence and re-contracting periods to ensure both sides are appropriately setting expectations that will meet—and hopefully exceed—your internal and end-client requirements.

Technology + Outsourcing Hybrid for Family Offices

Finally, a scenario where you can indeed have your cake and eat it too. For many family offices, technology is core to their operations. At SEI Family Office Services, we see hundreds of family offices whose accountants, A/P managers, investment professionals and reporting analysts rely on our technology to perform their daily objectives. We also see family offices that need an elevated level of support to make sure that their daily objectives can be met, both on an intermittent and permanent basis. In the instance of the latter, this model allows the family office to perform a selected set of operations, while leveraging an outsourced service partner, like the SEI Family Office Services team, to perform other tasks.

Pros:

• Offers a wide variety of technology and service combinations

The hybrid model comes in all shapes and sizes, allowing family offices to create an ideal cocktail of in-house technology utilization and outsourced services. For example, if accounting is an area of inefficiency, family offices can choose to perform the bookkeeping for a subset of entities, while offloading the accounting work for more complex entities, like multi-owner family limited partnerships, private funds and other pooled investment vehicles. Or maybe accounting isn’t the issue at all. Perhaps the volume of work needed to reconcile accounts or prepare client reports is beyond the family office staff’s capacity. Either way, a hybrid approach lets family offices take the most strenuous, time-consuming or just plain mundane tasks and hand them off to a team of capable, trustworthy subject matter experts.

• Provides a stopgap during short-term absences or times of transition

Hybrid approaches don’t have to be forever. In fact, many family offices employ these types of relationships on an as-needed basis. Should your family office find itself in a period of flux, whether it be due to parental leave, retirement or the pending appointment of a new staff member, the right outsourced service provider can quickly step in to fill the void. This becomes even more prolific if your primary technology provider also offers outsourced services, as the delivery teams are already well-versed in the technology and likely have insight into your ongoing operations.

Cons:

• Requires flexible technology and a nimble set of operations

While some solutions are more intuitive than others, all technology is nuanced. For instance, if your technology provider charges per user, you may find it cost-prohibitive to grant access to additional third-party service providers. Similarly, if the technology solution is not equipped with APIs or data extract tools, you may find it unmanageable to share data between your platform and your service provider’s platform. And technology isn’t the only hitch. If your operations require technology workarounds, are overly complex or lack documentation, you may find it challenging to bring outsiders up-to-speed, rendering your process transition ineffective.

Helpful Tip: When selecting a technology vendor, be sure to vet out their ability to provide supplementary services. If they are unable to offer outsourcing alternatives, request recommendations for endorsed outsourcing partners or industry consultants that have knowledge of the solution and can be relied upon to perform service contracts should the need arise.

Choosing the right technology model for your family office is key to building efficiency and enhancing the way you and your clients interact with their financial data. Whether you’re exploring family office solutions for the first time, or simply trying to understand what’s new in the market, take some time to evaluate your family office technology strategy to make sure you understand which approach will satisfy your internal staff and end-client needs in a manageable, sustainable fashion.