Understanding the difference between “customization” and “configuration” is essential when selecting an asset management solution. “Customized” software is hard-coded, and requires vendors to create additional coding to create unique functionality. This new code can prove to be incompatible with future updates, forcing you to adapt to the update by undergoing a time-consuming, costly process to “re-customize” the newly-broken original customizations to ensure that the intended functionality of new feature sets is available, or eliminate new functionality thereby removing the beneficial upgrades to maintain the usability of your original customizations. “Configuration” means the software’s architecture is completely open, enabling firms to grow alongside a platform that is developed in a way that eliminates errors inherent with customization and provides you regular control of the presentation and manipulation of your data.
The technological benefits of configurability are especially applicable to multi-family offices, which face workflow challenges unique from other alternative investment firms. These challenges were highlighted at the 2014 Family Wealth Report Summit, during the event’s “Developments in Family Offices – Structure, Achievements and Governance” panel. Featuring a diverse group partners and chief executives from the most respected family offices in the wealth management industry, the panel’s emphasis on the fluid and loosely defined nature of multi-family offices underscored the need for configurable software attuned to industry-specific operations.
One of the points immediately made by this panel is that multi-family offices encompass a number of structures, institutions, conventions and customs – there is no family office “market,” and unlike other alternative investment verticals, there is no universal benchmark or success metric. Each client-family in a multi-family office has different investment goals, and successfully addressing these goals requires asset management software with the ability to seamlessly integrate multiple data sources to efficiently track and analyzie performance for the families’ portfolios.
The panel also noted that multi-family offices typically have limited visibility, and obtain market presence through thought leadership and compelling engagement with clients. Continuity and retention is critical to a multi-family office’s ongoing viability, and different approaches to engagement may be required. The panel at the Family Wealth Report Summit drew clear distinctions between different generations. First-generation “wealth creators” have different approaches and attitudes toward wealth management than “inheritors” who have experienced multiple generations of wealth. According the speakers at the Summit, no multi-family office can dominate across all of these distinct demographic and psychographic audiences, and largely focus on specializing on serving one particular client base. These family offices cannot rely on a generic “customizable” platform in an industry that emphasizes deep and unique specializations. CRM platforms for these firms must be able to “speak” in a manner that is relevant to the desired audience, by constructing comprehensive investor profiles and compiling attractive market insight.
Rebecca Meyer, Pitcairn’s Managing Director of Client Strategy, followed up on these points by stating that typically, costs for multi-family offices are accelerating faster than growth. This cost inflation is partially due to increased regulation, and the work required for maintaining compliance. These costs, from both a financial and task management standpoint, can be eased with a configurable and intuitive front office solution. Software that can be adapted to a firm’s terminology and workflow and incorporate other leading office tools improves collaboration for compliance tasks, and enables fund managers to allocate attention to higher priority activities.
Chris Zander, from Evercore Wealth Management, identified the key reasons that clients select and continue their relationship with his firm. Evercore values fast response time and providing detailed and compelling reporting, and has established a lengthy history of strong investment performance. Response times improve with a configurable front office platform, by creating unique dashboards, reporting templates and investor records that instantly address challenges posed by clients. Industry-specific platforms also provide visually dynamic reporting presentations that capture client attention and provide data analysis capabilities not found in generic solutions.
Speakers at the Family Wealth Report Summit noted that family offices are late adopters to the technology space, and see software solutions as a cost liability rather than the actual function of a revenue generator. Vertical-specific, configurable platforms enable family offices to optimize their operations, answer evolving industry challenges, provide critical context for client engagement within an intuitive user interface, while avoiding the sunk costs associated with consistently retooling hard-coded software.