The New York Times recently reported that “an intergenerational transfer of wealth is in motion in America—and it will dwarf any of the past.” Our country’s 73 million baby boomers, it said, hold half of America’s $140 trillion in wealth, which they’re now leaving to the next generation as they pass or retire. This is a wake-up call for financial advisors. The long-held approaches to wealth management for the Silent Generation and baby boomers won’t necessarily resonate with millennials and Gen Z. So how can advisors adapt? Consider two words: “impact” and “technology.”

Creating Impact: A Next-Gen Priority
If you want to connect with today’s younger generations and earn their trust, it’s helpful if you understand what motivates and inspires them. These young individuals came of age amid societal commitments to diversity, equity, sustainability, mental health and effecting change, and they deem it important—and their responsibility—to create positive impact in the world through their actions, professions and decisions, including financial ones. They embrace collaboration, innovation, partnership and transparency, and they place greater emphasis on solving larger root problems in addition to addressing immediate needs.

While there are many ways for them to create impact and live with purpose—for instance, by “going green” to slow the effects of climate change or by supporting a civil rights movement—the most common way is to “give back.”

According to the National Philanthropic Trust, Americans made charitable donations of nearly half a trillion dollars in 2022. Some $319 billion of that came from individuals, while $105 billion flowed from foundations. Yet despite those huge numbers, research has found that philanthropy is not a major area of engagement between financial advisors and their clients, even with clients of significant wealth.

Rising generations will likely change this, though. Foundation Source research (conducted last year with two generations of family members from single-family offices) shows that younger generations are proportionately more involved in philanthropic endeavors than their predecessors, and they expect to have even greater involvement in the future. Older generations, by contrast, are more focused on wealth preservation and enhancement. Also, younger generations view philanthropy as a way to benefit society while their older counterparts mainly see it as a tool for legacy building.

Acknowledging these generational differences can help financial advisors attune their practices accordingly. The wealth holders of the future are more apt to view charitable giving as much more than simply donating to their favorite causes. Rather, they believe philanthropy is a powerful way to effect meaningful change in the world. The more that financial advisors can help younger generations explore the myriad options for giving and creating impact, the more they will be valued and trusted.

How can advisors offer such guidance? For starters, they can be well-versed in the various types of charitable giving vehicles—from private foundations and donor-advised funds to planned gifts and charitable remainder trusts—so they can help clients realize that giving can be far more impactful than making typical year-end donations to charities. Additionally, advisors can encourage clients to determine a charitable focus, one that aligns with their interests and values, so their giving is strategically directed to effect the change they most care about.

Furthermore, advisors can discuss the merits of hands-on philanthropy, in which clients can do things such as volunteer or work for a nonprofit, run their own charitable activities (for example, tutoring programs for children in need), or start a business with a mission of sustainability. It’s also helpful for advisors to build a network of specialists to tap into that offers clients education and more in-depth guidance.

By helping next-gen clients adhere to their impact-driven value system and effect positive change with their financial decisions, advisors can connect with them on a deeper level and be better equipped to support them.

Technology: Expanding Fintech to Philtech
Given the next generation’s propensity toward creating impact, advisors need to expand their suite of tech-based tools to ensure they’re able to assist clients with impact and philanthropic matters in the same way they help them with the core components of planning such as investing, retirement, banking, taxes and estate planning.

Regardless of which formal giving vehicles clients choose, financial advisors can use technology in a way that helps them more actively partner with their clients to drive impact and offer them turnkey services that help them implement their visions with efficiency and ease.

Fortunately, new philanthropic technology, called “philtech,” can help advisors support experienced donors as well as clients who are new to giving. There is an array of software, platforms and mobile apps that can facilitate activities as simple as making a gift or opening a charitable vehicle as well as complex and sophisticated giving strategies that entail research, grant proposals and impact measurement. 

So now it’s a matter of using these tools so they become part of the same process that’s used to manage the other key aspects of a client’s wealth. Ideally, advisors should be able to look at a client’s complete financial picture on their portal or dashboard and help with charitable assets and transactions the same way they do with, say, a client’s retirement accounts. Likewise, clients should have access to the technology as well—to conduct their own research, view their accounts and initiate impromptu gifts—so that all parties in the relationship can work together and do it more effectively.

This adoption and integration won’t occur overnight, but we are on the way to elevating philanthropy to the same level as investing and retirement planning in the wealth management landscape, and we are right on time for the largest-ever transfer of wealth to the generations who are embracing giving as a way to create lasting and meaningful impact.

Hannah Shaw Grove is the chief marketing officer of Foundation Source, the nation’s largest provider of technology, administration and expertise for private foundations and planned giving.