Bill pay can be a real value-add to family office clients, but it is frequently beset by technological weaknesses. Read on for an expert view on getting this important service right.

Mark Wickersham, VP Strategy, Marketing and Business Development at AgilLink, explains how family offices can take a more systematized approach to client bill payment and how to avoid traps firms commonly fall into. This piece forms part of this publication's new report "Technology Traps Wealth Managers Must Avoid 2022," published in partnership with EY, which is available for complimentary download now.

Until recently, bill payment and client accounting services were often overlooked. Family wealth firms have traditionally provided this service for a few key clients because they asked – rather than as a key component of a more holistic offering – and have relied on a mix of retail-based products and spreadsheets, leaving this as the weakest link in their technology stack. 

Yet bill payment can add tremendous value to your clients and your firm. In AgilLink’s annual bill payment survey, the number one reason for offering it is to add stickiness to a client relationship. Bill payment services are the super glue of client retention, but they can present certain risks if not set up correctly. 

AgilLink (formerly Datafaction) has been servicing business managers, family offices and RIAs that offer bill payment and client accounting to HNWIs for over 40 years, and has a deep understanding of the common mistakes family offices make when offering bill payment services to a broader segment of their client base. “How you set up the service for one or two clients is not going to scale when you try to offer it to a dozen or more clients,” notes Wickersham. “You are just not going to have the controls and transparency you need to efficiently and securely manage the service.”

“When firms fail to get it right, they then end up having to solve the problem with people rather than technology,” he continued. “Our technology isn’t revolutionarily different. What makes us different is that we have a deep understanding of the problems our clients are trying to solve.”

Start right    
A scalable and secure bill payment process starts with setting up a separate operating account so that family offices are not paying bills out of clients’ online banking account. Sharing client credentials is “a big no-no for a firm,” Wickersham says: “If there are issues clients can start to point the finger at you. There is no audit trail and it can be difficult to verify where the problem came from or how that account was exposed.”

A second common mistake firms make is not ensuring proper separations of duties; the person entering the bills should not be approving them. An institutional-grade workflow is foundational to a scalable service, where a bookkeeper may need approval from one or more partners and/or clients for certain invoices. Having an integrated, rules-based workflow ensures that funds are not released until the transaction is properly approved.

Detecting anomalies and potential problems quickly is key, but the foundation of this – timely bank reconciliation – is often overlooked due to the bill payment platform not being fully integrated with accounting systems. Falling behind on bank reconciliation is a sign that you do not have a scalable and secure bill payment platform.

See tech as a strategic asset        
Broadly, the struggle many MFOs face when trying to grow beyond a certain size is a lack of integrated technology that efficiently supports the business. A human capital-intensive approach is not scalable or profitable. To unlock their true growth potential, Wickersham believes firms need to accelerate investment, look at technology as a strategic asset rather than a cost center and embrace scalable cloud-based solutions that integrate with each other to create a best-of-breed technology stack. “I think being in the cloud is table stakes nowadays, and not just the software being in the cloud but having an API-based ecosystem and a mobile app too,” said Wickersham.

MFOs must also provide an Amazon or Apple standard digital customer experience, giving their clients 24/7 on-demand access to their data on the device of their choice. Client feedback confirms that “having a mobile app is a big deal,” as is controlling their participation level.

“Some clients want to always be involved in bill approval, but others only for certain situations and transactions – maybe they are building a home and they want to review all those invoices, or perhaps they just want to review bills over a certain dollar amount,” Wickersham observed. “And if they are going to be involved it needs to be on their device of choice, which more often than not is their phone.”

Care needed with auto debit and credit cards      
Another trap is relying too heavily on automated debit. Although it may be an appropriate payment method for certain important recurring expenses, such as paying mortgages or quarterly life insurance premiums, auto-debit differs from bill payment as you are giving permission for a company to take money from an account rather than giving permission for the bank to make a payment.  

In Wickersham’s view, relying on auto-debit for a majority of expenses is a sign that you do not have the proper technology and controls in place. Moreover, the lack of transparency and review can leave firms more vulnerable to fraud. 

AgilLink encourages firms to apply many of these best practices to the processing of credits cards. Due to the volume of credit card transactions, many firms may not have the same level of control and may not reconcile credit cards as they would bank accounts. This elevates the risk of not detecting fraudulent transactions as well as the potential for internal fraud.

The sweet spot of automation and control     
According to Wickersham, there is a scalable sweet spot which maximizes both automation and control, but that depends on an industry-specific approach: “Without fully integrated technology, which is made for the purpose, adding more controls ultimately slows down the process. Having the core component in place, but not integrating it, will create gaps and manual processes – and ultimately increase risk.”

Integration starts with turning an invoice into a digitized format so it can traverse the whole bill payment lifecycle seamlessly – through an approval workflow, to an integrated banking/treasury management system and then to multi-entity general ledger in one unified system.

The ideal for family wealth firms is a solution which delivers true separation of duties, transparency, fraud risk mitigation, labor-saving efficiencies and full audit trail for both client management and compliance purposes. 

“Even at the end of the process, when the accounting system is updated, if a client questions, ‘Why were my expenses so high?’ or ‘Why did I spend $20,000 with this vendor?’ they need to see with one click the back up and the actual digital invoice,” Wickersham said. “Or, if an auditor comes in and says, ‘Why did you pay this bill?’ you need to be able to pull up the document to see who entered it, who approved it and all the timestamps, and make sure that it matches the client agreement.”

Finally, Wickersham warned that family offices also need to be really sure of what they are signing up for where technology is concerned, particularly with cloud or SaaS solutions. “Since your vendor is providing a service in addition to the technology, you must first ensure good cultural fit and remember to evaluate them as a long-term service provider as well as a technology provider,” he said.

But perhaps most important of all is to seek a provider which sees through a family wealth lens, as “generalist” solutions rarely make the grade. “We have developed our bill payment and accounting solution in collaboration with our family office and business management clients for the past forty years,” Wickersham concluded. “That level of engagement and input with the industry is key.”

About AgilLink     
AgilLink provides secure bill pay and client accounting solutions to family offices, business managers and sport management firms. Our specialized solution incorporates document management, approval workflow, investment data integration and online banking with City National Bank allowing clients to scale while adding control and transparency. 

AgilLink is an RBC company and is an affiliate of City National Bank Member FDIC.

To learn more visit www.agillink.com or contact us at Sales@agillink.com