The ASIC report into death benefit claims revealing the devastating impact of poor industry practices on grieving Australians has again highlighted the pressing need for change. While some funds have taken up the cudgels, others are still playing hardball on improving their service offering.
A Retirement Income Covenant obligation notwithstanding, there is still a paucity of these complex products on offer. The Advice Through Superannuation draft legislation might offer a way forward.
Family offices warn of threat to critical investment decisions
Family offices, which are estimated to have more than $500 billion in funds under management, fear they are “falling behind” in their capacity to analyse the complex data needed to make critical investment and accounting decisions.
Managers and advisers claim there are problems collating and disseminating timely data because assets are often held in various structures, such as private companies and trusts, and managed by several fund managers.
Advisers say some family offices have up to 100 separate entities, differing investment structures, multiple asset classes and currencies, all creating different reporting needs and distinct tax treatments.
They warn different reporting systems and use of manual data entry can introduce errors, inconsistencies and outdated information, creating potential financial risks of mismanagement.
Robyn Langsford (pictured), KPMG head of family business and private clients, says: “Data collation and aggregation is also becoming more complex because of the increasing percentage of capital that is now allocated in private assets versus more transparent listed investments.”
The value of private capital funds, which raise money from superannuation, high net worths and family offices, has increased from $57 billion to $148 billion in the 10 years to 2024, an increase of more than 161 per cent, according to analysis by the Australian Securities and Investments Commission (ASIC).
ASIC chair Joseph Longo says the regulator is focusing on “opacity, conflicts, valuation uncertainty, lack of liquidity and leverage in private markets” to understand whether there is a need for intervention, “or whether we leave the market and wholesale investors to their own devices”.
“The private credit market does not appear to be systemically important in Australia, but failures are on the horizon – and regulators need information to consider the risks and plan responses,” he says.
Financial advisers claim concerns about the accuracy of financial performance makes it difficult to compare investment returns, make investment decisions or prepare for tax events on sales or returns.
Alex Jamieson, principal of AJ Financial Planning, says: “A lot of family offices are invested in private equity assets that are unlisted and do not have a market-to-market value. They can be overvalued compared with listed assets.”
Paul Moran, principal of Moran Partners, adds that difficulties obtaining accurate, timely information in family offices with a diverse range of investments across assets and structures “is an issue”.
“Sometimes there doesn’t need to be as many entities as there are in a family office to achieve the investment target. Where there is a large number, it can be difficult getting information together that is comparable.”
A recent KPMG report found that more than eight in 10 family offices are “heavily dependent” on technology for managing and monitoring their portfolios, a five-fold increase since 2021. The number of offices using largely manual collation has fallen from around 40 per cent to about 13 per cent during the same period.
But efforts continue to be made to increase capacity to report more effectively and streamline the timely capture of data often involving several asset managers, asset classes and currencies.
Eleanor Moffat, business services partner at tax consultancy BDO, says family offices require systems that can more swiftly consolidate and unify data so a portfolio can be easily analysed to create a more meaningful picture and offer improved advice.
“Family offices are far more advanced in Europe and America in their use of the technology used to aggregate performance. We are falling behind,” Moffat says.
Leading overseas providers of the technology specialising in data aggregation, analytics and portfolio reporting are beginning to set up operations in Australia.
Kirsten Taylor-Martin, national head of family business consulting for consultancy Grant Thornton, agrees that large family offices who have numerous entities can create data aggregation problems. “They can have complex structures, some family offices can have up to 100 entities in their group structure,” she says.
There are an estimated 2000 family offices in Australia, a 150 per cent increase in the past decade, according to KPMG.
