Single and multifamily offices often struggle when they try to integrate comprehensive financial information for their clients, but new products are making the job easier.

Recent developments in technology and data aggregation give these offices the ability to consolidate information on a family’s sprawling financial interests and use it to develop a better understanding of clients’ financial situations. That leads to more meaningful data, giving advisors the ability to make more insightful decisions on behalf of the families they serve.

But getting a client’s full financial picture isn’t always easy. Some families’ financial landscape is so vast and diverse that it can be seemingly impossible to assemble a complete, reliable snapshot and keep it up to date.

This article, however, will explore how technology can be used to make such situations manageable.

The Data Deluge
Like just about everyone today, family offices suffer from information overload. There is plenty of data available—sometimes too much. But quantity does not equal quality. Much of the time, the data is neither integrated nor available when decisions need to be made. Accounts at various brokerage houses can languish for years—even decades.

The need for accessible and complete information is especially critical during times when families need to bring order to their financial house, such as when a business is being sold or just after a death in the family.

Without the ability to see every investment and every financial concern—including current values and performance history—families run the risk of acting against their best interests. They may unknowingly create the wrong asset allocation or risk profile—taking too much risk or not enough for their financial situation. Liquidity, when not attended, can vanish or muffle investment returns.

Unfortunately, the data-gathering work needed to make the most knowledgeable decisions is often seen by advisors and clients as the “plumbing” of the investment management business—messy, overly complex and time-consuming, and not something most firms want to deal with. Yet this is exactly where wealth managers should focus and where they can provide the greatest value.

For a long time, family offices got by with cobbled-together solutions—perhaps a smattering of performance reporting software, some portfolio optimization platforms and back-office functions. More often, record keeping has consisted of little more than an Excel spreadsheet.

The demands of today’s high-net-worth clients, however, require that family offices use innovative technology solutions to bring order to the chaos.

Consultants and advisors to wealthy families can invest heavily in purchasing the necessary hardware and software, but that entails its own risks.

Technology changes so quickly that it is difficult to stay current. Moreover, the cost of an in-house solution can be prohibitive, requiring the hiring of computer savvy staff to input and reconcile data and continuously monitor and update software.

Family offices get more scale and efficiency from employing an outsourced solution—a technology provider that can focus on providing a continuously updated product that serves family offices’ needs with the best practices available. Third-party service providers can gather and compile data, generate customizable reports and train staff.

Cloud-based data aggregation technology, meanwhile, allows advisors to give wealthy family clients the ability to aggregate their financial information from all of their various investment accounts, including their alternative investments and partnerships, into a single view. Families can view this information in one portal to see their entire portfolio on a daily basis and share it with the financial professionals they rely on to help them manage their wealth.

A cloud-based platform solution allows daily net asset values and account reconciliation to be received with minimal staff effort. Since not all investment managers and custodians report performance the same way, the solution provider needs to take time to normalize the data, showing a coherent portfolio view.

Family offices that do not have the in-house expertise to manage aggregation software can outsource this work and begin to have more complete information at their fingertips, empowering them to make better financial decisions. Additionally, hiring an outsourcer with the scale and capital to continually invest in new technology and intelligent resources is key.

Case Study
The Beringer Group is a privately held, independent advisory firm with offices in Radnor, Pa., and Mount Laurel, N.J., that works with wealthy families. At a meeting with a husband and wife several years ago, the principals asked the couple how they kept track of their various investments. They pointed to a three-foot-high stack of unopened statements.

The couple joked that they argued constantly about whose turn it was to open the statements. In the end, neither did and the stack grew. Every few months, they shredded the unopened statements to make way for additional papers. It was easy for the Beringer principals to understand why the couple was avoiding the paperwork. In total, the family had more than 100 relationships with financial institutions. They were faced with the task of organizing bank statements, investment statements, partnership papers, charitable transactions and other accounts. They had no way of getting a snapshot of the components of their net worth. Nor did their investment managers or estate-planning attorney.

“It was so overwhelming that it became easier to ignore it,” says Chris Beringer, president of the Beringer Group.

By utilizing a robust data aggregation platform, the Beringer Group helped the family bring all this information under one roof, in real time, in a format that was easily accessible to all members of the family and to the financial professionals who worked with them.

What they discovered was at times shocking. The family, now worth more than $1 billion, owned a sizable amount of stock that had seen its heyday in the 1980s, a large number of open-ended mutual funds and a fund that had closed years before and whose proceeds were locked up.

The couple had never been given this kind of total portfolio view before, and it enabled them to make thoughtful, holistic asset allocation decisions. Beringer used the information to create a diversified asset allocation, liquidate duplicate positions and engage the best asset managers in their strategies.

The family’s accountants and attorneys were able to use the platform as well and were given access to input their own data pertaining to the family’s financial picture.

“[The family’s] money needed to be accounted for, and it hadn’t been until we started using this data aggregation system,” Beringer says.

Family offices and advisors often have difficulty integrating reporting on both liquid and illiquid investments because technology solutions are not core to their business and it’s difficult to stay current with the latest technology.

Finding the right partner to solve this dilemma can change a family’s decision-making dynamic and empower advisors to develop wiser, more cohesive strategies for managing family wealth. This is the new paradigm of wealth management—integrated, thoughtful and informed, thanks to new technology. Showing families’ timely data—reconciled and normalized—delivered in a way they can use and then share with the many professionals they work with, can free families from information overload and give them control over their future.  

James Lumberg is co-founder and executive vice president of Envestnet Inc., a provider of unified wealth management technology and services to investment advisors.

Pamela Fennell Jacobs is the principal of PFJ Consulting LLC and serves as a consultant to Envestnet. She has worked with single family and multifamily offices for over two decades.