Financial Tools to Consider When Designing Your Family Office WealthTech Stack
Family offices and financial institutions utilize a wide variety of technology platforms to manage their day-to-day financial operations. Without the right system at the core, data remains fragmented and decentralized. And when data is fragmented and decentralized, family offices lose time, money and accuracy.
Since our inception, SEI Family Office Services, formerly known as Archway Technology Partners, has advocated for tightly integrated family office operations. Most obviously, we brought together accounting, investment and reporting functions within a single application – but we acknowledge that not all wealth management functions that a family office needs to perform can be done within the Archway PlatformSM.
From the start, we've offered advanced APIs (Application Programming Interface) and direct data feeds with financial institutions to ensure a seamless technology ecosystem within the family office.
As family offices evaluate SEI Family Office Services and our accounting and investment technology, they frequently ask about our system’s ability to integrate with third-party applications. Here is a list of 10 types of ancillary systems that often exist within the family office wealthtech ecosystem:
#1 - Banks / Custodians / Brokerage Firms
Because family offices hold investments and cash across a medley of custodians and banks, managing and aggregating financial information can quickly become overwhelming without a single system of record.
By piping investment activity, position information and cash transactions directly into the accounting system, family offices and financial advisors gain a detailed view of the family’s complete financial picture within a centralized hub. And since journal entries and investment details sit within the same platform, accountants and investment professionals can track, manage and report on the same set of data.
#2 - Customer Relationship Management (CRM) Systems
More and more family offices and financial institutions are leveraging CRM systems to manage the growing number of households, family members, vendors and partners that exist within their network. Using the data housed inside of fintech solutions like the Archway Platform, private wealth management firms can leverage APIs to transpose client and financial data into the CRM system. As a result, client-facing personnel can quickly see updated financial summaries, client holdings, investment gain/loss data and performance detail alongside communication threads and administrative client information.
#3 - Data Enrichment Sources
As investing becomes increasingly complex, some family offices require advanced investment analytics – like fixed income characteristics, investment contextualization and specialized financial benchmarks – to fuel their decision-making process. By integrating third-party data enrichment sources with the primary accounting and reporting platform, accounting and investment professionals are able to deliver detailed, insightful reporting to their internal staff and end-clients.
#4 - Data Warehouses
At SEI Family Office Services, we have seen large, highly-sophisticated family offices use in-house data warehouses to aggregate data across multiple systems for fully customized reporting. By feeding data from their accounting system into the data warehouse, they can analyze large, complex sets of data to create advanced reporting in a manner that is both meaningful and comprehensive.
#5 - Financial Planning Tools
Many family offices and financial advisors to high-net-worth individuals leverage financial planning software to create and compare financial models and scenarios for individual family members. By leveraging the data inside of the core accounting system, investment professionals can review aggregated, reconciled cash and investment data using advanced what-if scenarios and planning techniques. As a result, they can curate personalized planning to help their clients reach their financial goals.
#6 - Industry-specific Software
While some families liquidate their business interest and move on, other families continue to retain a stake in the operating business. For some industries – like oil and gas or real estate – this requires specialized software that can be used to manage the business and perform industry-specific functions. By allowing the business and family office software applications to talk to one another, family office staff can interact and conduct business more fluidly.
#7 - Order Management Systems (OMS)
More and more large family offices are leveraging in-house resources to serve as their own internal trading desk. As a result, these firms need the ability to feed cash activity, trade orders and position details from their OMS into their portfolio accounting platform. But what exactly does this look like?
For one SEI Family Office Services client the process loosely looks like this:
Step 1: Transactions and open positions are transmitted to the Archway Platform after markets close.
Step 2: Upon receipt of this data, the Archway Platform applies pricing to all open positions and aggregates cash activity, including dividends and interest, from several custodians.
Step 3: The data is then transmitted back to the OMS for reconciliation prior to the next day’s market open, allowing the client to assess available cash and review the pre-trade data for future trade activity.
While not applicable for all family offices, it’s helpful to know whether or not your accounting system can receive and process this data in case the future need arises.
#8 - Pricing Sources
More often than not, custodians and brokerage firms deliver security pricing via their direct data feeds. However, some family offices opt to incorporate a third-party pricing vendor to ensure uniformity and accuracy or to otherwise assess worth on hard-to-value investments. Pricing sources can also provide dividend, interest and corporate action information, which can be fed into the family office’s system of record for automated and efficient data tracking.
#9 - Tax Software
Ranging from general account and net worth balances to investment gains/losses, K-1s and 704(c) partnership allocations, integrated accounting systems allow family offices to keep a single source of accounting information. By implementing an integration between the firm’s core accounting system and their preferred tax software, accountants can quickly access the reconciled data for tax planning and preparation and reduce the amount of manual data entry and tabulation typically required to plan for and file taxes on behalf of their end-clients.
#10 - 3rd Party Data Aggregators
Family offices exist all across the world and have accounts at large and small financial institutions alike. In instances where the core accounting and investment platform doesn’t have a direct integration with a particular institution, third-party data aggregators are an excellent supplement. In cases where your vendor does not have an already established direct data feed, a data aggregator can be leveraged. Data aggregators link with thousands of additional banks, custodians and brokerage firms, allowing family offices and financial institutions to retrieve the necessary data points to ensure that the family’s complete set of financial holdings is accounted for and reported on properly.
Creating a modern family office technology ecosystem doesn’t happen overnight. That said, we recommend following these three basic tips to help smooth the process of establishing seamless technology integration:
Tip 1: Assess the broad spectrum of systems you use today. It’s important to understand your current technology ecosystem before inserting a new platform into the mix.
Tip 2: Perform due diligence when selecting a new technology platform, especially if this system serves as the hub of your technology stack. Ask about the vendor’s current system integrations as well as their willingness to build new ones – this will not only provide insight into their existing capabilities but also shed light on their approach to innovation.
Tip 3: If you plan to build out connections with other applications in-house, request a copy of the technology vendor’s API documentation and guidelines. This will help you better understand what components can be extracted from or imported into the new technology platform, and also help you understand any additional costs or resource requirements.
Want to learn more?
Find out how your family office or financial institution can leverage our accounting, investment data aggregation and reporting solution to tightly integrate your operations and start building a robust technology ecosystem.
Product Solutions Manager – SEI Family Office Services
Paul Francis is currently a member of the SEI Family Office Services team serving as the first point of contact for prospective clients interested in the firm's software and service solutions. He is responsible for conducting initial product demonstrations to professionals within financial institutions as well as collecting industry feedback and trends to further SEI’s product development and innovation. Prior to this role, Paul was a member of the Client Relations team where he was the subject matter expert on data integrations resulting in streamlined internal processes for monitoring data feeds and improved efficiency in addressing integration-related inquiries.
Paul holds a Bachelor of Science in Finance and Entrepreneurship from Ball State University. Outside of work, he enjoys spending time on the lake and traveling with his wife and their two dogs.