If advisors in the family office space are going to use AI, they must acknowledge its duality. On one hand, it offers expediency, accuracy and money saved. On the other hand, it poses big risks, including the leakage of sensitive data.
It’s a treacherous area most are entering without any formal plan in place, says Francois Botha, founder of Simple, a Copenhagen-based family offices consultancy.
“Many of the emerging risks are now coming to light through a geopolitical lens. Data sovereignty and sovereign AI is a big topic, as are cross-border regulatory exposure and the targeting of high-net-worth families by increasingly sophisticated AI-powered threats.”
Most advisors are dabbling in shadow AI tools, applications or services without formal approval or oversight, says Botha. “They’re starting to figure out what’s possible, rather than defining what their approach or policies should be. The harm is very concrete.”
AI can help streamline manual, document-intensive tasks to improve efficiency and client service. They can also help advisors perform risk management and identify investment opportunities.
It’s no wonder many Canadian family offices are using tools such as Perplexity, ChatGPT and Grok 3 to simplify and speed up administrative tasks, prepare reports on investment outcomes and perform calculations to aid in decision-making.
At the moment, AI is often used on an ad hoc basis and mostly in low-risk areas such as administrative tasks and research, says Richa Bahl, partner and Family Enterprise Advisory Leader at PwC Private Wealth/Private Tax in Toronto. As a result, the use of these tools often escapes notice.
“Canadian family offices are increasingly using AI tools, but the awareness of associated risks varies depending on whether AI oversight roles exist,” she says. “Many organizations prioritize responsible AI, yet governance gaps remain, especially in smaller or less formal setups.”
Among the risks are confidentiality breaches, data quality issues and ethical concerns, all of which are critical given the sensitive nature of family office operations, she says.
Banning AI is not the answer; it just drives usage underground.
Francois Botha, founder of Simple
AI-powered social engineering, including “deepfakes” and highly targeted phishing, are making family offices more vulnerable, and most don’t have the internal capabilities to detect or respond to these threats quickly, says Botha.
Worse, tools are often adopted quietly, and leadership has no visibility into where data is going, he says. “Confidential investment memos, family tax information or deal terms get pasted into unapproved tools, and the office loses control of that data entirely.”
AI-generated summaries that incorporate so-called hallucinations—when generative AI models create false, illogical or misleading information—represent a direct threat to the quality of decisions, he says. The faulty data can be fed into AI tools advising on investment decisions without anyone knowing. And it’s at that point, Botha says, that shadow AI “erodes the culture of transparency and accountability that family offices depend on.”
One of the less obvious risks is data loss, says Kellman Meghu, chief technology officer for DeepCove Cybersecurity in Oakville, Ont. “The main risk is data loss on a scale we are just starting to appreciate,” he says.
That’s because when a large language model, or LLM—an advanced AI technology focusing on understanding and analyzing text—processes a spreadsheet, the contents are sent to an external server for inference, he says. Sensitive or proprietary data may be retained to inform subsequent searches.
“For investment teams subject to regulatory review, or family offices that need to reconstruct how a tax calculation or allocation decision was made, this gap in the audit trail is significant,” says Meghu.
Reining in AI
Though the risks of using shadow AI are serious, restricting AI’s use isn’t the solution, says Botha.
“Banning AI is not the answer; it just drives usage underground,” he says. Instead, “leadership needs to set the direction involving the whole team, providing approved tools and going through a structured change process so that AI usage is open, governed and aligned with the office’s purpose.”
But formal policies are not the norm just yet. While 72 per cent of organizations say responsible AI is a top priority, 36 per cent still have no responsible AI (or AI governance) function in place, according to PwC Canada’s 2026 Trust in AI survey.
Here are a few recommended strategies, according to Bahl:
- Assign clear accountability for AI use.
- Maintain tool inventories.
- Set data usage guardrails.
- Require human review for critical decisions.
- Integrate AI governance with existing privacy and security frameworks.
She suggests starting with a limited number of well-governed AI use cases for smaller teams, followed by an AI readiness check.
Botha agrees. He says formulating an AI policy requires understanding the office’s appetite for AI and advisors’ needs and workflows.
“All of this should guide the direction: what tools to use, how to implement them and how to manage a transition that could easily take 12 to 18 months before the office is truly gaining efficiencies or is properly protected against the risks of using AI incorrectly,” he says.
Family offices should aim for a clear strategy aligned to their vision and values. “More mature family offices are addressing this by establishing a dedicated AI or technology strategy role, while others are engaging external advisors to guide their approach,” says Bahl.
Here are ways that family office advisors can protect themselves and their clients:
Triage paperwork: Meghu recommends advisors take time to categorize their data, reserving less sensitive material for AI assistance. “A headcount planning sheet is different from an LP capital account statement,” he says.
Disable AI plugins: When opening documents received through third parties, disable AI plugins until after reviewing their contents, suggests Meghu. “A malicious embedding can be hard to find,” he says.
Audit Microsoft 365 permissions before enabling Copilot: This reduces access rights to the bare minimum, says Meghu. “If an analyst does not need access to the fund’s tax files, remove that permission before Copilot can surface them.”
The main risk is data loss on a scale we are just starting to appreciate.
Kellman Meghu, chief technology officer, DeepCove Cybersecurity
Review vendor data-handling policies: It’s imperative that advisors know where their data is going, how long it is retained, and whether it is used for any purpose beyond answering a query. “These policies differ across providers and change frequently,” says Meghu.
Maintain your own audit trail: If the tools do not log AI interactions, it’s important to document what was asked and what was changed in the company’s own records, he says. “This is especially important for workbooks involved in regulatory reporting or investor communications.”
Do your research: Provider due diligence should be paramount and needs to include AI usage and data-handling practices, not just financial or legal credentials, says Botha.
Once a plan is in place, it’s up to the family office to ensure it’s monitored effectively. Bahl says that although testing and monitoring is challenging to implement, it needs to be done.
Smaller teams should “start with a limited number of well‑governed use cases, select vendors with strong controls, and invest in staff training,” she adds, “so teams understand both the technology and the associated governance and accountability expectations.”
Anna Sharratt is a business and health reporter and editor with more than 20 years of experience. Based in Toronto, she has written for Canadian Family Offices since 2021. A regular contributor to the Globe and Mail, she has written for Inc.com, Forbes, Business Insider, Canadian Business, MoneySense, the National Post, The Toronto Star and other publications. She is the former managing editor of smallbiz.ca, health editor of Chatelaine and senior health writer for the CBC.
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