Why Do So Many Family Offices Use Excel?

Microsoft Excel is a household name – and has been so well adopted that it’s become the generic name for “spreadsheets” (alongside other contenders such as Google Sheets or Apple Numbers).

However, an era dominated by sophisticated financial software and complex data analytics that Excel helped foster, it might seem surprising many family offices – with traditionally abundant access to capital – still rely on the software for many core functions and tasks.

A recent LinkedIn post poked fun at this irony, given that family offices can be slow to adopt new technologies that support more sophisticated data aggregation and investment management tools that their core operations typically demand.

Diving into the comments on the post, there’s a lot to unpack.

What Is Excel Really Used For?

In short – Excel can be used as a Swiss Army Knife in almost every organization, and the same holds true for family offices.

Data teams use Excel to organise data, sales teams use it for organising leads and sales funnels, marketing teams for customer data, HR teams for employee info, C-level roles for reporting across key metrics and then, of course, finance teams use Excel for everything financial from budgets, to cash flow, projections, P&Ls – you name it.

In a family office environment, investment teams also use Excel for investment tracking and, alongside with finance teams, build reporting.

The Enduring Appeal of Excel – Why Does It Dominate?

There are several reasons why Excel has solidified its position as an indispensable tool in managing the complexities of family wealth – among them, and perhaps most naturally, excel is incredibly versatile, widely used, and understood – making it accessible to a broad range of users within the family office.

Familiarity

Excel was first released in 1987 – making the program itself 37 years old today. For many older familiar generations, Excel has remained a mainstay throughout a significant portion of their lives.

function loadConnatixScript(document) {
if (!window.cnxel) {
window.cnxel = {};
window.cnxel.cmd = [];
var iframe = document.createElement(‘iframe’);
iframe.style.display = ‘none’;
iframe.onload = function() {
var iframeDoc = iframe.contentWindow.document;
var script = iframeDoc.createElement(‘script’);
script.src = ‘//cd.elements.video/player.js’ + ‘?cid=’ + ’62cec241-7d09-4462-afc2-f72f8d8ef40a’;
script.setAttribute(‘defer’, ‘1’);
script.setAttribute(‘type’, ‘text/javascript’);
iframeDoc.body.appendChild(script);
};
document.head.appendChild(iframe);

const preloadResourcesEndpoint = ‘https://cds.elements.video/a/preload-resources-ovp.json’;
fetch(preloadResourcesEndpoint, { priority: ‘low’ })
.then(response => {
if (!response.ok) {
throw new Error(‘Network response was not ok’, preloadResourcesEndpoint);
}
return response.json();
})
.then(data => {
const cssUrl = data.css;
const cssUrlLink = document.createElement(‘link’);
cssUrlLink.rel = ‘stylesheet’;
cssUrlLink.href = cssUrl;
cssUrlLink.as = ‘style’;
cssUrlLink.media = ‘print’;
cssUrlLink.onload = function() {
this.media = ‘all’;
};
document.head.appendChild(cssUrlLink);

const hls = data.hls;
const hlsScript = document.createElement(‘script’);
hlsScript.src = hls;
hlsScript.setAttribute(‘defer’, ‘1’);
hlsScript.setAttribute(‘type’, ‘text/javascript’);
document.head.appendChild(hlsScript);
}).catch(error => {
console.error(‘There was a problem with the fetch operation:’, error);
});
}
}
loadConnatixScript(document);

As Microsoft has continually enhanced Excel, family offices have similarly tailored spreadsheets to suit their specific needs across an array of use cases – from tracking investments to managing household expenses. While also having a powerful array of features, Excel also has a relatively straightforward learning curve – enabling new users to onboard quickly.

Marc-Phillipe Davies, co-founder of Deallocker, said it best – quipping that “Excel is not unsophisticated just because everyone has it and costs next to nothing. It’s proof how incredible a tool it is! Shallow learning curve, cheap, universal, reliable, trustworthy”.

For that reason, many family offices continue to hold on to Excel as a trusted source of truth. Which leads to…

Resistance To Change

The saying, ‘if it’s not broken, don’t fix it’ easily applies to many family offices that continue to use Excel. Older familial generations can feel most at home with the software.

It’s also worthwhile to mention that this resistance is also not usually the fault of the family office itself. In an industry that’s renowned for its opacity, there are few benchmarks that would compel family offices to significantly enhance their operations by updating their technology stack; contributing to a resistance to, and fear of change that is pervasive – even when new options and features can significantly enhance portfolio reporting capabilities across complex financial instruments at a minimum.

As Michael Casciano from EVO Wealth Tech playfully added, “Inertia is the second most powerful force in wealth management after compounding interest!”

Cost

There’s also the fact that compared to specialised financial software, Excel is relatively inexpensive, making it an attractive option for many family offices, especially those in the early stages of their establishment or those that have existed for many decades.

“I also see a heavy reliance on spreadsheets, and reluctance to change is high for the reasons mentioned, especially ‘cost’,” outlined Ian Keates, Chief Executive Officer at Altoo AG.

Excel can additionally integrate with many other software applications (such as accounting systems and CRM platforms) enhancing its utility in the overall family office ecosystem.

While there are many platforms that can expand on Excel’s feature set and further integrate with more complex alternative investments or assist with ESG or Impact reporting, these toolsets can come with their own price tag – meaning that many family offices may simply choose to ‘go it alone’.

Software Vendors Don’t Make It Simple

Finding the right technology foundation, or replacement for Excel, is not an easy task. Many vendors who are the first to point out that family offices shouldn’t be using Excel do not simplify their marketing, messaging, and introduction to illustrate how family offices can understand, compare, buy and implement their solutions.

While there are many interesting and unique selling points among family office software providers, few invest the time and effort to transparently highlight their value propositions and unique features that could otherwise make a move from Excel.

From Excel To The Stars

While Excel is a powerful tool, it’s essential to recognize its limitations. For large and complex family offices, it might not be sufficient for managing all financial data and operations – additionally, manual data entry and calculations can be time-consuming and prone to errors. The key-person risk involved with only one person knowing how the sheets work they they built is also a risk that is often entirely overlooked.

For family offices seeking a solution in the middle, many are adopting hybrid approaches, combining Excel with specialised financial software for specific tasks. This allows them to leverage the strengths of both tools and optimise their operations.

The essential takeaway is that while Excel can suffice, family offices seeking to digitise – and who are ready to expand their abilities in-line with new tools as an investment – can access a wide array of new technologies that are reshaping the market.

As Oliver Topham, Business Development Manager at Flanks, concluded “…The mindset of ‘we’ve done it this way for years and it works’ will only hold the wealth management industry back and they need to consider how much time and money could be saved by looking into the many tech solutions out there today.”