How has the CFO role evolved?
The role has evolved into that of data manager. CFOs have always collected the data necessary to report to investors, but it is now incumbent on us to improve the transparency of that data regularly. Investors demand this as they improve their decision-making capabilities. In many cases, CFOs are charged with maintaining the accuracy and availability of data from all sources within the firm, including accounting information and fund operational and performance-related data. As a result, the CFO role is combining with that of a CTO; especially in small to mid-sized firms. CFOs have become the guardian of all things data.
What issue keeps you awake at night?
Unfortunately, tax issues. The ever-changing environment that federal and state tax legislation creates has me focused more than ever before on monitoring and adjusting those operational elements that we can effectively control the tax burden through. States are changing rapidly to react to the federal changes and there is little guidance available to validate one’s decisions. Decisions made today may need to change as early as next year.
How important is technology to your role?
The CFO’s involvement in technology development and implementation has increased significantly in the last decade. Technology is the fastest way to create efficiencies within our business, across nearly all our business units. We are constantly focused on where to create the next efficiency in our company. The difficult part for a smaller company is the ‘how.’ We have little redundancy in our employee base, therefore resources are scarce. We try to use a contractor model to bring in resources where needed and should the project become lucrative, we may hire that contractor as a full-time employee/vendor, similar to outsourcing.
What is the one question investors keep asking you?
How quickly the investment manager can produce financial information after the period closes. The second is whether we can meet their specific reporting needs, usually around consultant questionnaires, tax reporting, and other internal reporting requirements. Thankfully, industry organizations like the NCREIF/PREA Reporting Standards have helped to standardize these types of reports, which helps both investors and managers by defining results and allowing both parties to streamline data gathering and processing.
What lessons have you learned in your role?
There is seemingly no end to the advancements in technology helping us accomplish our jobs on a daily basis. Our job has been to keep up with that technology, apply it in meaningful and useful ways and make the work environment the most efficient and productive it can be. Reliance on accurate data has increased alongside the increase in technology capabilities, but our ability to aggregate and validate that data is slow to follow. Too many organizations try to own and sell this data to the detriment of the advancement of our industry. In the interest of advancing our investment asset class, we need to address this issue in the coming years.
What is the single biggest challenge for CFOs in real estate in the coming years?
Retaining talented employees is always a challenge, but with the field of competitors for a relatively thin labor pool having increased in the past decade, it has become increasingly difficult. Creating a competitive salary and benefits package, and a desirable work environment while balancing the costs associated with providing these elements, is an annual challenge for the COO/CFO team and even more so for the small to mid-size companies. This challenge will remain unless the pool of investment managers shrinks or the labor pool increases in size; neither of which seems likely in the short term.