Complain as they do about technology, most financial advisers don't realize how good they have it compared with advisers who work for family offices.
As a consequence of the broad, yet extremely personalized, services they provide to wealthy clients, family offices find off-the-shelf adviser technology largely inadequate. Without considerable (and expensive) tweaking, most advisory systems cannot generate on-the-fly net worth reports for random groupings of relatives, keep track of the multiple insurance policies or allocate shares of a private jet — all part of a day's work at a family office.
While few advisers face the specific challenges of family offices, the way the managers of these firms approach technology can provide useful lessons for advisers dealing with the everyday wealthy.
“When it comes to family offices, we see a pretty extensive expansion of data points beyond what a typical financial adviser needs to track; sometimes they want to see data across a multigenerational family, and sometimes they want to roll in all the [family's] businesses as well,” said Bruce Moulton, a principal with Moulton Strategic Partners Inc., a Flower Mound, Texas-based technology advisory firm for financial advisers.
One of the data points he re-cently worked on at a family office entailed reprogramming its customer relationship management system to deal with private-jet shares. The large family office that retained Mr. Moulton asked not to be identified.
But the customization that family offices demand comes at a price, noted the New York-based Institute for Private Investors, a service organization for family offices.
“Our members are wrestling with an increasingly complex range of portfolios. These require a very expensive and time-consuming level of customization in terms of technology that can be resource-intensive,” said Kristi Kuechler, senior managing director of the institute.
The customized systems used by family offices compile data from multiple sources and interpret them in a more sophisticated manner to better serve the needs of extended family members who create and inherit wealth, and manage complex business interests.
Mr. Moulton said that even seemingly simple needs at family offices may require a custom solution.
One client firm, for example, wanted its own type of letter of authorization, which allows the family office to act on behalf of the client when moving money from one account to another. Since some families have dozens of investment and banking accounts, creating and managing the rather simple document was not very simple.
The solution Mr. Moulton devised used the firm's XLR8 CRM system, which is an adviser-oriented version of Salesforce.com's offering. His firm is a reseller of San Francisco-based Salesforce.com's product.
“Controlling the creation of these letters in the CRM system minimizes the chance for errors, but it also documents the existence of the [letter of authorization] for others in the firm so they don't have to go rifling through a document management system or filing cabinet to find the signed copy,” Mr. Moulton said.
At Harvest Capital Advisors Inc. of Bellevue, Wash., a multifamily office where client net worth typically is in the $5 million to $25 million range, managing principal Chuck Royer said technology initiatives are “a constant work in progress.”
Recently, the firm further customized its Junxure CRM system, from CRM Software Inc. of Palm Beach Gardens, Fla., and its Access databases, from Microsoft Corp. of Redmond, Wash., rather than invest in new systems. To save time and plan for the future, Harvest also installed ScanSoft PaperPort Professional, a document management software package from Nuance Communications Inc. of Burlington, Mass., making all scanned files accessible through the CRM system.
“Building up the systems has taken us a lot of time, work and money,” Mr. Royer said, adding that the firm's professionals and clients are happy with the results.
Harvest Capital's technology expenses add up to more than $40,000 annually, of which $4,000 goes for its website; $5,000 for consulting fees related to infrastructure maintenance, including server upkeep; $5,500 for software licenses; and $27,000 for contract labor related to technology customization, such as programming its Microsoft Access databases.
One area that is receiving special attention of late is security, according to the company's operations manager.
“We have several four- and five-generation client families for whom security and maintaining confidentiality is a very big issue, even within the family,” said Sarah Royer, who heads an operations and compliance team that includes eight full-time, two part-time and one contract employee.
E-mail Davis D. Janowski at [email protected].
