Evolving Family Office Tech: Investing In Better Decision-Making Capabilities

Peter Clancey 7 May 2024

Evolving Family Office Tech: Investing In Better Decision-Making Capabilities

The following article from Canoe Intelligence examines how much trust, for example, wealth management practitioners can have in their data, and the way that technology can help this. 

Peter Clancey, head of sales for family offices at Canoe Intelligence, explains how family offices can use technology to gain visibility, control, and most importantly trust in their data.

The family office technology landscape is still emerging and, as it continues to evolve, so are the methods family offices use to analyse and report on their data. Now, with an abundance of technology solutions available to them, the focus has shifted to finding the right providers to integrate with their tech stack. Formerly, family offices were forced into the status quo, accepting whatever solutions were available to them, even if clunky or inefficient. Now, with a wide variety of options, family offices can seek out tech providers who prioritise what's important to them, such as heightened data standards, integrations, data security, user experience, and ease of implementation. 

For example, maintaining institutional-quality data can help improve team productivity, as a high confidence level in the data means that decisions can be made quickly and confidently. A provider with high transparency and governance controls in place can pass along that high-confidence data to its clients. Tech solutions are beneficial for numerous reasons, one of which is that they limit the need for employees to sort through large and complex datasets. This process of sifting through data and documents can be time consuming, risky, and expensive – especially for those who invest in private markets or alternative investments. These tech solutions are, in short, able to produce more accurate work quicker, with a bigger ROI.  

But, with tech out there that aligns with their goals and needs, why haven't more family offices jumped on board? Looking back at the rapid evolution of family office tech solutions, Peter Clancey, head of Family Office Business at Canoe Intelligence, recounts: “Even a couple years ago, family offices weren't using much tech at all, partly because very few solutions were built for family offices. But family offices remain loyal users of them, typically because managing and administering technology has historically been tough. Even as recently as five to 10 years ago, it required a lot of manpower, and implementations were difficult to manage. At the end of the day, the juice wasn't worth the squeeze.”

Nowadays, there is a broad availability of solutions that are more purpose-built to help family offices meet their analysis and reporting objectives. However, many family offices have yet to explore them, as they may still rely on outdated and/or manual tools because they are more familiar. For those invested in alternatives, the challenge of manual processing is further compounded by a lack of standardisation in the documents and data they are processing.

“In the past, we saw many workflows being performed in Excel. Even now, a lot more than you would expect is still done in Excel,” explains Clancey. “We also still observe quite a few groups relying on a service provider model. Several years ago, the tech that family offices did have was super fragmented, so you couldn't exactly build a best-of-breed technology model. Now, applications and tech stacks can be built and integrated together seamlessly via a cloud-based infrastructure, which leads to more efficiency and ultimately better investment and family service-related outcomes.”

That said, with newly-emerging fintech solutions continuously appearing on the market, choosing the right tools can be a difficult exercise. The industry is becoming saturated with a broad range of technologies and service providers, making it difficult for family offices to find the right solution to their problems. 

“Don't focus on the shiny things,” Clancey advises family offices who are exploring potential new additions to their tech stack. “Evaluate solutions based on actual functionality that can solve relevant challenges within your family office. Question yourself: what's truly additive to our organisation? What will help us achieve our goals? It's okay to be aspirational with functionalities, but I would think about that more as something to incorporate later. Then, you can move towards your existing goals and have next-in-line goals as well. But it’s imperative to be realistic about what you can and cannot do, especially in the case of family office teams who tend to be incredibly lean.” 

Beyond evaluating tech solutions for a particular workflow challenge, Clancey believes that family offices should take a step further and vet these technology providers as companies too. Ensuring that a company focuses on building a sustainable business model and maintains a clear vision with its products is a good reassurance that clients won’t be forced to change their tech stack regularly.

“I find it illuminating to also evaluate a vendor as an actual company,” Clancey remarks. “Are they cashflow positive or what's their funding status? What does their leadership look like? Do they have leaders that know how to build a business? Do they understand and listen to the market? You want to ensure that they're building a solid business and focused on continuously developing a product that brings their clients value because family office technology – much like investment technology in general – is still a somewhat emerging and rapidly-evolving space.”

Amongst the growing availability of solutions on the market, Clancey notes that it’s very possible for family offices to find solutions that will not only save them time and effort but also solve specific demands such as data accuracy and reliability. Transparency, he mentions, is a critical factor in ensuring that family offices trust their data when making critical operational or investment decisions. Processing data using today’s technology paired with elevated levels of transparency ensures that groups can make these decisions using high-quality data. 

“To better maintain institutional-quality data, look for cloud-based technology solutions that enable application developments that bring about transparency,” says Clancey. “I often talk to groups that spend significant amounts of money completely outsourcing their document collection or data extraction workflows, but then find themselves spending unnecessary time ensuring the data is accurate. That can be resource-intensive in terms of people's time and money.” 

“At Canoe, we utilise AI-based technology enabling automation while allowing clients to maintain a significant level of transparency and control over their data. Then, when it comes time to make critical operational and investment decisions, they know that they can trust their data.,” Clancey said.

For example, Canoe’s library contains millions of meticulously parsed and labelled documents and, historically, humans completed some of that processing work. Later on, that very data became the fuel for developing Canoe’s machine-learning models. Now, because those LLMs have been trained on high-confidence data, the aim is for the model’s output to be so trustworthy that it is not necessary to route it back to human review.

“Models used by the investment team in the front office are only as good as the underlying data,” explains Clancey. “If you are making investment decisions on bad data, you're risking the potential for bad investment outcomes.”

Now that the technology has drastically improved, family offices are beginning to realise the power that these solutions can provide. Thus, when evaluating tech options, family offices should consider: Is the solution designed with family offices in mind? Can it be easily integrated with the rest of the firm’s tech stack? Does the provider’s product vision and roadmap align with the firm’s goals? With purpose-built technology and aligned objectives, family offices can cut through the noise of providers to identify the solutions best suited for their businesses. 

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