Many family offices (firms that manage personal wealth for high-net-worth individuals) have taken steps in recent years to modernize the internal technology systems they rely on to manage their businesses – often referred to as the “tech stack.”
As families embark on the journey of digital transformation, the question inevitably arises as to whether artificial intelligence (AI) for family offices can improve the way they do business today.
The short answer is a resounding “yes.”
There are now many applications that use AI and machine learning to streamline office operations, and more and more forward-thinking family offices are using them.
Here’s what we cover in this article:
How AI and machine learning work
Before we look specifically at AI for family offices, let’s first lay the foundation of how the technology works.
In short, AI and machine learning take business process automation to the next level by making software applications “smart.”
To do this, artificial intelligence algorithms instruct an application to perform specific tasks, and machine learning allows the algorithm to continuously learn and do the task better.
When combined, these technologies can easily analyze large amounts of data, predict patterns, detect anomalies, make recommendations, and learn and improve over time.
Most likely, you already use AI and machine learning on a daily basis.
For example, the Google Maps and Waze navigation systems use AI and machine learning to analyze traffic speeds, determine the best route to a destination, and provide notifications of construction and accidents along the way.
Email spam filters use these technologies to aggregate and analyze various signals, such as: Such as specific words in the message, metadata (where the message was sent from, who sent it, etc.), and your personal preferences to keep junk mail out of your inbox.
And when you deposit a check through a mobile app, AI and machine learning work behind the scenes to decipher handwriting on checks and convert it into text using optical character recognition (known as OCR).
The influence of AI on family offices
Accounting and finance are the core of any family office and numbers are the core of accounting.
Accurate, comprehensive and timely data provides family office finance professionals with the insight they need to make decisions that lead to the best outcomes.
AI and machine learning are putting more analytical power right into the hands of these professionals and other decision makers.
While possible use cases are only limited by our imagination, there are many practical examples of AI for family offices within the finance function alone, such as:
Liabilities and receivables
Embedding AI and machine learning into cloud accounting software can eliminate the manual effort required for accounts payable and receivable.
For example, when AI and machine learning algorithms are integrated into the accounts payable process, the application can read invoices, extract data, assign the invoice to the correct general ledger accounts, approve the process and make the payment.
Monthly and quarterly financial statements
Getting the right information as quickly and accurately as possible helps you make better decisions.
Cloud financial systems equipped with AI and machine learning can easily search and analyze larger volumes of internal and external data to enable faster closing of the books.
Make better decisions every day
The same features that speed up the closing process also enable real-time reporting and queries.
Data is updated in real time, giving decision makers access to trusted, up-to-date information and reports 24/7.
With this information at their fingertips every day, family office managers can easily track trends and take action as needed to improve results – instead of waiting for reports at the end of the month.
recommendations
As financial systems become more intelligent, they can make action-based recommendations based on the data.
For example, they can help family offices predict cash flow over time and recommend actions to address potential shortfalls.
looking ahead
That means the question is not if, but when and how quickly family offices will use AI and machine learning to eliminate routine accounting work, reduce costs and improve their problem-solving and decision-making capabilities.
Although some fear that AI and machine learning will put accountants out of work, we disagree.
Rather, we see these technologies as a supplement to existing business processes.
Artificial intelligence and machine learning will automate tasks, speed up calculations and enable easier and faster access to more comprehensive information.
But humans must continue to analyze, interpret, and provide guidance from this information.
Although the technology is still in its early stages, AI will provide family offices with more efficient and effective ways to achieve performance goals.
Family office professionals who take the lead in helping their companies realize the benefits of AI and machine learning will have more time to focus on the more strategic aspects of the business, thereby adding greater value to their organizations create.
Editor’s Note: This article was first published in February 2022 and has been updated for relevance.