A Wealth of Data

The article highlights the often underestimated importance of treating wealth management as a data management challenge for affluent families.

It discusses the "wealth data gap," where families delegate control of their wealth data to third-party vendors, leading to vulnerabilities and power imbalances. By adopting a data management mindset and leveraging blockchain technology, families can centralize control, enhance security, and create an immutable digital family history. Emerging tools like iPaladin enable families to manage their wealth data effectively, bridging the gap and ensuring the preservation of their financial legacy for future generations. This shift in perspective offers significant benefits for those who embrace it.

“The world is one big data problem.”

I recently came across this quote from Andrew McAfee, a Massachusetts Institute of Technology (MIT) research scientist who studies how digital technologies change the world. While it resonates on so many levels, it struck me as particularly appropriate for families of great wealth.

In my recent series of articles, I focused on how the business of managing complex wealth can create a reliance on networks of advisors, technology tools that aren’t designed to speak to each other, and workflows that promote siloed practices rather than collaboration. All true, and each is as problematic as the other. Yet, fundamentally, these issues stem from the same root cause: data/information.

Wealth management is rarely considered a data management problem, but for families of great wealth, this is a wholly appropriate perspective to take. Wealth is amassed over generations - sometimes centuries - and is entrenched in securities, contracts, and companies. Each is nothing more than a data point in the vast and complex web that makes up family wealth.

At a certain level, families recognize this, and this is why family offices exist: to protect and manage that same vast web of data. Yet, the divergence between how families treat “wealth data” versus other forms of personal data is stark. I refer to this as the “wealth data gap.”

For example, it is unthinkable that a family would delegate control and responsibility for managing sensitive personal information to a third party. Yet, in the case of family wealth, this is commonplace.

The rationale for treating wealth data differently is understandable. As I’ve already noted, the business of managing family wealth can be complex, and families must rely on a network of advisers and tools to help them in the process. However, where the wealth data gap becomes problematic is when ownership and control of the data is ceded to third-party vendors.

A central theme of my recent article, Hostages of Great Fortunes, was the power imbalance that emerges when families lose control of their wealth data, something that is often the result of a fragmented approach to data management. Documents reside in different formats on different servers, with differing access and permission rights. This can create confusion, risk, and mistrust among family members, leaving generations hostage to external advisors and historical processes that seek to plug information gaps and maintain fragile working methods.

However, families can avoid or easily rectify this issue by taking a data management mindset. In this approach, data would be centralized under the sole control of the family, customized to their requirements, with permissions granted to appropriate third parties on a need-to-see basis to support workflows and collaboration. Going even further, with the power of blockchain technology, this information can be stored in an immutable form, creating a digital family history built for future generations.  

A data management mindset can also improve security. Many families do not recognize that data held by vendors is not governed by property laws and is held to a lower privacy standard. There is no duty placed on the vendor if the data is lost, stolen, or corrupted. And not to mention that, at the fundamental infrastructure level, third-party integrations are the most common source of data breaches.

Technology tools are now emerging that help families take a data management mindset to their family wealth. For example, in the case of iPaladin, ownership, and control of data continues to reside with the family. Our platform allows any type of data to be normalized, categorized, and then recorded, creating a single source of truth from which the family can make decisions about how their wealth is managed. Our blockchain technology creates a living digital memory for the family, chronicling every decision in real-time, and our “one way in, one way out” architecture ensures that all of this information is protected by military-grade security now and for generations to come.

The world may be one big data problem, but for families at least, solutions are now starting to emerge that tackle the wealth data gap. The shift in mindset required may be minor, but the benefits are vast for the families that do it.

Credit - Jill Creager - President & CEO of iPaladin

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