The panelists noted that technology can certainly deliver obvious benefits in the increasingly complex family office environment. But there are, as always, also challenges. Needless to say family offices are valued for, and are expected to provide, a high-touch and very personalized level of service. But high-tech solutions, which indeed often offer scalability and consistency, can at times be perceived as constricting, or provide “cookie cutter answers” when complex and highly customized solutions and answers are needed, it was said.

Martinez, who chaired panel, kicked off the discussion by asking Zeuner of WE Family Offices to share his views on how family offices can strike the right balance between “high-tech” and “high-touch.”

“The way to think about the issue of customization versus scale is that the role of an advisor or family office professional is to enable decision-making, to empower the family and help them make informed decisions, and feel confident and in control,” said Zeuner.

Some of the information required to make those decisions can “be very empowered by technology” while other elements cannot because it requires a “combination of the facts and the implications,” he said. “The facts is where technology has a role to play.”

For example, many family offices are spending too much time gathering data rather than focusing on what it means, he added. “I don’t believe technology is going to displace the advisor, but I do believe there is a lot of scalability and a lot of support the advisor can get from using technology appropriately.”

The cloud

Moving on to the inevitable topic of “the cloud,” Pratt of Market Street offered her thoughts on how family offices can approach making important decisions related to the migration of certain functions.
The first element to identify, she said, is simply user and business requirements, followed by an analysis of the vendor landscape, and then vendor due diligence. There isn't a uniform formula when it comes to shopping for a vendor as “a lot of it has to do with culture and risk tolerance,” she said.

Another component is cost, as having an application on-site means you need people to support it, but then there are also costs associated with moving to the cloud. “An on-premises installation tends to be a capital expenditure whereas the cloud tends to be more of an operational expense,” she noted.

Other considerations include: cybersecurity, vendor risk management; responsibility and liability; updates and patching policies; privacy and data residency and ownership; regulatory requirements; exit strategy; and business continuity and disaster recovery. Devlin of Pitcairn said her firm also spends time reviewing the financials of the vendor etc., to, among other things, “make sure they’re going to be around for a few years.”

Cybersecurity

Cybersecurity was a recurring theme throughout the Summit, and on this note Zeuner pointed to the SEC's recently-issued guidance, which he said firms can use as a framework for both themselves and vendors in terms of ascertaining and measuring best practices.

The guidance is centered around six core areas: governance and risk assessment; access to rights and controls; data loss prevention; vendor management; training; and incidence response. Within each of these, the authority has laid out the types of questions it could ask, which Zeuner believes is a great benchmark for family offices to work against. Indeed while not each and every family office is registered, “we see them adopt the same types of best practices and framework,” Martinez noted.

Pratt also emphasized that cybersecurity should not be a “check-box activity,” and that senior members of the firm right down to the bottom need to be involved to continually oversee vendors and processes. Auditors always want to look at vendor files, she noted, and, as highlighted by Martinez, all of the aforementioned applies across the board when dealing with third-party providers.

Touching on a slightly subtler element, Devlin reinforced how crucial it is to make sure you “know the people in your space.” Most will hold the door open for a UPS delivery, for example, but how do you know they are who they say they are? “Be careful who you let into your space – don't forget about internal threats,” she said, adding that Pitcairn has laptop and portable device encryption - including USB devices. Also of note, no one person within the organization is able to access both a client's social security and bank account number – two key pieces of personal financial information.

Data aggregation

The topic of data aggregation was also covered, with Martinez asking Devlin if she feels that technology in this regard has reached peak maturity in the space. “It is continuing to improve,” she said, “but it is still not quite there – it's still not completely automated.”

Martinez then asked Zeuner if he thinks it may be the case that while aggregation tools reduce the need to re-key data, they don't necessarily always eliminate the need for someone to analyze it for accuracy, completeness and even relevance for the particular question a client is asking or issue they need resolved.

“Data aggregation can help up to a point,” Zeuner said. “Family offices are looking at many other angles besides investment assets.” He gave the example of how family offices don't just reconcile data but “we’re doing quality control on top of that” to ensure transactions are priced at the right level. “Doing the real value-added function like quality control I think still requires a fair amount of manual input,” he said.