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Navigating the Future: Emerging Trends and the Impact of AI on Family Offices

Published

May 8, 2024

In the world of wealth management, family offices serve as the guardians of generational wealth, traditionally delivering personalized financial services to ultrahigh net worth individuals. The landscape of finance and investment is evolving, driven by technological advancements, most notably Artificial Intelligence (AI). In this blog, Rob Mallernee, Founder and CEO of Eton Solutions, offers some insights into the trends he is seeing across the industry. Eton Solutions AtlasFive software incorporates AI to help family offices optimize efficiency and stay ahead of the competition.

Note that this article is based on an interview with Rob Mallernee and has been edited for length and clarity.

Emerging Trends in the Family Office

Running a family office is a complex business, requiring a variety of different skill sets and processes. In the past, the family office relied on a lot of manual intervention and was slowly adopting technology to replace manual processes. Two factors then came into play, COVID forced people to realize that a system that is integrated and efficient at managing a highly complex environment with typically a very small number of people was needed, and a new generation of people entered the family office workforce with higher expectations of what was possible through process reengineering. Running a paper-based family office is a thing of the past.

A Shifting Dynamic

Family offices have had to align themselves to the realities of our post-COVID world. More family office employees are working remotely, requiring enhanced cybersecurity, and family offices want and need to get to “best practice” service for their clients, as well as for the good of their employees.  

Generational shifts in employees mean that highly skilled employees are not interested in antiquated processes – they want to be interacting with clients, and to be challenged in their work. Mallernee offered this perspective, “Family offices are all about the people in the family office, and today, while there's a competition to find the best investments, there's also an ongoing competition to find the best employees to serve your clients. The caliber of your staff is dependent on your operating environment to a great degree, with employees wanting to use data technology where they can, so they can spend more time adding value in client facing activities.”

Generational shifts in family office clients mean that there is a growing number of people who want their financial information at their fingertips. Mallernee stated, “The days of providing a quarterly report to the family forty-five days after the end of the quarter, are numbered because the forty-five- to fifty-year-old clients want more access. The twenty-five-year-old generation, expects to be able to see their data every day. People talk, and if I learned that a family office was offering reporting in near-real time, I would be asking myself, why can't I have that as well?” The bottom line is that clients expect technology that's seamless and easy to use and provides them information instantaneously.

The Evolving Role of AI in the Family Office

“We've done a huge amount of work in AI, and to my knowledge, Eton Solutions is the only family office wealth management system that's part of the Microsoft OpenAI partnership. There are a lot of manual processes in family offices today that require ten people, and in the future with AI, will only require one person,” said Mallernee.

Much of the manual processes like processing invoices, bringing in documents, having those documents tagged, index, sorted, bringing in manager statements, updating the value of the assets based on those manager statements, and reconciling your bank accounts, any predictable, repeatable processes, will be processed automatically using AI. Somebody will watch over the AI, so if the AI runs into a problem, the person will provide oversight rather than doing the work. Mallernee said, “Competitors will use AI, and that advantage will be hard to beat. For communicating with clients, instead of spending hours organizing documents, you will create a simple prompt for EtonGPT, a version of GPT that we've created specifically for the family office. Using a tax return as an example, the prompt will automatically create a report with selectable parameters that are automatically summarized and put on a schedule for you, added to the database, and made available to the client.”

From a family office management perspective, AI lets you look across all your clients and see trends about taxes, investments, incomes, and outcomes from a macro perspective. Few do this today because it's just too much manual intervention. AI makes everybody way more effective, so that manual, mundane, tasks that we would like to automate will be totally transformed in the next few years. According to Rob Mallernee, the key question is, “Are you positioned to take advantage of these technologies?”

Conclusion

The landscape of family offices is rapidly changing, driven by technology. Emerging trends indicate that technology will be needed to enable the family office to attract and retain valued employees and to address the demands of clients with high service expectations. By using AI as a competitive advantage,  the family office of the (near) future will be well positioned to adapt to changing market conditions and deliver a superior level of service to its clients.

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