AI for family offices: How to work smarter

Many family offices (firms that manage private wealth for high net worth individuals) have been taking steps over the past few years to modernise the internal technology systems they rely on to manage their business – often referred to as the ‘tech stack’.

As families undertake this journey of digital transformation, one of the questions that inevitably arises is around whether artificial intelligence (AI) for family offices can improve how business is conducted today.

The short answer is an emphatic ‘yes’.

There are now many applications that leverage AI and machine learning that can streamline office operations and an increasing number of forward-looking family offices are taking advantage of them.

Here’s what we cover in this article:

• How artificial intelligence and machine learning work
• The impact of AI for family offices
• Looking ahead

How AI and machine learning work

Before we explore AI for family offices specifically, let’s first set the stage as to how the technology works.

In a nutshell, AI and machine learning take the automation of business processes to the next level by making software applications that are ‘smart’.

To do this, artificial intelligence algorithms direct an application to perform certain tasks, and machine learning enables the algorithm to continually learn and get better at doing the job.

Combined, these technologies can easily analyse vast quantities of data, predict patterns, spot anomalies, make recommendations, and learn and improve over time.

More than likely you are already using AI and machine learning every day.

Google Maps and Waze navigation systems, for example, employ AI and machine learning to analyse traffic speed, obtain the best route to a destination, and offer notifications about construction and accidents along the way.

Email spam filters use these technologies to aggregate and analyse different signals, such as specific words in the message, metadata (where it’s sent from, who sent it, etc), and your own personal preferences to keep junk out of your inbox.

And, when you deposit a cheque through a mobile app, AI and machine learning are working behind the scenes to decipher and convert handwriting on cheques into text via optical character recognition (known as OCR).

The impact of AI on family offices

Accounting and finance are at the core of every family office and numbers are at the core of accounting.

Accurate, comprehensive and timely data provides family office finance professionals with the insights required to make decisions that yield the best outcomes.

AI and machine learning put more analytical power directly into the hands of these professionals and other decision makers.

While possible use cases are limited only by our imaginations, there are many practical examples of AI for family offices within the finance function alone, such as:

Accounts payable and receivable

Embedding AI and machine learning into cloud accounting software can eliminate the manual effort involved with accounts payable and receivable.

For instance, when AI and machine learning algorithms are integrated into the accounts payable (AP) process, the application can read invoices, extract data, code the invoice to the right general ledger accounts, approve the process, and make the payment.

Monthly and quarterly close

Getting the right information as quickly and accurately as possible helps you make better decisions.

Cloud financial systems infused with AI and machine learning can easily crunch through and analyse larger quantities of internal and external data to help close the books faster.

Better decision-making every day

The same capabilities that speed up the closing process also enable real-time reporting and queries.

Data is updated in real time, giving decision makers round-the-clock access to trustworthy and current information and reports.

With this information at their fingertips every day, family office managers can easily track trends and take actions as needed to improve outcomes—instead of waiting for reports at the end of the month.

Recommendations

As financial systems get more intelligent, they’ll be able to make action-based recommendations based on the data.

For instance, they’ll be able to help family offices predict cash flow over a given time period and recommend actions to take to correct potential shortfalls.

Looking ahead

This means that it’s not a question of if – but when and how quickly – family offices will put AI and machine learning to work to eliminate routine accounting work, reduce costs, and improve their problem solving and decision-making capabilities.

Although some worry that AI and machine learning will put accountants out of work, we disagree.

Instead, we see these technologies as complementary to existing business processes.

Artificial intelligence and machine learning will automate tasks, speed calculations, and provide easier and faster access to richer information.

But humans will still need to analyse, interpret and provide guidance regarding this information.

While the technology is still in its early stages, AI for family offices will provide more efficient and effective ways to achieve performance goals.

Family office professionals that lead the charge and help their firms take advantage of AI and machine learning will have more time to focus on the more strategic aspects of the business, thereby delivering more value to their organisations.

Editor’s note: This article was first published in February 2022 and has been updated for relevance.