Family Office Technology: In-House, Outsourced or Both?

How 3 Family Offices Are Using Different Technology Models to Operate the Archway Platform^SM

Selecting a family office software solution can be an exciting opportunity. Manual processes can be completed with the click of a button and routine workflows can be streamlined and buttoned up.

With the prospect of more automation, greater efficiency and new capabilities on the horizon, it can be easy to overlook one of the most important questions: how will you manage the technology?

[Read our blog on Building a Family Office Technology Stack to discover tips for performing a comprehensive wealthtech strategy evaluation in your family office.]

For family offices with dedicated resources that are prepared to manage the technology implementation and run the software in-house, the answer is easy.

But for family offices with staffing constraints or capacity limitations, failing to address this critical resourcing question can kneecap an entire technology investment.

Despite its importance, many family offices and financial institutions serving high-net-worth individuals aren’t even aware of which technology models are available—or which is right for their organization.

To help private wealth management firms understand how to choose the right technology model, SEI Family Office Services authored a guest blog for Family Office Exchange that defines and compares three primary family office technology models: in-house, outsourced or hybrid.

Here, we’ll provide three corresponding examples of how those technology models are actively being used by SEI’s family office clients to operate the Archway Platform.

In-House Family Office Technology

What You Need to Know:

After spending more than 18 years juggling two separate accounting systems and a troubling number of spreadsheets, a $1B+ single family office invested in the Archway Platform to better manage its accounting operations, aggregate assets and produce consolidated financial reporting for more than a dozen individual family members across the family’s 2^nd and 3^rd generations.

How is the 10-person family office staff using the Archway Platform?

Family Office Entity Consolidation: The family office uses a custom, multi-currency Chart of Accounts to perform bookkeeping for approximately 150 entities including individuals, trusts, foundations, LLCs and limited partnerships.

Brokerage and Bank Account Data Aggregation: The family office leverages automated data feeds with nearly 20 financial institutions to aggregate 250+ brokerage accounts and 100+ bank accounts.

Bill Payment and Vendor Management: Using custom check stock, the family office cuts an average of 60 checks per month across 500+ vendors.

Partnership Accounting: The Archway Platform’s sophisticated partnership accounting tools help the family office manage and report on several highly complex, multi-owner pooled investment structures.

Management and Client Reporting: Prior to beginning their implementation of the Archway Platform, the family office had a largely disjointed, inconsistent reporting process. Using the platform’s automated tools, the family office can now streamline their reporting operations to produce financial statements and gather deeper insights into the family’s financial picture including asset allocation, exposure, holdings, performance and net worth reporting.

Outsourced Family Office Services

What You Need to Know:

With a desire to minimize overhead expenses, reduce internal headcount and run a lean financial management operation, a single family office representing three households, and three generations, partners with SEI Family Office Services to administer the books and records for all of the family’s legal entities, which span 20+ individuals, trusts and partnerships, as well as a foundation.

What operations is SEI Family Office Services performing for the family office?

Portfolio Aggregation and Reconciliation: SEI’s accounting administration team consolidates and reconciles investment activity and transactions across 80 unique brokerage and custodial accounts including 125+ alternative and personal asset valuations.

Financial and Client Reporting: SEI Family Office Services prepares standard financial reports for the family office including balance sheets, income statements, cash flow forecasts and partnership-level reporting, as well as quarterly client reports which are delivered to family members online via the Archway Client Portal.

Performance Reporting: SEI Family Office Services provides quarterly NAV calculations and investment performance reporting for each individual family member.

Capital Movements: Due to the unique investment structure of the family office, SEI Family Office Services processes a significant amount of investor capital activity including commitments, calls and distributions into and out of the family’s limited partnership.

Cash and Expense Tracking: SEI Family Office Services works on behalf of the family office to facilitate cash movements to support charitable giving, as well as perform expense calculations and accruals.

Document Management: Using the Archway Platform, SEI Family Office Services stores and organizes financial documents for family office staff and family members to access and view.

Technology + Outsourcing Hybrid for Family Offices

What You Need to Know:

In the wake of unexpected staff turnover, a single family office that originally formed in the early 2010s partners with SEI Family Office Services to assist them with routine accounting administration functions for four of the family’s investment partnership entities, while their in-house staff continues to use the Archway Platform to manage 60+ additional entities.

What operations is SEI Family Office Services performing for the family office?

Complex Partnership Administration: SEI Family Office Services provides comprehensive oversight of the family’s complex investment partnerships, which are owned by underlying investor entities and contain a substantial number of side pockets.

Transaction Processing and Reconciliation: The SEI Family Office Services team processes transactions and completes portfolio- and fund-level reconciliations.

Software Management: The service team maintains and updates accounting records within the Archway Platform including adding new accounts, portfolios and securities for the investment entities.

Alternative Investment Tracking: SEI Family Office Services collects data, organizes documents and inputs alternative investment activity into the Archway Platform including calls, distributions, subscriptions, redemptions and valuations.

Monthly Financial Statements: SEI completes quarterly accounting period closes and conducts preparatory reviews ahead of producing financial statements including balance sheets, income statements, period balances, portfolio profit comparisons, open position summaries and private equity analysis.

How is the family office client using the Archway Platform?

Investor Entity Administration: The family office manages and maintains all family-level investor entities that feed into the investment partnership entities managed by SEI Family Office Services.

Cash Management: The family office’s accounting team executes all cash movements between bank accounts, including to/from family members and to/from investment entities.

Budgeting and Cash Flow Management: The family office maintains family and household budgets to manage expenses, monitor spending and measure cash flows against total assets.

Family Member Reporting: The family office staff prepares, produces and delivers quarterly reporting to family members including net worth, asset allocation history and comparison, performance against benchmarks and traditional financial statements.

At SEI Family Office Services, we understand that technology is not a one-size-fits-all endeavor and we’re prepared to help you think through important questions like:

• Which technology model is right for my family office?
• Who will be responsible for running the technology platform?
• Should I outsource some or all of my family office functions?

Schedule a call with the SEI Family Office Services team to discuss the Archway Platform’s accounting, investment data aggregation and reporting capabilities, and determine whether your family office should run the platform in-house, partner with our team of accounting and operations professionals to do the work for you or some combination of both.

DISCLAIMER: These case studies describe the attributes of a specific SEI Family Office Services client based on objective criteria, including organizational goals, product offering and asset size. Discussion of results is intended to help clients understand SEI’s customized approach and capabilities and should not be regarded as representative of the experience of other clients nor indicative of future results.