Business

Yes, every family office is unique, but a lot of their business can still be automated, says data specialist

Rob Mallernee has always been bemused by family-office executives who spend valuable time endlessly checking data and storing it on Excel spreadsheets.

By way of response, he has developed, and refined, a computer system that moves beyond Excel to store data and prioritise those items which require a quick response.

Pretty much every family office I’ve seen has had 6, 7, 8 different places to store data, meaning you needed to spend a lot of time and energy keeping everything in sync

His systems don’t make decisions, but Mallernee is developing ways for them to come up with ideas, based on their perception of their family office and their understanding of options on offer. 

His company, Eton Solutions, currently runs a cloud-based system for 30 single-family offices, plus multi-family arrangements worth more than $400 billion.

Eton has defined 270 processes in areas like payments, custody and tax which it can store, prioritise and flag.

Each administrator, or family member, can access data appropriate to their position, and gather background material, without needing to plough through documents. 

Mallernee says 5% of transactions tend to be sufficiently urgent to require a response from more experienced members of staff.  The rest, including bill payments, can be checked by an administrator, as required. Transactions and payments can be processed anywhere in any time zone. 

It is not the job of the system to make investment decisions, but asset valuations are continually updated, to help with the allocation process. Data supplied by custodians is cleaned up, where necessary.

When staff quit family offices or new generations take control, following a succession, data and procedures are retained for future use.

In theory, the whole exercise can lead to staff cuts, but Mallernee has found that family offices prefer to redeploy them, often into strategic areas.

Looking back, Mallernee says: “Pretty much every family office I’ve seen has had 6, 7, 8 different places to store data, meaning you needed to spend a lot of time and energy keeping everything in sync. This has involved an enormous use of manual processing and Excel spreadsheets, which are still incredibly popular.” Reporting under old systems can be delayed by weeks, or months.  Ad hoc reports for family members require hours of work by harassed members of staff and can contain errors.

Mallernee once talked to a consultant, who recommended a purchase of a number of systems which he would help to manage for a fee: “That struck me as something that didn’t make a lot of sense.”

Mallernee developed his first system at a trust company, and joined UBS in 2007 to become a managing director and take the idea further. “We were thinking they would have better technology, but it was worse than ours.” 

UBS clients with multi-currency accounts, for example, were managed through one of three platforms, depending on status: “We then had to create their monthly statements on Excel.”

Mallernee’s project was cancelled by UBS following the financial crisis of 2008 and he quit with his team. In 2009, they started Eton Advisors, a multi-family office, to use the system, later made available to third parties through Eton Solutions using its AtlasFive brand, newly updated. Eton Advisors runs close to $2 billion and provides fiduciary management to an additional $5 billion account.

In 2020, Eton hired Kevin Hayes, a former Lehman banker, who once worked for Man Group, the global hedge fund provider, and helped to develop stock market listings for other financial firms. 

Hayes, now Eton president, has played a key role in managing several projects at Eton, including a Bangalore-based back-office system. Could Hayes help with a stock market listing? “That could be in the future, but not in the near term.”

A new application Mallernee has been developing involves pattern recognition, where AtlasFive suggests ways to improve the efficiency of a family office, based on the computer’s understanding of its requirements.  This approach can also validate streams of data, to balance out the books.

Machine learning can be used to improve functions, helping AtlasFive to interpret the needs of each family office. Mallernee agrees that every family office is unique: “But a lot of these business processes, in our mind, can be automated and mapped to utilise best practice.” 

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