2023: Time for a Resilient Family Office
January 5, 2023
Resilient = Adaptive
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.
An all-encompassing view of the affairs of the family is the raison d’etre for a family office. The family office provides a wealth owner with one place to get answers about all assets and liabilities, with a dedicated team of professionals to interpret and analyze data and provide exceptional service.
The Resilience Problem in Family Offices
However, there is a resilience problem in many family offices. Family offices do not typically have an enterprise-focused strategy and an accompanying operational structure. Data gathering and data entry are usually manual work. Most family offices rely on spreadsheets and general ledger software. Even where more sophisticated technology is used, it is typically not integrated. Reconciliation and data checking is done “at the back end” when reports are created. Reporting cadence is, at best monthly, but more likely quarterly or annually (and often in static pdf or paper).
These problems exist at all levels within the office, down to areas like business continuity and disaster recovery. COVID-19 demonstrated that remote working is a challenge for family offices due to a variety of reasons, from office culture to disparate data sources and manual business processes.
Meeting the Resilience Challenge
What will be the most important areas of focus for family offices in 2023? They will be in areas that are critical to decision-making.
Among the key issues facing family offices is reporting because it is so complicated and because for many reports, an Excel spreadsheet is the data aggregator and source of the report. It is with reporting that the dimensions of complexity that a family office must deal with come into play. There are multiple information hierarchies that operate both independently but also in tandem.
These information hierarchies include:
- Asset complexity, where asset types vary widely in the efficiency of the operational processes involved in their trading, valuation, and performance measurement
- Family complexity around the branch, generational, and ownership structures; there is a progression where owning legal entities are single, multiple/grouped, and tiered/recursive
- Type of investment activity
As a result, the list of spreadsheets that are core to the ongoing operations of a family office is significant and complex.
These spreadsheets include:
- Direct equity valuation
- Alternative investments contacts, reports, and analysis
- Deal sheets
- IRR workbook and modeling
- Capital commitment workbooks
- Cash flow projection workbooks
- Marry-up pricing partnership tiers
- Cash receipts and wires activity
- Pooled cash workbooks
- Asset allocation and reporting
- Tax basis asset tracking
- Tax data estimates and adjustments
- Recording and allocating K1 data
- Notes payable: interest accruals and amortization
- Property tracking/recording
- And so on…
A family office needs to move away from this sort of approach if it is to become the modern, resilient office its family needs and the next generation will expect. So, how does a family office get as much timely data as it can, automatically turn that data into informative reports, and facilitate adaptive thinking and wisdom?
The facilitator of change is a modern, integrated technology platform that has a built-in operations model for a family office. Using this approach, an office will get the key elements it needs to be resilient during any crisis. These crucial elements include:
- Access to daily data wherever possible
- Pricing/valuations for non-marketable assets as current as possible
- Ability to normalize and standardize data no matter the source
- Stored data that uses a relational data model built for family office operations
- Ability to consolidate and aggregate data for all assets and liabilities at every entity level
- Multiple, overlapping data hierarchies
- Tools to ‘slice & dice’ data across all dimensions
- Ability to produce a daily report of true net worth
- Ability to produce a daily report on cash flows
- Interactive reporting capabilities through software like Power BI
To quote Ram Dass: “Information is just bits of data. Knowledge is putting them together. Wisdom is transcending them.” The right technology platform for your family office can manage the bits of data and put them together meaningfully so that your office staff members are free to use their wisdom to transcend them and propel your family office into the future.
The AtlasFive platform was developed by, and specifically for, a family office by a highly experienced development team building toward a clear vision of the Family Office of the Future. From the beginning, the focus has been data-first. AtlasFive is the only truly integrated platform for single and multi-family offices. It is designed to revolutionize the management, data security, and operations of family offices and facilitate the implementation of best practice business processes and workflows across multiple disciplines to help maximize the real benefits of a data-first approach.
Streamlining Tax Preparation for Ultra-High-Net-Worth Families: A Blueprint for Success
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.
Why Family Office Technology Matters: The Good, the Bad, and the Ugly
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.
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