Why Every Family Office Needs an Operations Expert

Many family offices have the wealth of a small institution, but they lack the operational controls and resources that an institution is required to have. Hiring experts in investment operations is a step in the right direction.

Family offices are complex entities that require a range of experts and specialists in a variety of areas:

Family governance, succession planning, trusts, taxes, accounting, charitable giving, investment management, among others…

But one area that gets overlooked is operations.

Why Operations is Overlooked

Family offices do not face the regulatory pressures that demand operational oversight in the way a wealth or asset management firm is subject to.

Without those requirements, they will chart their own course, for better or worse.

Maybe a family member handles operational work, but how effective are they? Do they even like the work? Or simply their time is better used in other areas.

Even if a non-family member does the work, the function itself may not have been a priority from the start.

Also, unlike investments and managing business cashflows, operations itself does not generate revenue.

The result is a piecemeal, haphazard, and reactionary approach to family office operations.

But Operations Is Still the Backbone

Operations is truly the foundation of any investment management firm, including family offices.

And that is because operations has a hand in so many crucial functions:

Reporting, data, technology, cybersecurity, workflow management, coordination between different departments…

An operational expert (or team of experts) would manage these processes effectively, which is  exactly why family offices need such talent.

5 Reasons Why Family Offices Need Operations Experts

1. Establish Greater Organizational Efficiency

Because operations is intertwined with so many facets of a family office, a true expert and leader will look at these activities and find better ways to get things done:

  • How long does it takes to produce X report(s) and deliverables?
  • How accurate is the data?
  • Is technology being fully used to drive greater efficiencies?
  • How much money is spent on technology, processes, and staffing?

These are just some of the questions a family office operational expert would ask themselves, of which to find answers and develop solutions.

2. Have a Modernized Approach to Operations

In that quest for greater efficiency and a modernized approach, the operations expert will have a long-term outlook and place digitization of the family office as a top priority:

  • Manual, routine, and mundane tasks will have to be automated or done via machine learning (AI).
  • Paper-based processes and data will be digitized and stored in a central repository, rather than allow for information to be siloed and scattered.
  • The younger generation, who will one day lead the family office, are accustomed to working and managing everything from their mobile devices and tablets. They will expect a modern setup in place.

3. Implement Better Data Processes

With an eye for efficiency and modernization, operations experts will focus their attention on data.

And the key is improving the data quality by improving the workflows around that data.

  • Manual data entry and reporting  be automated, or at least streamlined down to the least amount of human input.
  • Software and systems should be fully integrated, allowing for seamless flows of data; add and update across all systems
  • Establish quality control checks to ensure data accuracy.

Quality data leads to better reporting, analysis, and decision-making.

Families will have a more holistic view of their finances, assets/ownership, investments, taxes, accounting, and everything else related to family governance.

It takes a real specialist in operations to take data to that next level.

4. Focus on Cybersecurity

An operations expert not only understands the value of family office data, but also the importance of security around that data.

And the threats are real.

According to a study from Boston Private, “over a quarter (26%) of family offices have suffered a cyberattack. In almost two-thirds of these cases, it happened within the last 12 months.”

Kevin Hulbert, a senior adviser at global law firm Dentons, pointed out why they’re at risk:

“Family offices sometimes fall through the cracks of being big enough to be specifically targeted, but not having in place the strong risk management measures typical of bigger organizations, hence leaving them very vulnerable.”

Family office operational experts will place great emphasis on security to prevent these attacks from occurring.

This will require assessing the entire IT infrastructure, then putting in place all security measures.

5. Cut Costs

According to Citibank, a family office’s expenses often amount to approximately 1%-2% of total active assets annually. Using $100 million in assets as an example, that’s between $1 million and $2 million of yearly expenses.

An operations leader and expert will be mindful of costs, as the above solutions should be within budget.

That is why families must optimize inefficient, time-consuming workflows.

They should get more work done — better and faster — in less time and with less money.

An operations expert should also identify and eliminate wasteful spending on software and systems, as well as figure out the most efficient ways to use human capital.

If a highly skilled portfolio manager is spending hours manually inputting data, that is clearly a poor use of their time and family resources. Instead that work can be either automated or done by a third party at a lower cost.

Learn more about how family offices cut costs.

Operations Experts for Family Offices Come in Various Forms

It can be a seasoned industry veteran  COO, or someone who specializes in a specific workflow.

Families can hire full-time or part-time staff to carry out these functions, and they can partner with third-party family office operations services providers like Empaxis.

At Empaxis, we provide operations support for single- and multi-family offices by streamlining their middle- and back-office and accounting functions, as well as automating and digitizing their data processes.

Through this approach, family offices work far more efficiently and at a lower cost than doing the work in house.

Get the Experts for Your Organization

While operations may have been overlooked (until now), there are clearly benefits to having such experts, as mentioned above.

The organizational, technical, communication, and leadership skills they possess will help family offices run a leaner, fully optimized and modernized operation.

Focusing on digitization and data-centric approaches with a long-term outlook, operations experts will deliver benefits to the family office to be enjoyed for years to come.

Chat with an Expert

Get the latest in financial technology support, AI and digital transformation and investment operations outsourcing

Our monthly newsletter features helpful resources, articles, and best practices to implement within technology providers and investment firms