Carl Knecht, President and Rick Higgins, CEO of Risclarity discuss common bill payment mistakes in the family wealth space and how to avoid them with AgilCast host, Mark Wickersham, VP of Strategy, Marketing, and Business Development at AgilLink. View the discussion here.
What Not to Do
We see several common bill payment mistakes in family offices. The root of these mistakes often starts from a desire to automate a process without fully understanding that relying on off-the-shelf software can lead to misuse, including embezzlement and fraud. Because of the high consequence of improper bill payment, we highly recommend avoiding consumer-friendly accounting tools. Purchasing software created with the family office and wealth management in mind is a far safer decision.
Most Common Gaps
Over time, we’ve seen a variety of DIY automation solutions employed by family offices and wealth managers. While the software details may be different, the gaps are shared. Chiefly, these solutions overlook security, scaling, and process enforcement.
Security is the number one piece in the software puzzle because wealth managers and family offices are moving lots of cash around and handling a lot of skilled payments. Security is paramount, and family offices need to build a process that is efficient for their firms. Multi-family offices are potentially paying bills for clients across 40 or 50 different banks and locations. This won’t build efficiencies. So it’s important not to separate out the client service from the bill pay portion. It’s often not a client-focused solution.
Banks do a great job of building security into their systems. Their standard operations contain fundamental components built into the system that prevent fraud. Like other financial institutions, wealth management firms need to think about internal fraud when they offer bill payment.
One common mistake that we see is when a small wealth management firm will offer a bill payment service to a handful of clients (for this example, let’s call it accidental bill payment). Their biggest client wants it, so they do it. The way they’ve set it up may be fine for one or two clients, but when they move to expand that service more broadly, it doesn't scale. And that creates vulnerability. The solution is employing a multi-entity accounting system, and too many firms avoid this.
Automatic process enforcement
We've seen some catastrophic events in the industry — like embezzlement and fraud — that occurred because there wasn't a strong separation of duties. More crucially, there wasn't an enforced workflow. There may have been a designed workflow, but not an enforced workflow.
When running bill payment on AgilLink, these catastrophes aren’t possible. But if a process is moved to QuickBooks, then an embezzler could enter the trend, enter the statement, enter the vendors, and then approve and cut the check for their own use. We’ve seen this ourselves — an embezzler can accomplish things that would not have been possible if the process were automatically enforced by the software.
Lack of enforcement is one of the biggest downsides to many off-the-shelf packages for consumers.
Integration Can Save You
Bill payment shouldn’t be an accidental service. Taking on the responsibility of bill payment demands the security of a system built to scale that has enforceable processes to prevent security breaches, fraud, and embezzlement. This requires a best-of-breed bill payment solution designed for wealth managers. Repurposing an accounting and bill payment tool designed for normal bill payment into a secure scalable tool for family offices leaves the door open for headaches — or far worse.