In 2023, family offices are focusing on doing things right rather than radically different. Forbes emphasizes the importance of professionalizing family wealth, implementing long-term compensation benchmarks, retaining talent, and decentralizing risk for success amid uncertainty. One key aspect is optimizing accounting processes and workflows, acknowledging the impact of automation on accountants. Instead of fearing job replacement, the synergy between technology and staff is highlighted. Efficient automation in family offices involves streamlining accounting, standardizing workflows, and deploying technology to enhance decision-making.

Murali Nadarajah, CIO at Eton Solutions, co-authored this article with AtlasFive AI-tool EtonGPT. EtonGPT is the first family office large language model that has been fine-tuned with family office best practices. Built on GPT-4, it operates on a secure, private instance for each client.

In 2023, the landscape of family offices is undergoing transformative shifts, shaped by evolving demands and technological advancements, as thoroughly analyzed in Simple’s Family Office Software and Technology in 2023 report. At the forefront of these changes, four major trends stand out: technology integration, professionalization, outsourcing services, and customization, all weaved together against the backdrop of globalization.

As ultra-high-net-worth (UHNW) families navigate the intricate web of assets, investments, and complex legal structures, the task of tax preparation becomes a formidable challenge. Even when relying on external CPAs, the process remains time-consuming and error-prone. However, there is a powerful solution at hand: harnessing the right technology can revolutionize tax preparation for UHNW families.

Driven by advancements in machine learning and generative AI, this technology is making remarkable strides across virtually all sectors of white-collar professions, with family office services being a prime example. AI’s sophisticated tools do more than just streamline processes; they automate tasks and strengthen decision-making abilities.

Educating individuals about the intricacies of a family office involves understanding its fundamental role in risk management. A member of a family office once experienced a revelatory "lightbulb" moment, recognizing that the core function of a family office is to manage risks effectively. The failure to do so can indeed lead to the downfall of a family office. While both investment and operational risks demand attention, it is the latter that poses the potential for catastrophic failure.

The increasing accumulation of wealth has led to a surge in the establishment of family offices by ultra-high-net-worth individuals and families. The attraction lies in the increased control, visibility, and flexibility that these family offices offer, outperforming the services that traditional wealth management firms provide. Mordor Intelligence data shows that there were 7,300 family offices globally in 2019, marking a 38% increase over the previous two years.

In the family office world, the issue of governance is prominent. Discussions, theories, and various approaches to governance are the subject of numerous books and conference sessions. Governance ultimately provides the policies, processes, and oversight by which a family can work with its family office to maintain unity and trust in managing its wealth and business affairs.

Family offices have increasingly discovered that technology and strategy are inseparable. Technology has an inner logic that simply must be considered in strategic planning—the process of creating a concept of the business, identifying goals and objectives and the long-term approach to meet them, and formulating plans of action, can't be separated from a discussion of office technology. Technology is more than just functional nuts and bolts; it can set an office on a sustainable path for the future to empower it to work at that "higher level."

Psychologists define resilience as the process of adapting well in the face of adversity, trauma, tragedy, threats, or significant sources of risk. For family office’s, the need to adapt intensified with the pandemic and will be ongoing through a potential recession in 2023/2024.

All family offices rely on software to help run their operations. While many of these packages are routinely updated, they may no longer meet the needs of a modern office. What makes software obsolete? Gartner describes obsolete software as “an information system that may be based on outdated technologies, but is critical to day-to-day operations.”

Do family offices ever fail? Yes, they do. The reasons behind many failures involve family dynamics, in which generational and other differences create tensions and challenges. However, there is another major point of failure for family offices that is easier to correct—technology.

Along the technology journey toward automotive automation and self-driving cars, experts frequently talk about five levels of automation, ranging from no driving automation whatsoever (Level 1) to full driving automation (Level 5). Today’s family offices might think about a similar spectrum when considering where they are in harnessing the power of automation to improve the way they get from here to there.

When it comes to elevating the “customer experience” to improve client satisfaction and results, today’s family offices could learn a thing or two from Starbucks.

In business, it's all about the bottom line. There are several factors that affect that bottom line, and an effective business leader will monitor them all. One of the most important measures is what's called the operational efficiency ratio, also known as the indicator of the health of the business. The operating efficiency ratio compares the expenses to any revenue generated and obviously the goal is to have as low a ratio as possible—to be able to generate revenue in the most efficient way.

