Now, more than ever, the business of managing private wealth is exceedingly complex. Most family offices are doing the work of sophisticated financial institutions with limited staff, while relying on a patchwork quilt of software solutions that are hosted internally with little integration, security, or disaster recovery protection but considerable ongoing expense (e.g., hardware costs, annual software maintenance, personnel). Meanwhile, clients of the office increasingly want secure access to their financial information 24/7 on their computers, phones, tablets and other devices.

 

In the face of rapid, industry-wide technological change, the number of technology vendors developing solutions specifically for the family office market has remained remarkably static. Most traditional technology vendors consider the size of the market segment too small, the profit margins in serving the family office market too low, and the client needs too customized to justify the time and expense to develop targeted products. This reality is compounded by the perception that each family office runs a unique business enterprise that cannot be replicated.

 

Without significant profit incentives to motivate technology vendors to specialize in the family office market segment, offices are well advised to adapt their practices and procedures to align with technology platforms that are commercially available. The good news is that there are new developments in cloud-based applications and infrastructure in the wealth management market that can be applied in the family office setting. These cloud-based solutions afford greater data security, remote access, and integration, in the form of a common desk top, than ever before—often for comparable or even lower cost over time. Cloud-based solutions have the potential to change the way the entire staff and client base interacts with each other, and they require a new mindset when it comes to investments in technology.

 

Technology in this environment is no longer an IT decision, but one that requires office management to step back and think strategically about technology in the context of an ecosystem that addresses communication, security, business continuity, disaster recovery and integration. Cloud-based solutions allow you to pay only for the services you need when you need them. This approach turns IT procurement on its head, and also allows a family office to work with only a very basic physical technology infrastructure. IT expenses, in a cloud environment, transition from capital expenses to operating expenses.

 

Identifying the best solutions and making the right technology decisions in this ever-changing environment requires a clear understanding of your needs today along with an understanding of how your client’s needs may change in the next five years. The pace of change and the advent of the cloud have changed the nature of most technology investments from 10-year investments to three-to-five year investments, but the steps involved in making the right decision haven’t changed.

 

My new whitepaper, “Technology in the Family Office: Navigating New Solutions,” is designed to frame the new developments impacting the family office world and give you the tools you need to make the right technology decisions. The whitepaper is available free to FOX members by contacting their relationship managers, and to family offices interested in FOX technology consulting services. To request your free copy and to learn more about FOX technology consulting services, please click here.