{"id":3881,"date":"2020-04-01T14:47:00","date_gmt":"2020-04-01T14:47:00","guid":{"rendered":"https:\/\/fusionwm.com\/?p=3881"},"modified":"2022-10-14T21:50:07","modified_gmt":"2022-10-14T21:50:07","slug":"what-the-super-rich-can-teach-us-about-giving-back","status":"publish","type":"post","link":"https:\/\/fusionwm.com\/what-the-super-rich-can-teach-us-about-giving-back\/","title":{"rendered":"What the Super Rich Can Teach Us About Giving Back"},"content":{"rendered":"\n
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As investors\u2019 net worth grows, it often fuels a rise in the desire to \u201cdo good\u201d through charitable contributions.<\/p>\n\n\n\n

Indeed, we find through our experience working with the affluent and their advisors that one of the five key concerns that the affluent tend to share is how to conduct charitable giving wisely and how to magnify the impact of their philanthropy.<\/p>\n\n\n\n

Therefore, it may be helpful for you to examine some of the trends, patterns and preferences among the Super Rich\u2014individuals with more than $500 million in net worth\u2014when it comes to their charitable giving. Lessons from the Super Rich can often be incorporated into our own approach to various financial strategies and wealth planning.<\/p>\n\n\n\n

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Generational giving among the extremely wealthy<\/h1>\n\n\n\n

Many Super Rich families hold a strong belief in giving back\u2014seeking to make a difference in the lives of others, society and the world. Many strive to have a discernable and significant impact.<\/p>\n\n\n\n

We make this conclusion by examining single-family offices\u2014structures that many Super Rich families use to help them manage their financial lives. A significant majority of family offices (62.8 percent) are very or extremely involved in philanthropy (see Exhibit 6).<\/p>\n\n\n\n

Interestingly, as seen in Exhibit 6, far more of the second-generation family offices have high levels of charitable involvement. (First-generation family offices generally are those controlled by the generation that initially created them\u2014patriarchs and matriarchs; second-generation family offices are owned and controlled by the heirs of the original creators.)<\/p>\n\n\n

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This does not necessarily mean that roughly 40 percent of these Super Rich families are not extremely philanthropic. It could mean that their charitable activities are not run through their single-family offices. This tends to be more common with wealth creators than with wealth inheritors. