Platforms support companies
Article by Kai Linde in the German “Unternehmeredition“ magazine (June 2017)
For the financial management of their own company, entrepreneurs use highly advanced software solutions, while the management of their private wealth is often handled less professionally. The development of electronical platforms now promises efficient and transparent solutions for financial management in the private wealth sector as well.
The management of large amounts of money often bears a great deal of effort and challenges – Nobody knows this better than entrepreneurs, who have already dealt with the processes of financial management in their own company. However, there are digital ERP and monitoring solutions, which have been deployed in the corporate sector for many years. They help to efficiently and transparently map complex processes in order to be able to make faster and better decisions on this basis. However, as a successful entrepreneur, one does not only face the management of a company including its financials, but also the management of increasingly complex private financials. For the latter one, however, one seldom uses specialized software solutions. But what possibilities are there for entrepreneurs to manage their private wealth just as professionally as their company financials?
Opportunities for asset holders
Generally, there are several management options (besides an overloaded piggy bank) for private entities with an increasing fortune: While entrepreneurs with rather small fortunes often decide on third party providers, asset holders with complex wealth structures commonly found their own family offices. In the latter case, the wealth management is handled by confidants of the asset holder(s), which are employed specifically for this purpose. Independently of the chosen management option, the deployed software determines the transparency and quality of wealth management. However, quite often people only use rudimentary excel files or no software at all for the management of their private wealth. In spite of professional advisory, asset holders seldom have a transparent overview of their assets. Thus, investment decisions can only be made on an insufficient basis.
Trends in wealth management
Even if companies are a step ahead in terms of financial management tools, the fintech innovation surge does not stop before the private sector: Small innovative start-ups compete against old-established financial corporations. While the field of wealth management is shaped by experiments with robo-advisory, the market also offers more innovative solutions for private investors and family offices. They aim for a goal, which has been implemented in companies for years: The deployment of a digital platform for the easy and transparent mapping of private financial management with the goal of an increase in efficiency and quality.
Financial platform of the future
Financial management processes of companies and private entities are of course only comparable up to a certain point. Highest priority for the private sector is the full transparency of the managed fortune. Asset holders should not only be able to have a look at the current status of their total wealth from everywhere. They should also have the opportunity to track every single transaction in every detail. Such transparency consequently enables asset holders to give exact specifications – for instance for tax purposes – at every point in time. It also helps, if wealth is transferred to the next generation. Also, the “slice and dice” concept is increasingly put in the focus of expectations: Asset holders want to group, filter and analyze their wealth structures in terms of all different kinds of criteria, such as currency, risk class or term to maturity.
Furthermore, sustainable software solutions need to exhibit multi-asset-capacity and be adaptable to the individual wealth structures of the private asset holders. Besides classical liquid assets they should also support all kinds of illiquid assets, such as real estate, direct holdings or also art and other collectibles. It is also important to consider differences in structures – in this regard, one does not only need to differ between the individual family members but also between separate special vehicles or trusts / foundations.
Lastly, another important requirement for the private financial platforms of the future is the reduction of administrative and communication efforts and expenses. This means getting rid of the prevailing stacks of papers with a digital document management process. Furthermore, the platforms need to simplify the communication with external parties and systems. This includes data interfaces, import and export options as well as advanced digital reporting and communication tools, which can for instance replace the time-consuming preparation of documents for the tax accountant with a single export click.
The financial platforms of the future should enable entrepreneurs to get an overview of their complex wealth structures. Most certainly, adaptations to corporate standards need to and will be made. Only by using specialized software solutions, entrepreneurs can manage to establish a high level of transparency and quality in the management of their private wealth, such that they are able to make correct indications and the best possible decisions.