A term that was used when talking to a family office software provider and one that I’m going to use going forward. It describes the challenge for family offices and their advisers when they have made the decision to utilise a particular supplier and are now locked in (for better or worse) to their technology selections, some of which haven’t been reviewed or improved for some time.
I work with families on supplier curation and that can mean anything from asset manager and wealth manager counterparties to platforms, trading, research, professional services etc etc. The list is long and varied and usually very time and client specific.
One thing I always look out for is their underlying infrastructure. If they’re a wealth manager, what is the investment platform or custodian. For professional services, do they have middle or back-office function and what technology do they use.
A lot of the time, the deal breaker can be that despite an attractive advice, tax or asset management offering, they are beholden to a technology infrastructure that can potentially cause frustration, increased frictional costs (time, money) or create a manual integration to the office’s current technology.
A word I use way to often but is just so important when curating these suppliers. If the client has this GL software, can your capital call management software integrate or do we need to provide a manual upload? For your new portfolio management software, can you integrate with our current broker panel and reporting structure?
Counterparty Vendor Selection
When speaking to wealth managers and fund managers on the issues faced with aggregating family office data, it’s usually not the discussion they are used to having. Often the investment comes first and the “back office admin” piece is for someone else to solve.
If you’re looking at software for your platform, think about it from the client’s perspective as well. Be a counterparty that makes it easier for family offices to invest with you by ensuring your technology stack is built not just for the benefit of clients now, but for any future changes to their own investment infrastructure.
The ability to add supplier modules to the technology stack is becoming the next best alternative to finding the perfect single counterparty. To avoid vendor locking, family offices can now add or remove certain solutions that fix a specific problem and doesn’t require wholesale changes to the investment office operations.
Capital Call management an issue? Look at module from known organisation that can “plug in” to the current systems. In love with Excel but see some of the potential risks? These modular options can incrementally move the office to increased digitalisation whilst keeping it business as usual for the rest of the teams.
Some Vendor Locked Avoidance Questions
- List the GL/ABOR software your platform integrates with.
- How much of the reporting etc is proprietary and how much is third party vendor.
- Is it “off the shelf” or does the firm need their own team to provide an overlay.
- Can the technology move with you - If you leave the manager, is there a transfer of your data/software.
- Can you obtain your own account/license with the software provider or is that owned by the supplier.
- How long have you been with this vendor, what is the review process and what is their client base in your country. Reduce the risk of the provider shutting down or reducing their spend in your jurisdiction.
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