SFOs are not fully utilising digital tools

The digital transformation also enables single family offices to modernise and professionalise their processes and services. However, many SFOs are not fully utilising the potential of digital tools. According to PwC experts Lisa Cornwell and Niels Govers, this requires not only the involvement of the offices themselves but also of the family and stakeholders.

More and more affluent individuals and wealthy families are establishing single family offices (SFOs) to support them with various services. These offices often rely on internally developed digital systems that usually meet the needs of the family and stakeholders. However, to fully benefit from digital systems, it is essential that these systems are fully integrated with each other.

Currently, many SFOs experience incomplete and slow information provision and a lack of insight due to overlapping or missing information. Therefore, implementing digital solutions should be a top priority for many SFOs, providing centralised consolidated views and real-time asset overviews. Fully embracing digital transformation helps SFOs make better investment decisions, manage risks, and optimise their strategies.

Potential of digital applications

SFOs can, for example, use a digital solution to develop complex models that take into account various variables and scenarios. There are numerous datasets that family offices receive or need to provide, whether it is to manage capital requests for investments or to handle tax and reporting requirements. By having access to this data, the SFO can better anticipate potential risks and take proactive measures to identify and manage these risks. This can contribute to the long-term optimization and continuity of family wealth.

Furthermore, the use of suitable digital solutions can increase the efficiency of SFOs. Routine tasks such as administration, KYC processes, document processing, and market data analysis can be automated. This automation saves valuable time and resources for SFOs. SFO employees can then focus on more strategic tasks and add value to the management of family wealth and meeting the broader needs of the family.

To truly succeed, the family office, the family, and stakeholders must not only be willing to adapt but also ensure that the data used is accurate, rigorously reviewed, and aligned with each other to ensure that the results are relevant and reliable.

Implementation of new technology

However, the first challenge for the SFO is to determine which of the numerous solutions in the market (internally built, stand-alone software vendor, managed end-to-end service, global bank reporting solution, or a combination thereof) is most suitable. To successfully implement a new technology such as artificial intelligence (AI), it is important for SFOs to first analyse the desires and strategic objectives of the family and align them with the current situation and future plans for managing family wealth. Based on this, SFOs can select the right technology.

When implementing technology, it is crucial for SFOs to consider privacy and security, often the primary concern for the family. In a time when cybercriminals are increasingly attempting to access sensitive financial and personal information, strong cybersecurity is of great importance. This concern even prevents some SFOs from fully embracing the potential of digital solutions and instead heavily relying on local (non-internet-based) solutions or even paperwork.

In the current era, risk management and security, both in the physical and digital domains, must be high on the priority list. Therefore, SFOs cannot avoid taking the appropriate security measures to ensure the confidentiality and integrity of data. This must then be followed by individual family members. The implementation of strong cybersecurity measures is essential to protect against potential threats and maintain the trust of the family and stakeholders. Ensuring the confidentiality and integrity of data must then be followed by individual family members. Establishing and adhering to the proper governance around these topics is crucial.

Digital transformation necessary for future generations

In summary, digital technology has the potential to significantly enhance the way SFOs manage and control family wealth, enabling them to successfully pass on family capital to future generations. By leveraging technology-based tools, wealth managers can improve their investment decisions, better manage risks, and optimise their strategic operations.

In addition, embracing digital solutions and achieving digital transformation is necessary to keep the next generations sufficiently engaged in family wealth.