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Modern family office holdings are complex. They span different asset classes — liquid as well as illiquid — and tend be spread across different custodians and accounts within custodians. Particularly in the case of illiquid investments, since there is no specific market source, their valuation and performance tracking can be flexible. Complicated transactions such as cost adjustments, gifting, asset transfers, tax loss harvesting techniques and more make the manual aggregation of complete wealth information a tedious, time-intensive, and error-prone process. Hence, streamlining Family Office data aggregation through automation is a necessity.
However, modern family office technologies bring in a slew of efficiencies which make asset consolidation effortless, clearing time for the principals and their advisors to focus more on decision-making. Automated data aggregation is one such game-changing feature that works wonders when applied in an integrated accounting and performance reporting platform.
Automation tools do not just record investment transactions on the family office asset management platform. Integrated general ledger and reporting and software such as Asset Vantage (AV) also seamlessly and simultaneously map the relevant debits and credits from the general ledger and cash flow accounts with performance reports for a single source of truth. This allows for a consolidated and configurable view across different family entities to give a complete picture of the family’s finances. Furthermore, in addition to meeting core statutory requirements, the reports can also be hyper-customized to meet each Family Office’s unique view of wealth. Mapped against the latest market information, the insights that such platforms generate can transform the way a family grows and sustains its wealth.
The Automation Advantage
Automation streamlines the data aggregation process and provides several benefits:
Real-time investment information: Platforms like Asset Vantage automatically pull end-of-day investment data from electronic custodian feeds and public market databases. This way, with the latest asset information always on hand, family offices can make better decisions.
Increased Efficiency and Productivity: Family office software can process large volumes of transactions, holdings, cash balances and tax lots to accurately capture asset costs, market values, and gains and losses from custodian feeds. Only complex transactions need to be overridden and edited manually. It would be almost impossible to do this entirely manually in traditional retail and business accounting solutions.
Improved Data Accuracy and Consistency: Automated reconciliation with custodian holdings allows for minimization of human errors.
Cost Savings: Automation directly results in considerable cost savings and allows teams to invest more time in investment performance, taxation, cash flow, and strategic analysis.
Also Read: Artificial Intelligence: Redefining Investment Analysis in the Age of Big Data
Implementing Automation in Your Family Office
There are numerous tools available for a family office to automate its processes, such as data integration and robotic process automation, as well as artificial intelligence and cloud-based solutions. Family offices ought to ensure their selected tool offers the following functionalities:
Data Identification and Mapping: An integrated accounting and performance reporting platform like AV that helps identify the various financial and investment data sources and map them to the relevant general ledger and investment accounts during setup or new account creation.
Workflow Design and Optimization: Systems such as AV which assist in outlining efficient processes to collect and post data and generate the necessary reports according to the mapped data flow.
Ongoing Monitoring and Maintenance: A software made specifically for family offices, including AV, which continuously monitors data integrity using data reconciliation checks and balances.
Best Practices for Successful Automation
To ensure automation remains successful after implementation and continues to produce the desired results, family offices must follow best practices:
Data Governance: Establish strong data governance policies to maintain data quality and integrity.
Security and Privacy Considerations: Implement robust security measures to protect sensitive data.
Change Management and User Adoption: Prepare your team for the transition to automation through training and support.
Scalability and Flexibility: Choose automation solutions that can scale with your family office’s growth and adapt to changing needs.
By leveraging automation, family offices can streamline their data aggregation processes, leading to increased efficiency, accuracy, and cost savings. Selecting the right tools and following best practices will ensure a successful transition to automated data aggregation, empowering family offices to make better, data-driven decisions.
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