Moderator:
Simon Minder, M76 Family Office Consulting
Panelists:
Milko Benc, Orca & Benc Consulting
Tomas Hurcik, Orca
Martin Stadler, Altoo
Henrik Wolff-Pettersen, PandaConnect
Introduction:
Dr. Peter Lorange, Chairman, Lorange Network
Question 1: You have been in this industry for many years. What has changed the most in recent years in the industry? And what are the different requirements from family offices today?
A key issue has to do with moving away from Excel, or other basic performance solutions. Excel typically being the first software used by many single-family offices. As time evolves many such users shall require more customized reporting, and they may end up with software applications that can do almost anything, with many options.
It seems particularly important here for single family offices to take control over its own data decisions and investments, so as to optimize its processes and its own agenda, to ensure growth opportunities and to save costs. A particularly key issue for many is to take control over its own investment decisions, rather than to rely on banks for this. You would need good software, and not too complicated.
One might see this evolutionary process as one of professionalization at the single-family office firm, running it as a business, not just a family affair. In this connection, it is worthwhile to notice that the dynamics of the entrepreneur(s) in the single-family office typically leads to more proliferation of business activities: types of businesses, geographies, different tax and regulatory regimes, etc.
It is also important to observe that while initially many software tools were primarily used by the manager(s) in the single-family office business, now family members cum owners are increasingly becoming users also. Issues such as relatively simple access, transparency and availability of underlying documents become key! The next generation is increasingly becoming the important driver! Software usage is no longer about numbers, but information and documents, coming from multiple sources.
The family office is changing, more international, more diversified, more mobile, more time-sensitive, more demanding. What has become increasingly critical here is the visible mindshift towards owning, controlling data and saving costs in an ever more complex environment. Software solutions on offer today can bring family offices more professionalization as they themselves become more professional, more entrepreneurial. These solutions can be growth and diversification enablers, and include trust, transparency and teambuilding (inside and outside the family).
Question 2: How should a SFO start a selection process for a software solution or platform?
A critical first step when it comes to this is to attempt to clearly delineate who you are and what can you expect to be! This then makes it easier to assess whether to pursue an in-house software solution or to outsource.
Secondly, one must ask what are the family office needs? Needs such as administrative support, reporting or/and wealth overview can be met both ways. And so can trading/performance monitoring issues entailing liquid versus illiquid outcomes. The key is whether I would need a relatively high degree of control or not. In the former case, an in-house solution might be chosen. In the latter, outsourcing might be it, which typically also means that one might benefit from scale, i.e., lower costs. So, do I have the need to do all of this in-house (developed internally)? Do I de facto need a service (or software)? Do I have the necessary complexity for these software solutions?
Also, ask about the software. Will the solution be a service to my company or “just” software? What is my goal for the software?
Question 3: What is given higher weight by SFOs in the selection process: functionality or usability?
Keys to functionality (features) is to assess a) the time it takes to implement a particular approach, b) the degree of trust one might be able to put on this, as well as c) the ease of servicing.
Keys to functionality might entail “who is the user”? When you need to involve more-and-more people, then time having to be spent on a given system becomes key. Usability is an issue here, and getting everyone access. And a usability element such as “how to get in/out” is key. Ultimate goal: to spend the least amount of time in it. It should be kept in mind that the chosen software approach is a means to an end, and not an end it itself! Functions have to be useable.
Additionally, there must be a consideration for trust in the system chosen and in the data! And as usability involves inclusivity, with more interfaces (both online and offline) in the family office involved, bringing up another important point in the selection process: security.
There seems to be a new trend or movement in software towards so-called ‘no code software’. This provides a plethora of options and can be rather overwhelming. Most family businesses are not in need of this.
Efficient decision making is paramount, and to assess this one shall have to be clear regarding who is the client! There must be a lot of functionality addressing such efficient decision-making, but it must be usable indeed, and not merely a lot of complexity. Security issues must also be addressed.
Question 4: What are currently the most requested features?
To be able to get a clear picture of one’s liquidity seems particularly critical. Reporting ability is also important. “Press one button and get it all!”.
While some users (“superusers”; typically the professional manager(s) of the single-family office) might require more complex dashboards (entities, assets, CRM, HR, accounting, direct and indirect relationships), others (owners) might require simpler dashboards, perhaps with a primary focus on liquidity.
Connectivity too is crucial today. In general, it seems to be key to be able to put together several software solutions so as to achieve the type/degree of functionality one would need. This calls for good interface capabilities among software types. The trend today is away from stand-alone systems, unless they are in-house, towards connectivity and collaboration with other systems, data-in and data-out (see point 5 re. application programming interfaces).
