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Family Office Focus: Efficiency in Accounting and Investment Analysis - Research

Wendy Spires

ClearView Financial Media

25 March 2019

This publication’s research arm has taken a deep dive into the key technological and operational challenges specific to family offices, surveying and interviewing firms managing over $72 billion in assets to produce an invaluable benchmarking tool for the sector. 
Family offices are wasting huge chunks of the working week on manual workarounds as they struggle along with generic software for accounting and investment analysis, new research from this publication has found.

Family offices are spending a fifth of working hours on manual processes on average - rocketing to two-fifths for larger ones -  because they are trying to run high alternatives allocations and scores of legal entities through multiple non-specialist systems.

MFOs are allocating 44 per cent of assets to alternatives and SFOs 60 per cent, with the latter’s greater adventurousness underscored by an average allocation to private equity or hedge funds of 21 per cent against 17 per cent, and direct standing at 27 per cent for MFOs and 38 per cent for SFOs.

The accounting and analysis challenges surrounding alternatives are then compounded by assets being held in a plethora of structures. Almost two-thirds (65 per cent) of the SFOs included in this study are using 26 or more legal entities, with many of the larger MFOs handling many hundreds. 

No succor for specialist needs

Produced in partnership with FundCount, “Family Office Focus: Efficiency in Accounting and Investment Analysis” gave this organization an unprecedented look under the hoods of family offices through a survey of 44 firms and interviews with 20 senior executives representing over $72 billion in assets under management.

This field work revealed that two-thirds of family offices are using multiple systems for accounting and investment analysis and the majority have no specialist software in place - in spite of family offices having almost unique needs among wealth managers due to the breadth and complexity of their activities. Just 15 per cent have a specialist system for general ledger accounting, for instance.

Indeed, a surprisingly high number are relying on QuickBooks and Excel while engaged in what seems to be a highly risky, not to mention hugely inefficient, game of “systems ping pong”. 

Chief among the pain points identified by the research was investment reporting, systems deficiencies clearly having a huge impact on performance in a number of areas. Time to produce reports/reconcile data, investor satisfaction and report accuracy are the top-three KPIs used by family offices, yet 81 per cent are not using a specialised system for reporting - and this at a time when clients’ expectations for customization and timeliness continue to rise. 

Our deep-dive survey and interviews yielded a wealth of insights that make “Efficiency in Accounting and Investment Analysis” an invaluable benchmarking tool for family offices. It is also a highly illuminating, yet succinct, tour of the key technological and operational issues facing the sector today.

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