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New paradigm for family offices:  Turning data into intelligence

by James Lumberg and Pamela Fennel Jacobs


NOTE FROM THE EDITOR:  The Beringer Group pride ourselves on utilizing the most effective technologies to give our clients the precise information they need, at the exact moment they need it.  Envestnet, a pioneer partner in the data technology field, used us as a 'case study' in the following white paper.  We reprint it here with their permission.


The Data Deluge


Like just about everyone today, family offices suffer from information overload. There is plenty of data available, sometimes too much--but quantity does not equal quality. Much of the time, the data is not integrated, nor is it readily available when decisions need to be made. Accounts at various brokerage houses can languish for years--even decades. Other times, the sale of a business or a death in the family creates needs to be examined in context of existing portfolios. At these junctures, families find themselves needing to bring order to their financial house. They need all the professionals they work with -- accountants, attorneys, investment bankers, trust officers and charitable consultants -- to integrate their advice.


But how will this crucial information be compiled, and where will it be stored? For a long time, family offices got by with cobbled together solutions: perhaps a smattering of performance reporting software, some portfolio optimization platforms and back-office functions. More often, record keeping consists of little more than an Excel spreadsheet. Without the ability to see every investment and every financial concern, and their current values and performance, families run the risk of acting against their best interests. They may have unknowingly created the wrong asset allocation or risk profile - taking too much risk or not enough for their financial situation. Liquidity, when not attended, can vanish - or muffle investment returns. Unfortunately, the data-gathering work needed to make the most knowledgeable decisions is often seen as the "plumbing" of the investment management business - overly complex and time-consuming, and not something most firms want to undertake. Yet this is exactly where wealth managers should focus and where they can provide the greatest value.


An innovative technology solution is needed to bring order to the chaos. Certainly, consultants and advisors to wealthy families can invest heavily in purchasing the necessary hardware and software, but that entails its own risks. Technology changes so quickly that it is almost impossible to keep current. What's more, the cost of an in-house solution can be prohibitive and require computer savvy staff to input data, reconcile the data and continuously monitor and update the software. We believe that family offices get more scale and efficiency from employing an outsourced technology solution. The technology provider can focus on providing a continuously updated product that serves family offices' needs with the best practices available. An outsourcer can gather and compile data, generate customizable reports, and train staff. A family's information would be accessible from any location. In our opinion, for the vast majority of family offices an outsourced solution is the most cost-effective and sustainable option.


From Information To Insight


Imagine the value a wealthy family could derive from a technology solution that could aggregate its financial information, from all of its various investment accounts, into a single view, even integrating illiquid alternative investments and partnerships. Families could view this information in one portal to see their entire portfolio on a daily basis and share it with the financial professionals they rely on to help them manage their wealth.


Cloud-based data aggregation technology currently used by many registered investment advisors can bring this complete level of aggregated financial information into a single window. Establishing a relationship with a commercially available data aggregation platform means that families and their advisors no longer have to track down paper and online statements. A cloud-based platform solution allows daily net asset values and account reconciliation to be received with minimal staff effort.


Since not all investment managers and custodians report performance the same way, the solution provider needs to take time to normalize the data, showing a coherent portfolio view. Family offices that do not have the in-house expertise to manage aggregation software can outsource this work and begin to have more complete information at their fingertips, empowering them to make better financial decisions. Additionally,hiring an outsourcer with the scale and capital to continually invest in new technology and intelligent resources is key.


Case Study


The Beringer Group is a privately held, independent advisory firm with offices in Radnor, PA., and Mt. Laurel, NJ, that works with families of wealth. At a meeting with a husband and wife several years ago, the principals asked the couple how they kept track of their various investments. They pointed to a three-foot high stack of unopened statements. The couple joked that they argued constantly about whose turn it was to open the statements. In the end, neither did and the stack grew. Every few months, they shredded the unopened statements to make way for additional papers.


It was easy for the Beringer principals to understand why the couple was avoiding the paperwork. In total, the family had more than 100 relationships with financial institutions. They were faced with the task of organizing bank statements, investment statements, partnership papers, charitable transactions and more. And they had no way of getting a snapshot of their net worth at any given time. Neither did their investment managers or estate-planning attorney. "It was so overwhelming that it became easier to ignore it," says Chris Beringer, President of The Beringer Group.


By utilizing a robust data aggregation platform, The Beringer Group helped the family bring all this information under one roof, in real time, in a format that was easily accessible to all members of the family and to the financial professionals who worked with them. What they discovered was, at times, shocking. The family, now worth in excess of $1 billion, owned a sizable amount of a stock that had seen its heyday in the 1980s, a passel of open-ended mutual funds, and a fund that had closed years before and whose proceeds were locked up. Beringer and his colleagues created a diversified asset allocation, liquidated duplicate positions and engaged the best asset managers in their strategies. The couple had never been given this kind of total portfolio view before, and it enabled them to make thoughtful, holistic asset allocation decisions. The family's accountants and attorneys were able to use the platform as well, even allowed access to input their own data pertaining to the family's financial picture.


"[The family's] money needed to be accounted for, and it hadn't been until we started using this data aggregation system," Beringer adds. The Beringer Group now utilizes data aggregation with four other families, helping them easily access information about their wealth.




While single and multi-family offices can turn to many sources for investment advice and portfolio management, there are relatively few that can solve their biggest challenge: a comprehensive view of their wealth, with integrated reporting on both liquid and illiquid investments. Family offices and advisors often have difficulty sourcing this service because technology solutions are not core to their business, and it's difficult to stay current with the latest technology. Finding the right partner to solve this dilemma can change a family's decision making dynamic and empower advisors to develop wiser, more cohesive strategies for managing family wealth. This is the new paradigm of wealth management - integrated, thoughtful, and informed, thanks to new technology. Showing families'  timely data - reconciled and normalized - delivered in a way they can use and then share with the many professionals they work with, can move a family from information overload to a family with control over their future. .

James Lumberg is Co-Founder and Executive Vice President of Envestnet Inc., a leading provider of unified wealth management technology and services to investment advisors. Envestnet offers ideas, best practices and resources that allow advisors, foundations and endowments to deliver a broader value proposition. Envestnet's technology solutions can empower nonprofits by offering scalability, transparency, and governance best practices. Pamela Fennell Jacobs is the Principal of PFJ Consulting LLC and serves as a consultant to Envestnet. She has worked with single and multifamily offices for over two decades. See for more information.





Copyright 2014.  The BERINGER Group