Question 5: How important are interfaces (banks, other sources) in the selection process?
Interaction with banks (APIs) comes down to whether one might need a daily update or not, as well as how to allow banks to connect. Regulatory issues are paramount here. Liquidity management is key, as is the quantity of interfaces.
Question 6: How much time must a SFO invest in a system change? I.e., from the decision to make a change and the go-live?
Another way of stating this is to ask: “how much time is needed to select and implement a software approach?”. This, in the end, depends on each particular family’s needs. It seems important not to be overly specific, but to go for standard contents as much as possible. Overall, several months may often be required (paperwork like power of attorney, bank documents, data consolidation, data migration, system configuration, user training, compliance, accounting, password integration and management, document management system, contract negotiation), again dependent on the family itself as well, complexity as its current stage of digitalization. To visit software providers’ home pages, as well as asking other single-family offices regarding their experiences is also critical.
Another step might be to link up with one’s banks. The banking sector tends to be rather regulated in many countries, especially when it comes to banks’ (in)ability to provide liquidity to family offices when needed. To keep relationships with several banks “for a rainy day” thus seems a priority, as does keeping things going with numerous banks.
Question 7: Do you see a trend towards SaaS (software as a service) models today?
SaaS adds value. There seems to be a trend towards this, but the privacy issue must be kept in mind as the data can be accessed from everywhere and others may have limited access. Privacy is the biggest asset of a family. Collaboration is pushing SaaS.
Which devices will be used to access the data? Keep this in mind.
Question 8: What are the expectations from families?
Software providers should be honest, forth-right about their capabilities. Families will not get upset if a software solution cannot “do it all”. Although software for family offices is not just about reporting, not all solutions will match the family office needs. A provider may need to suggest other solutions, alternatives or complementary tools to their clients.
There is a need to manage expectations from the beginning, including during the on-boarding profess. One provider offers a three-week unpaid trial to guide the family office smoothly through the features and functionalities to clearly see whether the software values apply to them. The test process helps determine what the tools can do. Deciding about the software is often a long-term decision. Defining needs, identifying the “must-haves” and “nice-to-haves”, and number of users can help.
Question 9: Three key elements to make implementation a success?
1. Preparation is a necessity. Update all data, get it into the system. Know your structure.
2. Listen to your service provider—they know a great deal.
3. Start modest. Get value from day one.
And remember companies are different. Good advice: drop old habits.
Question 10: What needs to be implemented first?
This depends on what needs to be done in-house and out-of-house. Security is essential!
Need to understand what you have.
Then you need a reporting system. There may be new needs (reporting, CRM, Bloomberg, IT, document management, legal entities management systems), depending on the level of depth you want.
Question 11: Are the somethings that family offices overlook?
Reporting. Idea of what is happening.
Topics overlooked are the “necessary evils”, like taxes, NextGens taking over wealth or wealth hand-overs, moves across borders, marriages, that create big waves. These cause discomfort and can be expensive. Software providers can fix these quickly.
Question 12: What are the questions customers never ask but should?
Ask the provider contact to speak to existing clients. Also advisable is to speak both to those who used other solutions before, as well as those the provider may have lost. Look at the past situation.
What is the value of the software? This will help determine the value of the software, what it can do to the business and its growth, and how much the software can cost.
Are there hidden costs? Has all been revealed? Will there be extras coming up?
Does my decision-making get better with or without the software?
Extra Questions:
Anecdotal evidence that strategic decision-making has been done?
Flexibility, transparency, accuracy in the software will hopefully provide trust, transparency, and an occasion for better decision-making.
During succession, older generations were used to daily information. Now they are losing control, calling NextGens for information, those who are now managing the firm. And now they are letting the people helping to also have daily access. Parents have difficulty giving away control. Software can help.
Where is the cut-off range for Excel to software?
Size, complexity, legacy planning varies in the family firms. Creating a corporate memory, keeping track and control on a daily basis will only come with implementing a software. In addition, Excel spreadsheets have to be maintained manually. This is not only time consuming, but also a big source for erroneous data entry. Therefore, the use of a dedicated software can pay off very quickly.
How to deal with governance instruments and agreements?
Structure charts, assets, family members, etc. are part of the software service. These are quick and easy to do. Legal entities can be included in the service, as well as documents, wills, holdings, etc. Governance may be a core raison-d’être in the provider firm. If it is just for communication, there are other software solutions just focusing on the communications part.
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