Family office software: ‘Time is right for Canadian families to get onboard now’
Canadians have been slow to adopt, but that’s okay because platforms have recently made big strides
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Last month, Canadian Family Offices examined the data-management challenges that wealthy families face as they contend with growing families, expanding portfolios and diversifying assets.
This month, we’re looking at the growing market for software tailored to address those challenges. These systems — such as Copia Wealth Solutions, Addepar, Masttro and others — aim to provide comprehensive pictures of a family’s entire financial universe. They combine asset management, investment reporting, accounting, auditing and other capabilities in one platform. (They usually also include the ability to manage and track non-financial data relevant to ultra-high-net-worth families — an artwork collection, for example.)
For many family offices, these platforms come not a moment too soon.
“Right now, honestly, probably the biggest competitor to all these providers is Microsoft Excel,” says Jennifer Tennant, a Vancouver-based family office professional. “But if you’re going to be spending a few hours a day tracking the administration of your estate with spreadsheets, that’s two hours a day that you don’t have to do things that are more worthwhile and generate value.”
Canadian family offices have been slower to adopt these kinds of platforms than their international counterparts, but that may not be an altogether bad thing, says Bobby Stover, family office leader for the Americas at EY, based in Dallas.
“Canada is probably five or 10 years behind on technology adoption,” he says. “But if you’re a first mover in technology, you can make much more costly mistakes, and invest in under-developed tech. Artificial intelligence, for example, has become much better in the past two years. Now a lot of the bugs have been worked out, and the time is right for Canadian families to get onboard now.”
Still, these platforms are far from interchangeable. In fact, several of them — such as Copia Wealth Studios, or Eton Solutions’ popular AtlasFive — originated within family offices themselves and were developed to address the needs of specific families. This makes them powerful solutions but not necessarily adaptable to every family’s circumstances.
Finding the right fit means parsing a growing and competitive field – and an expensive one. The platforms’ robust functionality, top-flight cybersecurity and wealth-planning tools don’t come cheap. The annual cost for most platforms ranges from tens of thousands to hundreds of thousands of dollars, depending on the functionality needed.
One big limitation: customization
Tennant helps families navigate this landscape.
Every family has different needs, and each platform has strengths and weaknesses in addressing them, says Tennant. “One of the big limitations is in customizing. With Masttro, for example, you can change the structure of an organization chart, and in Addepar you can customize reporting pretty substantially … but generally how the platforms use data, and how the data works and is displayed, is fairly restricted.”
Wealthica is a newer, Canadian-built entrant (the company is based in Montreal). It has more customizability and functionality thanks to a variety of third-party apps that can be plugged into it. Family members can also customize its interface to their preferences. (At about $12,000 annually for a single-family office, Wealthica is also substantially less expensive than its competitors.)
However, according to Stuart Guidry, platform consultant at Eton Solutions, few families need a truly bespoke solution.
“The family office industry prides itself on this idea of ‘If you’ve seen one family office, you’ve seen one family office,’” he says. “And this is true as far as it goes; every family wants to consume information differently. But that does not mean that every family office should have a different process around how they pay an invoice, or record the general ledger entry for a dividend on a public equity. There are well-established best practices for that.”
A more significant issue for Canadian families will be choosing a platform that understands Canadian taxation and related legal and business frameworks.
Eton Solutions was an early mover into the Canadian market, says EY’s Stover, and has better tax-related functionality in Canada. According to Tennant, Addepar is also attempting to “Canadianize.”
Are you a guinea pig?
Ultimately, says Stover, selecting the right system is not about choosing a perfect fit but the closest fit for your family’s needs. First assess what you have, he says, then assess what you still need.
“If you’re in Canada, and you have family members and investments in four jurisdictions, multicurrency capability is going to be a factor for you,” Stover says. “If you’re investing through a U.S wire house in U.S stocks, they’re going to track the basis in your stocks differently than you need them for Canadian reporting purposes.
“So can your vendor solve for that, or are you the guinea pig? These are important questions to ask.”
Also consider that when migrating data to a platform, the family office side will face a modest administrative burden to input data and keep the platform up to date. That’s especially the case when first implementing a solution and migrating a family’s financial life — everything from investment data to prenuptial agreements — onto a platform.
Still, the platforms are designed so that the heavy administrative lifting is substantially automated, or occurs on the vendor side.
“Our expectation is that clients are going to be involved in providing us the information we need and validating it after we’ve loaded it,” says Guidry. “But our whole implementation philosophy is to have people on our side, CPAs and other employees, dedicated full-time to the project, to make this as easy for clients as possible.”
Younger generations will want this
As more of these platforms turn toward the Canadian market, that kind of client-focused attention on Canadian families is likely to heat up, especially as younger generations begin to demand more sophisticated software solutions.
“The younger generations want this,” says Stover. “I think there’s a sea change coming where the leaders of family offices will become younger, they’ll demand seamless technology, more capability, real-time reporting, effective use of machine learning and automation.
“I’d say the jury’s out right now on who the winner will be in this, but families are going to be the ones who benefit.”
More from Canadian Family Offices:
- Survey says: How to support clients (or not) when they want alt investments
- Wealth report: Alberta is home to early-stage wealth, opportunities for family offices
- Six more Canadian family-office leaders and the books that inspired them
- Five things that can go wrong at the family office
- Paul Desmarais III: ‘Get training outside of your family business’