The idea of a family business may seem traditional and against the independent wave of today’s age and time. Yet, recently, more and more people have been inclined to start a family business.
According to a recent database by Credit Suisse that outlines the world’s largest 1000 family businesses, some of these publicly-traded companies have a market capitalization of no less than $1 billion, with family-owned stakes at 20% and more. Some of the many successful and big-brand family businesses from the database include Walmart, Nike, Samsung, Oracle, Roche, Richemont, and Tata Consultancy Services.
As for family businesses in the Middle East, they are employing over 80% of the region’s workforce, according to a report by PwC, while a report by KPMG in 2017 revealed that a third of the companies they interviewed in the GCC said that their business revenue has been increasing over the previous year.
The challenges facing family businesses
As early start-ups, family businesses may not consider managing their investments or finances since they may not be spread out as larger businesses. Therefore, when rapid expansion occurs within a family business, managing investments becomes more complex.
Some of the major challenges that face family businesses is the feasibility of tracking their investments, especially with more diverse investment portfolios, as every investment class has its own forecasts and strategy for investment.
On the other hand, family offices may find it difficult to monitor and manage their investments all-together. Instead of being fully-occupied with working on multiple tools, successful family offices should be searching for investment opportunities. However, a lot of time is wasted on managing investments, rather than seizing investment opportunities. Usually, tools are hard to use, too complex, and not user-friendly, and it can take several weeks of training for users to familiarize themselves with them.
Security is one of the main concerns for a family business, as computers are prone to hacking and important financial data can be stolen. Addedly, it is difficult to find well-researched insights ahead of time.
It is essential for family offices to transform the way they manage their investments. Excel sheets, word documents, printing, and other traditional means have become a time of the past. These ways of managing finances are no longer efficient, and take too long.
Instead, investors need a safe way to view their investments and data in real-time, without a third-party providing them with false numbers. Addedly, investors require such data to be provided in a single platform or tool that is user-friendly, so that investors can focus on seizing opportunities and standing out in their respective markets, while automating such administrative factors.
FinTech’s role in shaping family offices’ investments
Thanks to FinTech (financial technologies), it is now more feasible for family offices to manage their investments and receive forecasts on their investments and investment sectors without risking security.
Investment platforms such as Investera have been created as solutions to people who want to manage their investments in a user-friendly interface. Because it can be too complex to view investments manually, and because there is a growing need to check data on-the-go through devices (such as mobiles), investors want to keep track of their investments’ performances regularly. This investment management platform aids private equity firms, family offices, and more, by providing a holistic end-to-end system for managing workflow transactions and documents, building structures, easy-sharing of confidential files, as well as generating reports.
Such platforms aid family businesses in viewing detailed reports on their investments, as well as informative forecasts and real-time data that provides users with a competitive edge in the market, by capitalizing on profitable investments. Through these means, it becomes simpler and easier for family businesses to manage their investments while planning ahead.
Why we need FinTech
According to a report by Wamda, thousands of FinTech startups have raised over $63 billion worldwide. In the same report, it states that FinTech provides users with an investment platform, which is crucial, given that 86% of adults in the Middle East and North Africa don’t have a bank account.
It is important to note that the shift to FinTech comes with the eventual succession in a family business. As one generation hands its responsibilities to the next, it is essential to take on the practices of the current. Since blackberries were once the businessman’s phone, people have been updated on the world through their hand-held devices. As such, it becomes necessary for a family office to view its investments and finances with the aid of FinTech, in an easy-to-view platform, allowing them to remain updated on their investment assets. With such a roadmap, it becomes easier for family businesses to form a clear vision for the future of their investments, since, after all, the key to success is planning ahead.