Your job as the CFO of a family office is to help the family preserve and grow their wealth, manage financial affairs, and oversee investments and estate planning. You’re also the chief communicator to multigenerational family members about finances, which means navigating complex dynamics and differing goals.
Right there, you’ve got more than enough on your plate. Now consider: on any given day, how much time are you also spending in the weeds, helping staff with banking reconciliations, tax compliance, payroll, bookkeeping and more? Being bogged down with these routine issues steals away valuable time from high-level planning, strategic decisions and driving long-term growth.
Modern automation tools such as artificial intelligence (AI) and robotic process automation (RPA) offer game-changing productivity, efficiency and speed. They’re reshaping family offices by automating complex processes, reducing errors, consolidating operations and boosting decision-making. Here’s a look at how they can free you from redundant tasks, streamline intergenerational wealth transfer and management and enhance your investment decisions.
RPA is “rules-based” software that uses predefined conditions to automate repetitive tasks. AI is a more sophisticated technology that uses data to learn and make decisions. These accessible modern tools can shave off hours, days or even weeks from repetitive, mundane tasks and transform your family office in several key areas:
Task automation. RPA can bring efficiency, accuracy and speed to many back-office functions. Take, for instance, accounts payable. Depending on the size of your family office, your AP staff could be managing reconciliation for several hundred bank accounts. Manually, this process can take weeks. RPA can do the same function in minutes, allowing you and your team to review only the items that require more thought or insight.
When it comes to bookkeeping, RPA can enter invoices, facilitate payments, reconcile to banks feeds, and reduce manual data entry. This saves time and minimizes errors.
Compliance and risk management. As you know, compliance documents can consist of superdense legalese. If you have thousands of pages of investment advisor regulations to review, it could take an employee months to read everything. A bot, on the other hand, can read it all in minutes to make sure you're compliant or let you know what to do to become compliant.
To help with risk management, AI tools can analyze large volumes of data to identify potential risks, offer predictive insights and improve the accuracy of financial reporting, all while minimizing human error.
Trust administration. Again, these documents are written in legalese. AI can quickly read a trust and keep you abreast of the specific requirements and obligations. It can help with beneficiary communications by sending out automated updates, so family members are aware of the key provisions of the trust. And, you can use AI to analyze data for assessing investment performance, identifying trends and generating reports that can help the trustees and the investment advisor enhance their decision-making.
To help with risk management, AI tools can analyze large volumes of data to identify potential risks, offer predictive insights and improve the accuracy of financial reporting, all while minimizing human error.
Fraud prevention. AI can analyze huge amounts of data to identify unusual patterns and provide real-time alerts to any suspicious activity. For instance, recently there have been a rash of fraudulent capital calls from criminals posing as alternative investment firms. Some investors have been deceived into wiring money into a fraudster’s account. AI has been successful in detecting that the requested funds would be routed to a fraudulent account, allowing the investor to promptly address the situation and avoid being scammed.
AI is particularly helpful because rules-based software has a hard time detecting fraud. Hackers can work around rules. However, it’s tougher to deceive AI systems that use more nuanced and smarter algorithms — which mimic human decision-making — to combat cybercrimes.
Tax. You can use automation tools to reinvent your tax work. From a broad perspective, they can identify mistakes in past tax returns, enabling you to refile or amend those returns. On a more granular level, RPA can take over mind-numbing processes that can take weeks, if not months, such as sifting through data on income, losses, capital gains, dividends, etc. to prepare K-1 forms. A bot can read the K-1, identify, extract, aggregate and standardize the information and reconcile it efficiently — in mere minutes.
Digital asset management. Suppose your wealth owner wants to tell the family’s story to future generations with a book or video. An AI tool like Google Gemini can save you from spending hours searching through a digital asset manager to find the right videos, images, audio files or documents. Instead, it automates tasks like metadata tagging and visual recognition to enhance search or identify content based on its type (i.e., video, audio and text). It can also help with writing, visual design and language translation.
One impediment to smooth wealth transfer? Reviewing an estate plan is an activity that’s often kicked down the road because it’s all about what happens when you die. This is a subject most people don’t want to think about or discuss.
Another hurdle is that estate planning documents and reports, which illustrate wealth flows from one generation to the next, are written in legal language. Few people want to read them or pay lawyers annually to ask basic questions like, who’s the trustee of my irrevocable trust? As a result, five years can lapse between meetings. By that time, people have forgotten what the documents say.
AI and RPA tools can minimize drama and bring order to multigenerational wealth transfer in several ways.
With AI, it's easy to review estate planning documents annually with family members. Automation tools can read estate plans, build dashboards and create scenario analyses with graphical representations or charts of the money flows to explain what happens in multiple scenarios.
AI can take complex legal agreements and put them into a common-sense, graphical display that walks the family through everything, so they can understand what's going on without having to read legalese. This can be transformational because it explains how the estate plan works year in and year out and can refresh people’s memories of the details.
For example, family members can review an estate plan annually to see how the money flows to the kids if someone dies. Or, if a spouse dies, see how the money goes to the marital trust. Annual updating gives a much better connection between the wealth owner and what happens after their death, what planning has been done and any changes that need to happen.
Another major benefit of an AI tool? It’s not emotional and will read commentary about managing and transferring wealth without any personal response. It can act as an agent for unbiased, concise communication. Family members won’t have to chase each other for information. Instead, they’ll have a clear way to know how to allocate and manage their wealth and time, which can help lessen or prevent family clashes.
In the not-so-distant future, you can also expect to see chat bots that let family members ask a question and get an answer immediately. They're not going to have to wonder who does what? How do I get this? Where am I at today?
To future-proof and build wealth, family offices can use automation tools to help create a centralized system that integrates all financial information and resources into a single data model that can be accessed in real time.
AI allows you to use predictive analytics and data analysis for more informed decision-making. Automation tools can also uncover hidden opportunities by highlighting emerging trends and undervalued assets. You can identify niche investment opportunities not found through traditional means by analyzing data from multiple sources, while engaging in proactive risk management.
For example, you can run a scenario analysis on a potential investment using AI. Before, you likely would have had a junior analyst come in to build models, which could take even the savviest staffer days. AI, however, can do the job in minutes and give you a quick answer about whether to go after a certain investment. Because you have more bandwidth, you can then look broader at more investments.
Family offices that fail to adapt to these new tools and processes may miss out on competitive advantages, accumulate inefficiencies and incur higher costs over time. But, convincing your team that AI will complement their work, not replace them, can be a challenge.
We’ve seen similar scenarios before. When Microsoft Excel was released in the 1980s, accountants and others in financial areas thought they were going to lose their jobs. Instead, we learned how to work differently and more efficiently.
AI and RPA are just another wave of productivity that is changing how we work. When a digital worker can handle some of the more routine, repetitive processes, humans can focus on analytical and creative thinking.
It’s also not practical to have employees root through minutia and explain it at hundreds of dollars per hour. There is a limit to what a professional can get involved in and still make it cost-effective for the wealth owner.
With automation tools, however, that boundary no longer exists. AI and RPA can do this work cost effectively and improve outcomes, enabling you to do more than you ever thought possible.
Do you appreciate the benefits of AI and RPA but wonder how you can integrate these tools into your family office? Get practical answers to clear your path. Find out how our family office experts can help you deploy the right automation solutions to reinvent your multigenerational wealth management and administrative tasks.
Maximize your day with industry-leading support. Reach out to our team to explore how we can help you streamline your family office and build wealth.
