New tech in the family office: Blockchain, AI and younger generations all making impact

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Family offices tend to be viewed as traditional and conservative entities where wealth is grown and preserved quietly, and where the needs of multiple generations are addressed with bespoke, hands-on services.

That perception is true to a large extent. But today’s family offices are also increasingly modern and digital, says Richa Arora, a senior family advisor in the family office practice at KPMG Canada, which has invested extensively in sophisticated technologies such as AI and blockchain.

“The pandemic really accelerated the digitization efforts of family offices, especially as more family offices looked to modernize and streamline communications across stakeholders, improve processes and better manage privacy,” she says. “As a firm, we’re very big on being ahead of the curve in terms of bringing cutting-edge digital tools to our families.”

Arora spoke recently with Canadian Family Offices about how technologies such as artificial intelligence (AI) and blockchain can transform family offices, and why the rising generation – who have come of age in a digital universe – should have a seat at the table when families discuss their technology journey.

How are family offices adopting new technologies today?

Leaders in the family office space are reacting positively to digital disruption. More offices are adopting online, cloud-based platforms. It’s been a very positive trend where it’s shifting to better reporting and better decision-making.

What technologies in particular are gaining the attention – and perhaps even being implemented – among family offices?

Blockchain and AI are the two emerging technologies that have had an integral impact in the family office space. A lot of family office platforms have evolved so that AI is being used with robotic process automation, or RPA. When you combine RPA with artificial intelligence and machine learning you can get meaningful dashboards that save time, and you can focus that time on more efficient decision-making.

RPA gathers data from many sources – including direct data feeds from banking sources – and provides meaningful information to all family members. The system is smart enough so that, where in the past the various parts of family office systems didn’t speak to each other, now everything is integrated and automated.

What do you mean by “meaningful information?”

AI can allow families to bring data to life. For example, with a proper process in place, AI can review thousands of legal or financial documents and identify issues and opportunities with a level of speed and accuracy that is unachievable by humans alone. AI and RPA can be applied to many areas of a family office, from identifying potential investment opportunities to ordering supplies. Automation also removes repetitive or mundane tasks from an individual’s job, allowing them to focus more on ideation and creative solutions.

Why is this important and useful?

There’s a lot of data in family offices, so accuracy is key and privacy is critical. With these technologies, you can use human resource time more effectively to review data. In our world, we would still have a pair of eyes reviewing data but the process becomes faster. So instead of the client services team going over reports, they can focus on building strategy for their clients.

What about blockchain? How does it help family offices?

Blockchain streamlines the processes for financial transactions and enables real-time, multi-party tracking and management of bank guarantees and letters of credit. Blockchain also facilitates the faster sharing of information and data among the parties and fewer intermediaries, which can help lower the cost of financial transactions.

Other significant advantages include improved data management, retention and security and robust reporting and compliance. Blockchain can facilitate more accurate reporting with an automated compliance process that features real-time alerts. As well, software with smart contracts and automated procedures can streamline the process between the investor and the investee, including due diligence processes.

How can a family office assess its readiness to invest in new technologies such as blockchain and AI?

Start by looking at the bigger picture – ask yourselves where you are today and what you’re looking to achieve. Oftentimes family offices with multigenerational families plan for longevity, so it’s important to ensure that what they’re investing in today is sustainable through the next generations. Where do you want to be as a family in the next five, 10 or even 15 years?

What are the individual and collective aspirations of the family, and how can we create alignment on a path forward? Does every family member truly understand how they will be impacted by change? Does every family member understand what is expected of them and how that change translates into the vision for the future? Are there mechanisms in place to foster the consistent demonstration of desired behaviours? Are there change leaders within the family?

Are there best practices for ensuring a good return on investment in new technologies, or at least for improving the chances of a successful implementation?

It’s important to ensure you have a proper change-management framework that details how you’re going to implement and manage the change, and who’s going to be championing that change internally. Detailed planning is key, and you need to have someone with the knowledge and experience to guide you through the critical, thought-provoking questions. Like ‘do you actually need a full platform or are you looking to only solve a particular problem over the next five to 10 years and maybe need to just make an addition to your existing technology?’

Many next-generation members of wealthy families prefer to access their information, including banking and other financial data, from their mobile devices. Does this present a challenge for family offices?

With new technologies come new risks. Cybersecurity threats continue to grow in frequency and sophistication. Family offices need to embed a comprehensive cybersecurity ecosystem as part of their risk management processes. This may include fundamental security controls such as firewalls, anti-virus software, secure configurations, security logging, two-factor authentication, and ongoing monitoring, as well as regularly reviewing processes and limiting access to information to those who actually need it.

It’s also important to have the ability to consider and plan for the security challenges of certain systems, such as email. Many family members use their personal email accounts for correspondence, making it harder for the family office to manage security.

Speaking specifically about next-generation family members, how might their comfortable relationship with technology hamper or advance the goals and risk-management strategy of their family office?

I think giving the rising generation the opportunity to shape the future is really key. We’ve found that when you give the next generation a seat at the table, they’ll often bring forward innovative ideas, like using AI to tighten processes and reduce costs from a security standpoint. These are usually eye-opening conversations for the older generations.

Do these discussions necessarily translate to acceptance of younger people’s ideas about technology?

There can be some resistance depending on where people are in their technology journey. But overall I’ll say it’s been positive.

Talking about technology has actually opened up communication between generations, with the rising generation as digital natives bringing forward ideas and being invited to have a seat at the table. They have a huge role to play in helping the family office and family enterprise continue to innovate and adapt to the digital world, which is key today to driving growth in business.

What advice would you give to family offices who are still living in a largely analogue world?

Technology is a competitive edge. To stay competitive, family offices really need to expedite their digital journey. My advice to older-generation members is to use the next generation to talk through innovative ideas. In addition to learning from them, you’ll also be using these discussions as engagement points to get them more involved in the family office.

Responses have been lightly edited for clarity and length.

More from Canadian Family Offices:

• Family office software: ‘Time is right for Canadian families to get onboard now’
• Wealthy people and family offices: Hackers know you’re not ready
• Latest trends in HNW families’ use of insurance products
• Ten things keeping well-to-do Canadians awake at night

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