Best Practices

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The Constant Challenge of Improvement

There is no standing still; family offices need to constantly improve or you are moving backward. The problem is getting better requires change. Change in technology, change in practices, change in people, and change is hard.

For many family offices, the “this is the way we have always done it” mindset can be a barrier to change. This approach has downstream ramifications affecting the progress needed to meet the evolving needs of the family and business environment. While there is always resistance to change, there are external dynamics that are forcing the family offices to act. Compliance, risk, cyber-security, and the need to do more with less are all factors for change.

RSM's recent survey highlights this evolving mindset. RSM surveyed 100 family offices in the US and Canada to find out how family offices were coping with the challenge of operational excellence in the context of staffing, technology, cybersecurity, and succession planning. According to Tony Wood, Global Family Office leader for RSM US LLP, family offices have to look at making the best use of people, processes, technology, and data. 

Strategic Importance of Outsourcing

The survey found that an increasing number of family offices see outsourcing as a strategy to provide better services and in some cases save on operating expenses through outsourcing both staffing and technology. Family offices are required to provide a wide range of services with a relatively small staff. As such, offices need to figure out which functions they should provide in-house and which they should seek to outsource. Control, expertise, and value all come into play when trying to determine this mix. Outsourcing can also help elevate challenges in regard to the difficulty in attracting and retaining qualified candidates in specific functional areas.

IT services ranked as the most often outsourced services by 81% of the respondents of the survey. Outsourcing IT services is a great example of where family offices can tap into best-in-class technology and best practices. It allows the family office to stay current while freeing up in-house staff to focus on more client-facing activities. 

Most frequent functions outsourced by single family offices:

  • IT services - 82%
  • Bill pay - 64%
  • Tax services - 55%
  • Legal services - 49%
  • Financial accounting - 43%
  • HR - 33%
  • Risk management - 29%
  • Investment accounting - 28%

What was most surprising from this survey is how low the percentage was for the outsourcing of investment accounting (28%). Although it requires a narrow and specific skill set, there are several high-quality options (including from Risclarity) available in the marketplace. Outsourcing of back office functions such as this can free up resources for more client-facing tasks. 

On the other end of the spectrum was bill pay (64%). While there is certainly risk to the family offices in providing this type of service (without the right infrastructure and controls in place) it is an area of high value to family members. By incorporating bill services, family offices can provide better data, better reporting, and potentially reduce the risk of fraud to the family.

Technology and Cybersecurity

Technology is the key to providing family offices with the data and information they need to serve their clients effectively and efficiently. Technology enables offices to streamline their workflows, allowing staff to focus on more strategic decision-making and client-facing activities.

The survey found that a large number of well-established family offices still rely on legacy systems and that only 3% of single family offices have what they consider to be leading-edge technology in operation, leaving a lot of room for improvement. 

Biggest family office concerns related to technology:

  • Cybersecurity - 71%
  • Cost of technology - 56%
  • Security of cloud-based data - 36%

A family’s high profile can make their family office a prime target for a cyberattack. Beyond significant public information available on family members, family offices have access to accounts and are privy to detailed financial information and sensitive personal information of the clients they serve. Coupled with a family office’s lack of a strong IT infrastructure, data governance, and risk management policies that would be expected from a public company, family offices are vulnerable to the threat of compromise.

The survey indicated that mitigation of cyber threats principally involved backup servers for redundancy, strict data security policies for risk mitigation, and business continuity plans to move forward after an attack or breach.

Finding the Edge

Family offices are facing numerous challenges posed by staffing, technology, cybersecurity, and meeting the expectations of the next gen. Family offices can better meet these challenges by recognizing the strategic importance of operations. Operational excellence should be the goal of every family office. Improving the quality of your back office operations takes into account the most efficient use of resources to improve performance, protect the family, and meet the demands of a new generation. Recognition is the first step in this ongoing journey.


RSM 2024 Family Office Survey


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