Financial best practices for the modern family office

Accounting and bill paying

Accounting and bill paying are some of the more important responsibilities for a family office.1 Unlike other services, these are provided by family offices in a manner similar to those of small businesses. It is relatively straightforward for family offices to initially deliver these services. However, not all family offices deliver these services well. In fact, the timely and accurate delivery of financial information is one of the more challenging tasks for a family office.

One reason for this is that, despite the similarities with small businesses, family offices often do not initially provide accounting and bill paying with a level of staffing or professionalism commensurate with their needs. As a result, the family finance department often struggles to catch up with the increasing level of activity and complexity commensurate with wealthy families.

The following practices should be considered and, where appropriate, incorporated into the family office’s finance function.

Investment reporting

One of the principal responsibilities for any finance department is robust reporting. Delivering accurate consolidated investment reporting on a timely basis is surprisingly difficult for most family offices. The reasons have to do with how the needs of wealthy families differ from those of small businesses and asset management firms, for which most investment reporting solutions are developed. These differences include:

  • Investments in a wide variety of asset classes, liquid and illiquid
  • Assets often held through numerous planning entities and trusts, in which family members have different pro rata ownership interest
  • Principals’ idiosyncratic preferences regarding financial reporting
  • Information acquisition, organization and reporting that varies greatly between general ledger and portfolio management systems
  • Information from customer relationship management systems, documents storage and retention and project management that is valuable but difficult to integrate

As a result, there is no ubiquitously used reporting system for family offices. The following discusses topic to consider when evaluating consolidated reporting systems.

Consolidated reporting challenges for family offices

The private wealth community has fallen significantly behind in effectively deploying advanced technologies and the corresponding best practices when supporting core family office business functions.2 The same enterprise-wide accounting and finance platforms that other industries employ have not historically satisfied the information and reporting requirements of complex families.

In addition to the limitations of these large platforms, there are several other factors that have contributed to the lack of technological growth, including:

  • Complex and lengthy solution assessment and decision-making processes
  • The high degree of variability in operations, information needs, and reporting conventions, which makes technology standardization difficult
  • The hesitation of technology firms to invest in R&D for niche markets

It is common to see family offices adopting the practice of using a combination of nonindustry-focused tools. These solutions—invariably a mix of spreadsheets, small business accounting platforms and portfolio management tools—while disparate, are readily available and have provided a critical flexibility that family offices need and want to solve very specific information challenges, such as:

  • Spreadsheets that are the tool of choice as they are cost effective, have a wide base of users, require little direct overhead to support and include functionality for complex equations and customizations
  • Other systems such as general ledger and portfolio management applications that are often used as data sources in the compilation and preparation of the spreadsheets

The challenge of using these various tools is that they create significant operational inefficiencies that can result in poor data quality.

Tax reporting best practices

Income tax planning and preparation constitute an area of significant focus for wealthy families, and therefore the family offices that serve them. What follows is a discussion of the best approaches for delivering and receiving tax advice.3

Wealthy families spend a significant amount of time with their advisers developing, implementing and administering complex income and estate tax-planning strategies. It should be noted, that much of this planning is not designed specifically to reduce or avoid income taxation. Rather, some of the most widely used tax mitigation strategies are legitimate components of broader philanthropic, multigenerational and asset ownership/governance plans.

Family offices are heavily involved in the tax function for wealthy families, and it is not uncommon for the first few hires in the family office to have deep finance and/or tax experience. Indeed, the ongoing oversight and compliance complexity created through tax planning is one of the reasons why family offices are set up.

Trends impacting family office information systems

Making IT-related decisions for a family office is markedly different than it was in the early 2010s.4 Without understanding the dramatic changes that have taken place in technology, it is easy for family office executives to make decisions that are costly and ineffective and can needlessly burden the family office enterprise.

A robust industry of IT companies has recently sprung up to provide support services for small and medium-sized enterprises (SMEs) and large, multinational corporations. These firms, known as “managed service providers (MSPs),” have benefited from the trend toward out-sourced IT functions. The value proposition includes lower and more predictable costs from shared economics and a preemptive as opposed to reactive position for managing issues as they arise. Family offices, however, are not SMEs, nor are they large, multi- national companies.

Family offices are rarely started as de novo entities built with a robust strategic planning process. They are often put together in an ad hoc fashion or are simply the outgrowth of management companies formed informally over time to manage the personal and financial affairs of the principals and their families. Therefore, the following challenges and questions tend to arise as family offices look at building and maintaining their IT capabilities:

  • Do we use the IT assets of the operating company (if one exists related to the family office principals)?
  • Do we hire an IT professional in-house for our systems?
  • How do we hire IT firms to design, build, maintain and/or review our IT services?
  • How do we determine what IT services are needed, and how much should we spend to obtain them?
  • How can we build a flexible model that adapts to future needs?
  • How can we build security into these systems?
  • How will we handle mobile devices?

This is an excerpt from The Family Office, A Comprehensive Guide for Advisers, Practitioners, and Students. Now available where books are sold.

Adapted from The Family Office by William I. Woodson and Edward V. Marshall. Copyright (c) 2021 Rybat Advisors, LLC. Used by arrangement with the Publisher. All rights reserved.

Our experienced family office team can provide the resources and expertise needed to effectively address the issues and challenges you face. For more information regarding our capabilities, visit our family office services webpage today.

1The authors would like to thank William Farren of My Accountant for his contributions to this chapter. William F. Farren, “Bill Paying Services,” (unpublished manuscript, July 24, 2020), typescript.
2Jason Brown, “Innovations in Private Wealth Technology and Reporting,” SEI Archway, 2018,
3The authors would like to thank Stephen Prostano, Gemma Leddy, Thomas Riggs, and Marc Rinaldi of PKF O’Connor Davies’ Family Office Group for their contributions to this chapter. Stephen Prostano et al., “Tax Reporting,” (unpublished manuscript, August 19, 2020), typescript.
4Brad Deflin, “Family Office Cybersecurity IT and Trends,” Total Digital Security, March 8, 2018,

Bill Woodson

Bill Woodson is the head of Strategic Wealth Advisory and Family Enterprise Services at Silicon Valley Bank.

The views expressed in the article are those of the author and/or person interviewed and do not necessarily reflect the views of SVB Private or other members of Silicon Valley Bank and SVB Financial Group. The materials on this website are for informational purposes only, are subject to change and do not take into account your particular investment objective, financial situation or need. Since each client’s situation is unique, you should consult your financial advisor and/or tax planning professional before acting on any information provided herein