Anyone who works with families of wealth knows that family relationships and money are never far apart. Yet, family relationships can be the highest source of distrust one may ever find. How could the blockchain change all of that? What makes family members trust each other - or not? And is the blockchain concept limited to a technology application?

Trust can be a rare thing among families of wealth—and their members. The willingness to trust can be colored by generational and behavioral biases, cultural background, hidden motives, and family disagreements. How could the concept of the blockchain - a network of computers that verify digital components and transactions—work for families? It’s impossible to explore this concept fully in such a small space so the objective here is to introduce a few ideas to start the conversation.

The blockchain works because networks of independent entities consistently confirm and update information as transactions occur, making it impossible for any single entity to alter information out of self-interest or for any other reason; any alteration would necessitate the instantaneous alteration of every other transaction in the network. It allows parties who don’t know each other to effect transactions without having to trust each other or any central authority.

The blockchain’s potential usefulness for families can be examined from three perspectives: one, in exploring practical ways the system could serve a much smaller network, such as a family; two, by identifying triggers that would incentivize families to develop a network of trust; and three, considering the willingness of various cultures to support such enhanced transparency.

Is there a practical application for families?

Aside from the obvious “filter-down” benefits for families as beneficiaries of more secure financial systems of the future and as clients of financial firms creating blockchains to enhance client service , families may benefit from ongoing validation of sets of information or data so that it becomes real for them. This speaks most readily to advisor track records and performance, various family members’ experience in working with an advisor, and roles that may seem dutiful to family members but which over time have become engrained in their behavior because of family expectations.

A blockchain type of network could possibly work in a family with hundreds of family members in documenting family meeting minutes, governance formation discussions, the way decisions were made on various issues, and even the creation of trust documents. A broader type of family network might involve peer groups, which have become more popular over the past decade and which foster trust among families who may not otherwise know each other while still respecting their privacy.

Why families might embrace increased transparency

Whether families embrace or push back against the open transparency required to establish a blockchain depends on their willingness to trust. That may seem obvious, such as the example set forth by a recent article using witnesses of a falling piano from a skyscraper window to describe the reliability of the blockchain. Family wealth consultant and educator James Grubman appropriately takes issue with this example, noting forensic literature that casts doubt on the consistency of individual witnesses whose perceptions of what happened may differ. “What makes it reliable is the aggregate,” says Grubman. “Linking the reports together creates a truth that is stronger than individual truth.”

This is the key to family blockchain creation and utility for families. It displaces guardians-of-truth types of systems that allow clandestine manipulation or protection, adding efficiencies to families’ use of information - even from within the family - and an automatic audit trail. As Jamie Weiner, principal and co-founder of Inheriting Wisdom attests, “Business and wealth-owning families know that trust and engagement produce substantial, tangible results.” Family leadership may think “oh, I’ve dealt with that,” only to find their perceptions to be different from what can become a costly reality.

A network repository developed by branches of families - even those with hundreds of members - could contain more detail or not, based on the openness of the entire family toward enhancing transparency among them. Some family members may fear that sharing certain pieces of information with the entire family entity could have repercussions, yet such sharing may actually solidify the family’s privacy from the outside world while engendering greater family spirit within itself.

Conversely, there could be the risk that the blockchain information could be used adversely by a disgruntled family member. But the benefits of transparency may be greater than the risk. After all, disgruntled family members have been using family information to bring lawsuits or otherwise shift things in their favor since time immemorial. So manipulation and secrecy are nothing new. Rising generations across cultures desire such transparency, yet wish to be respectful of their family culture. The blockchain actually guards against such manipulation. It could also become a vehicle for families to choose which aspects of cultural traditions they will keep and which might move them forward for generational wealth success.

Creating trust among families of various cultural backgrounds

Trust is not an easy issue for families to address. Add the mix of cultural backgrounds in families today and it can become even trickier. A recent paper co-authored by Dennis Jaffe, research associate at Wise Counsel Research, and Grubman, note that in many cases, networks, relationship building, and slow-to-trust attitudes prevail. This can especially be true in different regions of the world. Jaffe and Grubman describe the three predominant cultures: individualist , emphasizing rational thinking and personal dignity; collective harmony , a focus on family, tradition, and “face;” and the honor culture , focusing on family, tradition, and hierarchy.

Individualist cultures tend to trust more quickly, harmony and honor cultures not so much. Yet all three have elements which can benefit each other and which may have significant implications for family blockchains. There are areas where cultural overlap may facilitate trust development.

For example, individualist cultures would fare much better by adding an overlay of “family’s best interests” first, fostering greater family spirit. As well, honor cultures can benefit from the idea of developing innate talents of individual family members, even if they are expected to fulfill a certain role. It will enhance their performance in that role and will most certainly add to family joy.

These are some of the most basic beneficial elements from which families of each culture could borrow. Other cultural aspects may hinder trust development. Jaffe and Grubman make the point that “the most successful families selectively incorporate perspectives of other cultures into their functioning across generations. Putting it all together leverages the strengths of each culture and minimizes the drawbacks.” This means that change doesn’t have to happen overnight, nor is any one culture mandated to adopt aspects of other cultures with which they are uncomfortable. How this is interpreted in blockchain development may vary from family to family, yet the idea of developing a blockchain may provide a conversational doorway through which important trust discussions can be started. 

Blockchain technology is so new, its final forms may be quite different than we now can imagine. Families who are interested in multi-generational success may find it a useful way to explore the current state of their trust relationships and discover desired levels of trust family members may not have previously expressed. The potential of the blockchain is too great to ignore. And anything that could effectively enhance trust and bring generational and cultural forces together has to be worth considering.