We all know that data equals knowledge. It provides a way to measure and is a basis for decision-making. In any organization, knowledge enables individuals to respond to challenges before they become full-blown crises.

Back in the old days, when the holy grail of an integrated investment ledger and general ledger was just a dream, a family office had to cobble a system together with the tools available. Many offices relied on the combination of Microsoft Excel and QuickBooks, or they looked to a wide variety of point-based functional technology products that had been sold into the family office space – after being developed for fund managers, hedge funds, private equity firms, etc. Not a great solution, but options were limited.

More than a few economists are now predicting a recession in late 2022 or in 2023. Then again, others say a downturn will be averted. Either way, most people think that a family office is well protected and would not be affected much by a recession. History says otherwise.

In today’s world, no industry is immune to cybersecurity attacks. From hospitals to logistics companies, businesses recognize the importance of proactively ensuring their data is kept secure. Alarmingly, the pandemic only increased the rate of attacks across all industries: some reports estimate cybercrime has been up 600% in the last 2 years. There are over 18 million websites infected with malware at any given time – all it takes is one employee or client visiting one of these sites to expose a family office to potential exploitation.

Building, retaining, empowering, and optimizing teams is perhaps one of the biggest challenges facing any organization. Without good people who have the knowledge and tools to excel at their jobs, businesses cannot perform.

Across multiple surveys of family office software users, cybersecurity is consistently the single most important and commonly identified item of concern. The potential breach of the family office IT system and the loss of confidential data keep many family office personnel up at night.

The idea of machines overthrowing and displacing humans has long been feared. This fear dates to at least 1872 in Samuel Butler's literary work Erewhon. Then, machines were mere metal gears, yet this fear still festered. The fear was driven by comparing the rate of the evolution of machines vs. the pace of the evolution of humans. Butler states, "What I fear is the extraordinary rapidity with which they are becoming something very different to what they are at present. No class of beings have in any time past made so rapid a movement forward."

Islands can be ideal vacation destinations. However, data islands (or data silos) cause significant problems when managing a family office. Created by using the wrong tools and work processes, data islands result in work duplication, reporting delays and errors, and families wondering about the true status of their affairs.

If your family office is still using on-premises IT infrastructure, such as in-house servers running your applications, you probably are taking significant unnecessary security and compliance risks. You're also wasting precious time and resources that could be better spent adding value for your family.

"Tailor-made" is a popular expression that suggests a great fit for a given need or situation. A great fit can be fantastic if achieving that right fit doesn't require exorbitant amounts of time, inefficient manual processes, costly custom software development, and too many resources.

Since a single family office (SFO) is solely tasked with managing the money of one single family, the Securities Exchange Commission (SEC) has historically allowed them to operate under different regulations from traditional investment advisors. The 2008 financial crash first prompted regulators to reconsider this exemption. Although no changes were made at that time, the more recent collapse of Archegos Capital Management in March 2021 spurred lawmakers to introduce bill H.R. 4620, which would change how SFOs are regulated

Charles Darwin wrote that the strongest and most intelligent members of a species are not the ones that survive. Instead, the strongest and most intelligent ones are those “most responsive to change.” His observation is worth considering as family offices enter the new year.

Bill-pay in a family office—what does it look like?  The process starts when a product or service is purchased, and the office receives a vendor invoice for payment. That invoice is recorded, validated, approved for payment, and then paid. The process is time-consuming and error-prone for many family offices, involving manual, paper-intensive workflows, multiple point systems, and spreadsheets.

Aggregating data for reporting, planning, and performance tracking is one of the most essential requirements for any family office. Its importance continues to grow. As the hub for a wide range of information critical to the family or families it serves, the family office needs to quickly and accurately aggregate, analyze, and report on data from various sources.

The direct investing process for family offices is an ever-increasing “barbell” challenge. Initially there is the process of evaluation and due diligence around the proposed investment, and then once the investment is made the perils revolve around data and maintaining the investment “reality”: IRR, ownership, reporting, etc. Investment on one side and operations on the other — this can be a big-lift for a family office.

The Simple team completed a survey of Family Office software for Forbes magazine which included Eton Solutions.