Digitalisation key to wealth preservation for family offices

As the market for family office technology expands, those that resist digital transformation risk undermining the very legacy they strive to protect.

Family offices, responsible for preserving multi-generational wealth, face mounting pressure to modernise. Many still rely on outdated tools, manual reporting, and fragmented data systems, leaving them vulnerable to inefficiency, security risks and succession challenges. As younger generations demand mobile access, real-time insights and intuitive digital tools, failing to embrace digitalisation may lead to financial losses and the erosion of family values and legacy.

“Digitalisation is the glue that holds multi-generation wealth together. Family offices will struggle to survive — let alone thrive — without it,” says Chelsea Smith, senior national director of family office advisory services at Bernstein Private Wealth Management in the US.

A centralised digital system consolidates financial data, governance structures and succession plans in a secure, accessible format. “It should contain all financial information, documents and governance frameworks that can be shared with all family members as needed,” explains Ms Smith.

Structured communication tools are essential for helping next gen family members understand the family’s investment strategy and long-term vision. Without them, investment decisions risk diverging from their priorities, particularly as younger members increasingly favour ESG and impact investing. “If you’re not engaging the next generation, you risk making investment decisions that don’t align with their values,” she says.

Some families are experimenting with private social media accounts, like Instagram, to share values and educate heirs on wealth management. Bernstein has embraced this trend by developing an online learning module bringing together next generation family members in a structured digital environment. This culminates in in-person networking events, reinforcing both education and relationships. “Meeting them where they are and how they like to learn is critical,” adds Ms Smith.

Policing the red zone

With an estimated $84tn set to change hands globally in the coming two decades, succession planning is central to digital transformation. Nicholas Charles, CEO of London-based tech start-up Danti, warns that the lack of digitalisation is a key risk to sustaining family wealth.

Seventy per cent of families lose their wealth within two generations, rising to 90 per cent by the third, according to a 20-year study by US-based consultancy Williams Group.

Having seen this “three-generation curse” in his own family, Mr Charles argues that wealth platforms often neglect a crucial step: creating a wealth blueprint. “Every family is unique, but they all share one goal — they don’t want to lose what they’ve built.”

His platform defines a strategy based on 10 pillars of wealth, including education, governance and philanthropy. It then integrates technology to monitor risk areas — his “red zones” — and strengthen long-term wealth preservation.

Many family offices still operate in silos, with investments, tax planning and legal matters managed separately. This fragmented approach often collapses when the principal passes away, as there is no centralised system to ensure continuity. “The principal is often the central force keeping everything aligned. Once they’re gone, things can unravel quickly,” warns Mr Charles. A lack of clarity around ownership, liabilities and financial structures can lead to disputes, inefficiencies and even financial ruin.

Yet family offices are slow to adopt new technology. Deloitte reports that nearly three-quarters admit they are underinvested or only moderately invested in essential technology, while administrative and compliance tasks consume 19 per cent of their time, rising to 27 per cent in North America. This reliance on outdated tools creates inefficiencies, raises operational costs and weakens governance.

This reluctance is not due to resistance to change but rather a lack of tailored solutions, says Simran Kang, CEO and co-founder of MyFO, a platform launched 18 months ago that now serves 70 family offices, primarily in North America.

“Most platforms were built for hedge funds and institutional investors, leaving family offices struggling with slow onboarding, fragmented reporting, and a lack of real-time insights,” she explains. Some families even lose track of past investments, with critical financial commitments buried in scattered documentation.

The right digital tools, however, can enhance transparency, streamline information-sharing, and help educate the next generation in a structured way — reducing family conflict and strengthening long-term financial management.

Real-time data

Managing a family office is inherently complex, with assets spread across multiple asset classes, financial institutions and jurisdictions. This fragmentation makes it challenging to gain a clear, consolidated view of wealth, leading to delayed decisions and missed opportunities.

Handling billions in transactions, family offices require customised reporting tools to track total net worth across alternative investments, pooled funds and the broader balance sheet. Real-time data aggregation enhances transparency and offers immediate visibility into family wealth, allowing families to make informed financial decisions with confidence.

“The ability to report on asset holdings and values accurately, and to customise this reporting for different stakeholders, is of substantial importance,” says Mary Timmons, chief operating officer of Northern Trust’s global family and private investment offices group.

Private equity and private markets are an increasing priority for family offices but remain highly manual, primarily due to lack of standardised formats for data sharing. This is where technology can play a crucial role, says Ms Timmons.

Despite the benefits of technology, many family offices still rely on PDF reports and manual data aggregation, slowing decision-making and creating inefficiencies in capital allocation, tax planning and estate structuring.

