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Why Family Offices are Replacing Industry-Agnostic Software with Integrated Accounting and Investment Tools

A Compilation of Five Common Pain Points Experienced by Family Offices Using Out-of-the-Box Software Solutions

Among family offices, generic business accounting and retail investment solutions are widely known and adopted. Although not designed specifically for family offices, these brand name software packages require minimal configuration, they’re easy to use and they’re typically offered at an attractive price point – what’s not to like?

But as your family office grows to include more entities, more family members, more bills and more complex investments, you begin to experience the limitations of these generic software solutions.

Family office growth and complexity draw out the limitations in general-purpose software solutions

For accountants, it can be incredibly challenging to consolidate dozens, and in some cases hundreds, of accounting and investment activity files without error. Not to mention the number of hours you spend wrestling with Excel to provide family office staff and family members with meaningful reporting.

For investment professionals, out-of-the-box software typically means disparate, single-purpose systems. As a result, investment professionals spend endless hours exporting and importing between accounting and investment platforms, waiting on consolidations and reconciliations from the accounting staff and incomplete, and often late, reporting.

For family members, the end result is disjointed, partial reporting that isn’t representative of their complete financial picture.

Is there a better solution for family offices out there?

We’ve heard it time and time again: “Our family office has outgrown our general ledger and homegrown spreadsheet-based reporting. We need a system that’s more integrated, accurate and secure.”

At SEI Archway, we know there are better accounting and investment reporting solutions that have been purpose-built for family offices, but it always helps to understand the specific issues family offices are facing.

So we’ve asked time and time again: “What are the biggest pain points when it comes to using these generalized solutions inside of a family office?”

Here’s what we’ve heard:

The Pain: Inability to consolidate data across entities.

Family offices tend to have lots of entities ranging from individuals and trusts to partnerships, foundations and LLCs. Within some generic accounting software packages, accountants are required to keep track of unique files for each entity within the family office. The result? Individual, disparate financials that have to be manually consolidated outside of the system.

The Relief: A multi-entity general ledger accounting system.

There are a handful of software solutions – SEI Archway included – that inherently allow users to track multiple entities using a single database. This not only allows for seamless consolidation of financial information across all entities within a family office, but also encourages a consistent chart of accounts, global vendor tracking and enhanced investment insights across entities, accounts and portfolios.

The Pain: Inability to track investments fluidly.

Many accounting-specific solutions are known for just that – tracking bank account balances, managing expenses and paying bills. What they’re not known for is their ability to bring in custodial or brokerage account information, track a variety of asset types or measure investment performance.

Instead, family offices are oftentimes using a generic accounting solution as their general ledger along with a separate portfolio system to track their marketable securities, a spreadsheet to track their alternative investments and a set of precariously interlaced Excel files that are used to report to the family.

Data is translated and mutated from one system to the next as investment activity is passed through the accounting tool and dumped into .CSV files, where it makes its way into convoluted Pivot tables and rudimentary charts and graphs. The results are error-prone, inefficient and, more often than not, incomplete.

The Relief: An integrated platform that captures both accounting and investment data.

It doesn’t have to be so hard. Integrated systems specifically designed for family offices do exist, allowing accounting and investment teams to work within a single solution to manage back-to-front office functions.

This means that in addition to executing traditional accounting operations like account aggregation and reconciliation, expense tracking, bill payment and cash management, accountants can also perform sophisticated partnership accounting functions, enter capital movements, calculate investment gains and losses, manage complex allocation structures and track and forecast investment cash flows. Best of all, they can produce comprehensive, consolidated financial reporting for their day-to-day usage as well as for regular client reporting.

But accountants aren’t the only ones who benefit from integrated systems. Using the same database, investment professionals and executives are able to run investment-specific reporting across the reconciled data. With no more forgotten data imports and Excel validation errors, on-demand, accurate investment reporting can be run across custodians, managers, geographies, currencies and asset types in a matter of seconds.

          The Pain: Individual vendor tracking and management.

Since most industry-agnostic accounting systems require entities to be segregated within their databases, this means accounts payable users have to recreate their vendor list across each individual entity. With dozens of entities inside of a traditional family office, this process can become cumbersome and difficult to manage.

The Relief: A global vendor list spanning across all entities within a family office.

Purpose-built family office solutions understand the need to consolidate information – including accounts payable details – across multiple entities, especially when entities share vendors and service providers. A global vendor list allows bills to be tracked and payments to be made to the same vendor using the same vendor information, regardless of which entity is being billed.

The Pain: Everything requires a manual journal entry.

A blessing and a curse of off-the-shelf accounting software, ad hoc entries provide unlimited flexibility. Debit this account, credit that account, entry complete. But transactions that are complex in nature and span across multiple entities can make one-by-one entries tedious and prone to error.

The Relief: Pre-configured tools and screens that automatically create journal entries.

Toggling between files and balancing journal entries just isn’t efficient. Using the Archway platform as an example, our clients go through a one-time setup to customize the accounting rules behind business-specific functions like vendor payments, investment portfolio transactions and transfers and gifting of cash and securities between portfolios and entities. Once configured, the system will automatically generate the journal entries without requiring the user to memorize or reference complex accounting rules.

The Pain: Unable to produce comprehensive family office reporting for internal staff and family members.

Family offices are expected to report on more than just cash balances and expenses, but simple accounting solutions limit the amount and type of data you report on within the application. As a result, family offices are forced to work across multiple systems and leverage ancillary tools like Excel to produce any semblance of a total wealth picture for their clients.

The Relief: A single reporting database to produce financial statements, allocation, exposure, holdings and activity, performance and risk reports.

The Archway platform leverages a single database to store accounting and investment data allowing its users to produce comprehensive client report packages. What would typically require a family office to leverage multiple financial systems is achieved through a fully-integrated accounting and investment software solution.

In our experience, family offices need to answer client questions like:

    • What is my overall net worth?
    • How are my equity portfolios performing?
    • How much cash do I have available?
    • What is my allocation towards emerging markets?
    • How much committed capital is sitting in my private equity investments?
    • What is my exposure to a specific investment through levels of nesting and partnerships?

In order to provide clients with a holistic financial picture, family offices need to be able to aggregate and report on their clients’ financial information using a single system to ensure the accuracy and completeness of the data.

Ready to learn how SEI Archway's integrated accounting, investment data aggregation and reporting platform can bring more efficiency and accuracy to your family office? 

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Dennis Mangalindan
Dennis Mangalindan
Vice President, Business Development – SEI Archway

Dennis is responsible for developing strategies to help SEI Archway reach new markets, attract new leads and acquire new clients. In this role, he leads speaking engagements at industry events and manages the sales cycle. With a core focus on family offices, accounting firms and other wealth management organizations selecting a technology solution, Dennis has worked with many of the Forbes 185 families and Forbes 400 individuals for over 17 years. Prior to joining SEI Archway, Dennis served as Managing Director of Sales and Marketing at Financial Navigator, Inc. where he was responsible for the company's growth and market penetration.

Dennis holds a Bachelor of Science in Business Administration with a concentration in Marketing from San Jose State University. Outside of SEI Archway, Dennis enjoys traveling with his family, reading and scouring used record stores to grow his vinyl record collection.
Dennis Mangalindan

Dennis Mangalindan

Vice President, Business Development

SEI Archway