The adage "children should be seen and not heard" may be appealing at times, but when it comes to a family's charitable planning, it's certainly not the best advice. Rather, involving the next generation in family philanthropy can make the difference between the successful transfer of wealth and values and the loss of family wealth and unity. Thoughtful philanthropic planning can play an important role in preparing the next generation for wealth and responsibility.
By incorporating multi-generational philanthropy into their practices, advisors can serve as invaluable resources for founding generations seeking to foster proper stewardship of their family wealth and values among their children and grandchildren. This process also provides the opportunity for advisors to develop relationships with next generation members who are just beginning to assume responsibility for the family's wealth and philanthropic investments. Indeed, advisors who go above and beyond to meet their clients' philanthropic needs will find that a more holistic approach to wealth management enriches their advisory practices.
A Market Opportunity
Advisors who can initiate multi-generational philanthropic planning sessions have a competitive advantage because clients want to see the next generation take lead roles in philanthropic activities.
Family foundation trustees and high-net-worth individuals are increasingly involving the next generation in planning philanthropic legacies and managing charitable giving vehicles. A survey released in January by New Philanthropy Capital showed that 85% of multifamily offices include children under age 21 in family philanthropy discussions and planning. A Bank of America survey confirms the trend-53% of baby boomers involve their young and adult-age children in charitable giving decisions. And, according to the National Center for Family Philanthropy, nearly 80% of family foundations plan to continue beyond the current generation of leadership, and almost 60% believe that next generation members are enthusiastic about participating in the family's philanthropy.
The desire to involve the next generation in philanthropic planning should come as no surprise. Philanthropy offers affluent clients an opportunity to teach the next generation about financial stewardship and to do so in a context of giving back. It also offers a tangible project in which children can be actively involved when they may otherwise be too young to participate in the family business or other wealth planning activities. Research consistently indicates that proper modeling of family philanthropy can help children understand wealth not as an identity but rather as a tool they can use to make the world a better place.
Baby boomers who have spent the past 30 years accumulating wealth are now at the stage of life when they are more focused on spending and giving away their assets. This means that if your client has a foundation, or any other formal charitable giving vehicle, he or she is likely grappling with how, and when, to include younger family members in the charitable planning process. At the same time, their Gen Y children are looking for ways to put their wealth to work for the social good. Studies indicate that Gen Yers are far more socially conscious than their parents were at their age. This is why there are a record number within this age group volunteering.
This "perfect storm" presents a ripe business opportunity for advisors to engage older clients and their children or grandchildren in the family's philanthropic planning.
Engagement Strategies
More often than not it is a trigger event that presents the opportunity for including the next generation(s) of family members in the philanthropic conversation. Such opportunities may arise when clients:
Sell a business and wish to establish a giving vehicle as part of the transaction;
Come into an inheritance or infuse additional capital into a giving vehicle;
Consider establishing a foundation (or other type of formalized giving vehicle);
Want to establish a corporate foundation as part of the family business; or
Want to ensure their charitable interests are represented in their estate plans.
It is important to seize the opportunity created by a family's trigger event to identify a client's wishes regarding next generation involvement. Remember: The strengths and values of a family foundation are best passed down while the senior family members are still living. This allows for a family's values to be more easily transmitted from one generation to the next as children and grandchildren learn directly from their parents and grandparents.