The financial cost of disorganisation is significant. Mr Charles of Danti estimates that consolidating a family office’s financial position through advisers can take weeks and cost tens of thousands of pounds, only for the data to be outdated by the time it is compiled.

Bernstein’s Ms Smith recalls a case where a family office, unable to assess its exposure to a failing bank in real time, suffered substantial losses. Digital platforms eliminate these risks, automating data collection and reporting while cutting administrative hours.

“For every $100m in net worth, we save a family 40 hours of administrative work per month,” claims MyFo’s Ms Kang.

Game-changer

AI is transforming wealth management by providing predictive insights, streamlining due diligence, and automating reporting. Its role in investment management, liquidity planning, and tax compliance is set to expand, improving efficiency and decision-making for family offices.

“While adoption is still in its early stages, AI holds vast potential for family offices,” believes Northern Trust’s Ms Timmons.

She points to AI-driven tools like her bank’s The Digitizer, which extracts unstructured alternative investment data and integrates it into workflows. “This is a game-changer,” she believes, reducing the burden of tracking and valuing private market investments.

Meanwhile, blockchain technology is also emerging as a tool for wealth protection. Danti’s Mr Charles points out that inheritance disputes often arise from false documentation.

Blockchain’s tamper-proof ledger ensures critical documents, such as wills and trust agreements, remain secure and auditable. “With blockchain, every amendment is recorded and auditable, preventing fraud and manipulation.”

However, as digitalisation accelerates, so do cyber security risks. Family offices manage vast sums of wealth, making them prime targets for cyber attacks. While no system is entirely immune, risks can be managed through secure platforms that incorporate encryption, multi-factor authentication, and AI-driven breach detection, explains Mr Charles.

Resistance to change

Ironically, cyber security concerns hinder family offices from adopting digital solutions. “Many family offices resist digitalisation, fearing that cloud-based solutions make them more vulnerable to attacks,” says Danielle Valkner, private US family office leader at consultancy PwC. However, manual processes often pose greater risks. “Many families still sign and mail cheques or email sensitive financial instructions, which are far more vulnerable to fraud than secure digital platforms,” she adds.

The biggest barriers to adoption remain the perceived cost and complexity of implementation. Yet, the cost of inaction is far greater, including difficulties in attracting top talent.

For many family offices, inertia is the greatest challenge, says MyFo’s Ms Kang. Long-standing employees may be accustomed to legacy processes and transitioning to a digital-first model requires not only financial investment but a cultural shift.

However, momentum is shifting. “The younger generation is driving demand for digital solutions,” she notes, as tech-savvy heirs grow frustrated with slow, outdated reporting systems.

While resistance to change plays a role, “bandwidth constraints” are a bigger hurdle, believes Northern Trust’s Ms Timmons. With a primary focus on serving family members, navigating digital transformation can feel overwhelming. As a result, many family offices turn to external firms to implement new digital tools within their unique structures.

Success lies in first identifying the core problems technology needs to solve. Family offices must evaluate in-house capabilities versus outsourced solutions, considering factors like “key person risk”, manual workloads and budget constraints. The more they assess their needs early on, the more effective their technology investments will be.

Pain points

While the market is expanding, with both fintech start-ups and established providers offering new solutions, the most effective providers go beyond technology, says Ms Timmons, focusing on measurable results and client feedback. “The better we understand their goals and pain points, the better we can develop tools that truly meet their needs.”

Smaller and newer family offices have a digital advantage. Unlike older, multi-generational offices burdened by legacy infrastructure, newer offices can adopt digital-first strategies from the outset. “First and second-generation families are often more nimble and open to virtual, tech-driven models,” explains PwC’s Ms Valkner.

The rise of private wealth has spurred a wave of innovative solutions for ultra-high net worth individuals and family offices, she says. Yet, firms must balance scale and automation with highly customised solutions.

Managing multiple investment managers and custodians adds complexity, as inconsistent digital capabilities hinder automated access to quality data. Family offices also struggle to integrate advanced investment strategies, shared ownership structures, and legacy systems with new technologies.

Bernstein’s Ms Smith notes that some offices over-engineer their digital infrastructure, investing in tools they do not need. Others become paralysed by too many choices, leading to inaction. She recommends a phased approach: rather than attempting an all-at-once transformation, families should focus on their priorities, the purpose of their wealth, and the support needed to achieve that vision.

In an increasingly complex and fast-moving financial landscape, the ability to act on accurate, real-time information will be a defining competitive advantage and an essential investment in long-term sustainability and security. Ultimately, family offices that embrace digitalisation will not only preserve wealth but also ensure its responsible transition to future generations.