‘A thirty second job’: how AI replaces the family office analyst

This article summarizes an episode of VC10X’s video series featuring Ronald Diamond, founder of Diamond Wealth, and Wendy Craft, CEO of Elle Family Office.

Image credit: Timmy Loen

Ronald Diamond, founder of Diamond Wealth, gave a warning to the very rich. He said most family offices are inefficient projects built for ego and should not exist. This view goes against the common practice where rich families build their own financial firms, no matter their size.

Diamond believes, by keeping a small group and outsourcing specialized work, families can protect their wealth without carrying the costs of a large internal staff.

The cost of weak expertise

Many rich people build family offices to show off, but they are not big enough to work well. Diamond argues that 85% to 90% of these firms exist only because of ego and wasted money rather than financial necessity.

“You need about US$500 million in order for it to make economic sense for a family office,” Diamond notes. “I think it’s driven primarily by ego.”

However, small teams cannot be experts in every type of investment. In fact, many try to invest in new companies, real estate, and loans all at once. The solution is to only invest in the industry where they first made their money.

“If you made your money in venture, invest in venture, outsource the rest,” Diamond advises. “You made your money in real estate, focus on real estate, outsource the rest.”

Putting planning first

The rush to invest money right away often leads to failure. A long-term plan requires setting up rules and a succession plan before investing any money.

Diamond believes the process must follow a certain order:

• Rules create the legal and company foundation before investing begins.
• Focus keeps the family working in the area they know best.
• Outsourcing gives complex jobs like investing in private companies to outside experts.

Automating the junior analyst

Hiring human analysts creates high, fixed costs like salaries and benefits. Smaller offices now use AI tools for these roles. The tools can review company data in seconds instead of weeks.

“AI is going to take the work that normally takes [a junior analyst] a week or two to do, and do it in 30 seconds,” Diamond explains. “So, it will fundamentally change everything.”

Handling the human side
Software can process data, but it cannot build the relationships needed to find private deals. The technology helps sort information, but a person still has to make the final decision.

Defining the real return