The Case for Centralized Information
I’m often asked:
“Why would I spend money and time to have a family repository when you are keeping everything for me? My attorney has important legal documents, my CPA has the tax returns, and my broker has the investment information.”
It makes sense. If you can find what you need and you trust these people to send you information when it’s needed, why would you?
Sometimes, the best way to illustrate a point is through a real-life example.
A Family’s Experience with Disorganized Records
A family came to us last year, having gone through a couple of bookkeeping firms. And before that, they had a long-time bookkeeper who they loved. As we transitioned the family over to us, family documents were requested (and received). They came in multiple batches and with labels like “old bookkeeper” and “historical information.” Not uncommon, but always unfortunate.
When we asked about the structure, they said that historical was the original bookkeeper and the other was the next bookkeeper. They assured us that their files were up to date for the nine months they had worked with the family.
This family is relatively simple from a structure perspective; however, they have 60+ private equity investments. Searching through the files, we discovered that many did not have any documents associated with them, and thus we are relying on the memory of the family of when and whom they did that deal with, even though they were sure those documents existed. Perhaps they did, but the transfer of information between firms has eroded the integrity of information.
The Cost of Poor Information Management
Shortly after we began our work, the family announced there would be a prenuptial agreement drawn up and every asset needed to be accounted for. This project cost the family over $85,000 to do forensic accounting on these assets for the last 15 years and connect the information we had with the family’s recollection of the details. It also cost them months of time on finishing the prenup agreement.
Fast forward, the family has decided to change investment firms and has asked that both the new firm and us keep duplicate records. Makes sense given the pain that was just gone through to rebuild 15 years of information, but what happens now?
The Risks of Fragmented Records
Whose records are the single source of truth? Since the investment firm has all the records, they will begin building their own family files. Will all the workpapers and information be duplicated on the family office side?
My sincerest hope is that the family will be happy for many years with the current arrangement. History, both this family’s and my experience, remind me that things change – for lots of reasons.
What happens then? And for the next team(s) of people to inherit these files, how are they going to sort through different file structures with duplicate documents and different naming conventions?
How to Avoid Loss of Information
I recognize that managing documents for a family isn’t glamorous and seems like it should be an inexpensive and easy thing to do. This family paid a hefty price in both time, funds, and frustrations. Fires, floods, theft, laziness, retirements, and business closings are all things that can lead to this situation.
By controlling your information and who has access to it, your family can avoid unnecessary risks.
Your historical records and documents should never live on someone else’s server.
Why Centralized Information Matters
It is inevitable that those who serve your family are going to need access to information. Whether it’s your legal team drafting estate plans, your CPA preparing tax returns, or your family office managing day-to-day finances, each advisor relies on a clear, accessible picture of your family’s assets, liabilities, and historical records.
However, without centralized oversight, gaps form. Miscommunications occur. And these small oversights can balloon into larger, more expensive problems.
A centralized family repository provides a single source of truth. It ensures that no matter who your service providers are today—or tomorrow—your family retains full control and clarity over its information.
Steps to Build and Maintain a Secure Family Information Repository
1. Establish a Digital Vault
Utilize a secure platform to create a secure, collaborative, and centralized location for all key documents. These platforms allow you to control access, ensuring only authorized parties can view or modify specific files.
It is okay for the system to be created under an advisor, as long as you have in writing from the company that full control and administration can be transferred to the family at a moment’s notice, and the family has full authority over the files. Even better, create it yourself and give them access to build it.
2. Create a Governance Plan
A family information repository isn’t just about storing documents; it’s about managing them effectively.
Outline clear protocols for:
- Naming, storing, and archiving files
- Assigning a designated person or team to oversee document management
3. Leverage a Family Office
A family office can help administer and manage your family’s records, ensuring they are organized, accessible, and up-to-date.
However, it’s important to remember that ultimately, the family owns this information. A family office should act as a steward of your records, not the owner of them. The information should always remain under the family’s control.
4. Ensure Continuity
Regularly back up your repository to guard against cyberattacks, hardware failures, or other unexpected events. Consider retaining an independent digital custodian to preserve continuity through transitions.
5. Prioritize Transparency
Families evolve, and so do their needs. Maintain open communication with your advisors about the repository, and make it a point to conduct periodic reviews to confirm that everyone has the information they need.
6. View It as an Investment
While it may seem daunting at first, treating the creation and maintenance of a family repository as an investment in your family’s legacy will yield invaluable returns. It minimizes the risk of losing critical information, prevents costly mistakes, and saves time for everyone involved.
A Better Way Forward
Your family’s records are not just a collection of documents—they are a reflection of your history, decisions, and future plans.
By centralizing your information, leveraging a family office, and maintaining ultimate control over your data, you position your family for smoother transitions, more efficient processes, and greater peace of mind.
Life is unpredictable. Changing advisors, emergencies, or even day-to-day operations can expose the cracks in an unorganized system.
Building a centralized repository ensures that your family is prepared for whatever comes next, allowing you to focus on what truly matters: your family’s well-being and success.
