Managing the financial affairs of a family office and high-net-worth individuals can be challenging. To start, family office finance and accounting functions are tasked with the heightened responsibility of operating and reporting on complex ownership structures and physically disbursed assets in a way that meets the needs of multiple stakeholders, including family members and third-party service providers.
Accordingly, the rolling of the calendar year represents not only a new year, but also a new cycle of aggregating and analyzing substantial amounts of data for the family’s back office. As these entities plan ahead, family offices should reflect on the prior year and whether their accounting and finance function is providing a high level of value, and whether it strategically aligns with the family’s goals and objectives.
Revisiting Your Year
A careful assessment of the people, processes, and technology utilized by the back office may help family offices identify challenges and set goals and objectives for the new year. It may help organizations to consider the following when reflecting on their year and accounting functions:
- People. A thoughtful approach to the attraction, development, and retention of back-office resources will help strengthen the value provided by the accounting and finance function. Family offices may ask themselves the following questions regarding their teams:
- Does the organization utilize the most appropriate staffing model?
- Are there alternative arrangements that would better meet family needs?
- Are roles clearly defined and is there an effective separation of duties in place?
- Does the team possess the necessary operations, technology, and regulatory expertise required for family office activities?
- Is there a process in place to gauge employee and service provider performance?
- Is there a documented succession plan in place and system of effective knowledge transfer?
- Does the organization utilize the most appropriate staffing model?
- Process. Effectively designed processes help streamline back-office operations, which may reduce the administrative burden of family members and third-party service providers. Consider the following for family office processes:
- Have workflows been seamlessly structured and is there an appropriate level of internal control?
- Are there any repetitive tasks and is automation being fully leveraged?
- Is there an effective system of document management where records are stored and easily retrieved?
- Have processes and procedures been fully documented in a manual and shared with stakeholders?
- Is there an effective communication strategy and are the results of operations communicated to family members in a meaningful way?
- Technology. The right family office technology stack can help simplify the complexity associated with family office operations and produce meaningful data that is automatically distributed to stakeholders on a timely basis. When thinking about technology, family offices may ask the following:
- If there are multiple applications in the technology stack, do they seamlessly align and integrate?
- Have new and developing technologies been carefully considered?
- Is there an information security policy in place and have the applications in the technology stack gone through a cybersecurity risk assessment?
- Does the core accounting system aggregate data from multiple sources and automatically consolidate on an on-demand basis?
- Can reporting be customized and tailored to present information in nontraditional ways and track multiple asset bases?
- Can access to financial information be restricted by user?
- Are systems producing the necessary output without the need for manual manipulation?
- If there are multiple applications in the technology stack, do they seamlessly align and integrate?
The landscape of the family office finance and accounting function is continuously evolving and requires periodic evaluation to help improve efficiencies and value. A careful, annual assessment of people, processes, and technology may help family offices identify current challenges and prospective opportunities. This proactive work also may help to potentially enhance the value of the information and services the offices provide to family members.
How Forvis Mazars Can Help
Our team at Forvis Mazars offers an integrated suite of services with the primary purpose of accounting for and managing a family’s wealth and assisting with the effective transfer of that wealth to future generations. Our family office professionals help with several accounting, tax, and wealth management services to help you plan for the future. For more information, please reach out to a professional at Forvis Mazars.