High net worth investors often have a love-hate relationship with information technology. Investors can easily appreciate the tremendous benefits they gain from utilizing technology to gather, organize and analyze financial information. However, poor planning can result in frustration for a family office if its systems do not support successful wealth management.
Investors can best achieve an effective technology strategy by following these steps:
- Understand trends that reflect the technology available to family offices.
- Assess their office’s needs and develop a framework for determining technology priorities.
- Use the knowledge gained from the first two steps to evaluate solutions and products.
Advances in technology are made visible in trends. Such trends can last a few years or for several decades. Often the trends covered in the media are the ones with the shortest life span and do not necessarily have the biggest impact on investors. On the other hand, trends that are seldom mentioned in the media can last very long and have a tremendous impact. For example, three current trends that everyone is familiar with would be social media, cloud computing and mobile devices. Other, less obvious but still powerful, technology trends include the electronic availability of investment data, maturing of the software industry for buy-side investors, outsourcing and investor education.
Due to the hype of the media and basic human nature, there is a tendency to think the best solution lies in pursuing the latest trend. This approach leads to poor strategic thinking. To counter this tendency, the next step is critical.
Assessing Office Needs
Finding the part of your technology platform that is most in need of improvement is far more important than finding the newest technology. The goal is to identify that area of improvement where the greatest impact can be made. This assessment is best done by having every member of the office evaluate its technology infrastructure (computers, network, security and backup of data, etc.) as well as the functional areas where technology can be applied (financial reporting, investment tracking, portfolio re-balancing, etc.). In every instance, each user should assign a separate score for:
- How important the area is to the operations of the office.
- How well the area is being addressed by the current systems.
Implementing the Strategy
The steps above will produce a list of the most important needs of the office. Using this list, combined with an understanding of major technology trends, a complete Needs Analysis and Opportunity List can be created. Once these documents are well-defined, the family office will be ready to evaluate specific products and service providers with confidence.