Many applications used within the family office do not have a comprehensive approach toward data import. Custom modules must often be built to import data and reconcile positions, but this is not always a straightforward process. Subtle differences in the source data you may receive from investment managers or custodians, for example, make a fully automated process difficult to develop. Each source has its own unique way to represent and process data, which must be converted to your system's protocols. In addition, complicated situations such as corporate actions and the processing of reversals make development a difficult undertaking. Multiply these issues by the number of data sources and it is easy to see why the implementation of an aggregation platform can be an expensive and time-consuming activity.
What other issues can I expect? The best data aggregation platform should strive to maintain data that is complete, up to date and consistent. In reality, however, it's almost impossible to completely attain these goals.
Part of the problem is that not all sources provide timely reporting. Hedge fund holdings, for example, are always reported with significant delays. A family office with a high allocation to alternative investments must make compromises between preparing timely reports and using "stale" data.
What Solutions Are Available?
Vendors and service providers recognize the importance of data aggregation and are providing workable solutions. If data aggregation is, as it should be, critical to your service mission, the following solutions might apply.
Financial Institutions
Global financial institutions serving the ultra-high-net-worth market, such as Northern Trust and U.S. Trust, provide sophisticated technology for their clients. They each provide ways in which portfolio data from outside sources can be aggregated with assets where they are the primary custodian and/or manager. Northern Trust, for example, provides an aggregation solution where holdings from external parties are combined with Northern data and presented through its Wealth Passport interface. U.S. Trust provides similar aggregation through its PIMS system.
If you use your provider's systems as your primary accounting and portfolio application, such solutions provide a natural way to aggregate data. They provide significant and integrated functionality without your family office having to invest in a second portfolio accounting application.
Family Office Platforms
While most family offices use the software provided by their custodians and/or primary investment managers, many prefer to implement their own integrated accounting/portfolio management system. Systems such as Archway's ATWeb and SunGard's Investran are designed to accept the widest range of asset classes and can often be customized to meet an organization's unique requirements. Family offices that purchase these solutions expect that they can aggregate all assets. While these vendors do not have data imports built for all custodians and money managers, they are very willing to work with providers to develop custom interfaces.
It should be noted, however, that building and executing custom interfaces are not trivial exercises. Understanding the nuances of a provider's system (how do they record reversals?) and deciding how your in-house system will validate data (will your system process corporate actions and verify results received from the provider?) are but two of the issues that must be resolved. Also, since your office may use multiple providers, developing and managing a suite of interfaces could be expensive.
An example of another asset aggregation solution is Access Custodial Data (ACD) by Advent. Several hundred custodians, using interfaces developed in conformance with specific standards, provide data to an Advent system, where it can be imported by users' applications (AXYS, APX or Geneva).
Advent's ACD interface is used not only by family offices but also by organizations such as Reliance Trust, a mid-sized private trust company. Reliance provides account aggregation services as part of its operations outsourcing solution for wealth managers. Reliance leverages Advent ACD as well as proprietary programs to aggregate portfolios and perform daily reconciliations.
Asset Aggregation Platforms
Several vendors provide solutions where asset aggregation is one of the key selling points. Private Client Resources (PCR) and Wealthtouch are two companies that provide an integrated aggregation service and a portfolio management/reporting system. As service organizations, both Wealthtouch and PCR take full responsibility for aggregating and reconciling data using automated and manual tools, as necessary. Information is presented to users through sophisticated Web-based applications.