As renowned financier Warren Buffett once said, “It takes 20 years to build a reputation and five minutes to ruin it.” This observation rings particularly true for UHNWIs, whose actions, decisions, and associations are often easier to scrutinise in today’s hyper-connected world.
Broadly speaking, reputation risk management for UHNWIs involves what they and their families:
- Do: Ethics and potential controversies should be factored into decisions about business dealings, investments, philanthropy, and personal conduct. For example, involvement with businesses or organisations facing legal issues can put a UHNWI’s reputation at risk.
- Say about what they do: Many UHNWIs avoid the public spotlight, but they should be prepared in case they find themselves in it.
However UHNWIs choose to make and publicise decisions about their wealth and lives in general, there are three key ways UHNWIs can avoid reputational scrutiny or, if necessary, address it:
01 UHNWIs should tell their own wealth stories
Viktor Frankl, Austrian psychologist and author of Man’s Search for Meaning, believed that humans are driven by a fundamental search for meaning in life. This search can lead us to interpret and frame things in a way that provides us with a sense of purpose and order. In other words, people are “meaning-making machines.”
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UHNWIs agreeing with Frankl should not leave the stories of their wealth to other people’s imaginations. According to Reid Hoffman, co-founder of LinkedIn, “The best way to control the narrative is to write it.”
Many UHNWIs have shared their principles, tips, and histories in books written by themselves or others. For example, Alice Schroeder extensively interviewed Warren Buffett for her book The Snowball: Warren Buffett and the Business of Life.
While many UHNWIs will avoid putting their stories on the public record, all UHNWIs should proactively give their wealth meaning. This self-assigned meaning is instrumental in legacy planning and can be shared privately with heirs and other key stakeholders.
This meaning can also serve as the basis for reputational crisis management strategies. UHNWIs may never be asked to publicly articulate what they stand for, but they should be prepared to do so.
02 Formalise the family’s approach to inviting publicity, especially via social media
In every wealthy family, there will be members who enjoy the media limelight more than others. An example from the late 19th century is William Waldorf Astor, the nephew of John Jacob Astor IV, whose Astoria Hotel eventually became part of the Waldorf Astoria Hotel in New York City. William was an avid social climber who married into British aristocracy and actively sought newspaper and magazine coverage.
Today, the increasing popularity of social media has made it easier for family members to be in the public eye – whether they want to be or not. In many ways, the ease of communicating this way is a double-edged sword. On the one hand, family values and philanthropic contributions can be shared with the world with just a few clicks. On the other hand, so can poorly thought-out displays of wealth and off-colour remarks.
A heavy-handed call for a complete end to social media use is unlikely to be successful. Especially by younger family members, such a ban may be perceived as censorship.
Guidelines and education are likely better solutions for achieving consensus and ensuring that all family members’ interests are represented. Based on the results of a 2023 survey of wealthy families conducted by multi-family office Stonehage Fleming, UHNWIs have significant room to improve here. Only a quarter of respondents indicated that they are educating family members in the use of social media as a means of reputation management, and just over 10% reported taking steps to actively track their families’ digital footprints.
At the very least, UHNWIs should begin a dialogue with family members about what is acceptable to share on social media and what is not.
03 Lock down data security
Alongside more convenience and better data-driven decision-making capabilities, increasing levels of digitalisation in the financial world have heightened the risks of weak cybersecurity with respect to both money and reputations.
A data breach or leak can result in not only stolen funds but also weakened credibility. Many hackers publicise their exploits, aiming to expose the poor judgement and/or negligence of their victims with respect to cybersecurity precautions.
Hackers may also use stolen credentials to make transactions and run elaborate scams that can continue to erode trust in a UHNWI even after the identity theft has been discovered, as stakeholders and counterparties may wonder if they are in fact dealing with the right person. Formally clearing a UHNWI’s name of wrongdoing may be challenging, but removing lingering doubts as to their involvement will almost certainly be a reputational nightmare.
Two examples of notable data leaks affecting UHNWIs have been the Panama Papers incident in 2016 and the Paradise Papers incident in 2017. While many of the UHNWIs’ corporate structures revealed by these leaks were legally legitimate, the exposure brought unwanted and often problematic attention.
The takeaway for UHNWIs from such incidents is to conduct careful due diligence on the data security practices of all their financial service providers, not just their banks and custodians.
Building reputational peace of mind with Altoo
While designed primarily to give UHNWIs clear, holistic, and up-to-date visibility of their complex wealth, the Altoo Wealth Platform features secure electronic messaging functionalities for interacting with family members, advisors, and other stakeholders. These functionalities give digital natives a familiar way to share information on a need-to-know basis without relying on social media or other less secure communication channels that put sensitive information at risk of being disclosed.
The platform aggregates UHNWI’s multi-source wealth data via ultra-secure connections to their banks and custodians before automatically analysing and visualising it with technology infrastructure hosted in a tier-4 Swiss data centre. Security comes first in all aspects of Altoo’s operations, from technology architecture to team composition. UHNWIs can rest assured that their private data is just as – if not more – secure with Altoo as with any of their other financial service providers.
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