Family Office Investment Management Solution
Why Family Office: Families want to protect their wealth and transfer the wealth to their future generations. Also, train their following generations with their vision, do the tax planning, reduce the legal fees, manage the assets, and last but not least, privacy. The aforementioned can be achieved using the family office setup which consists of qualified professionals such as investment managers, legal consultants, accountants, etc.
Types of Family Offices: There are two types of family offices, i) Single Family Office, usually set up by the Ultra High Networth Family to look after their wealth. Setting up a dedicated family office is a costly affair. Hence, there comes a solution, which is ii) Multi-Family Office, which manages the wealth of multiple families. This reduces the cost to the single-family as the overall cost is shared among the families.
What does the family office do, they do financial planning, manage investments, tax planning, estate planning. This blog is focusing on the investment management platform for the single/multi-family office.
- One-stop solution that covers the following i) Manage investments, i.e. maintain the Investment Book Of Records (IBOR), ii) Manage custodian relation and the position with custodians, iii) Informative reports about position, performance, cash flows, ledger, iv) Manage Accounting Book of Records (ABOR), v) Family relations, vi) Manage Fees & Charges
- Support of Asset Classes such as equity, fixed income, forex, properties, private equities, derivatives, and mainly structured products like total return swaps, equity swaps, interest rate swaps, fixed-rate swaps, credit default swaps.
- General ledger accounting that should support the different standards such as IFRS and GAAP. If I say IFRS, that should cover the accounting requirement for the FVTPL, FVOCI, Amortized cost. Reports to show the balance sheet, P&L, etc.
- Position reports should show the un-realized p/l based on the accounting type. e.g. FVOCI should use the reval cost to calculate the un-realized p/l
- Amortised cost, should support the amortization using the effective rate method (IRR) or yield rate method. Linear amortization may be an option for that.
- Good looking statement report on the investments that show the position as of date, performance for the period, transactions for a period, cash ledger, cash flows for a period. Also, a nice-looking allocation charts as a summary in different dimensions such as asset class, country, currency, custodians.
- Mostly the positions will be kept with different custodians, hence a proper solution is needed to get the data from different custodians may be using SWIFT messages or readable files CSV, excel, etc. Some might require a solution to read the custodian statements received in PDF
- Importantly, the solution should reduce the manul work of the operations team that includes
- Getting the market data, security/instrument information from market data vendors like Bloomberg, Reuters, Morning Star, etc.
- Automatic posting of accounting entries and accounting entries integration with core G/L systems like T24, SAP, Dynamics, etc.
- Automatic upload of the data received from custodian banks such as transactions, cash movements
- Alerts for the coupons, maturities, corporate actions, compliance rules
- Audit reports for the all the transactions and static masters
- Upload/keep documents of the titles/instruments/securities. Custodian agreements, etc. Some documents will have expiry dates, so getting that info and generating alerts for that will be an useful feature.
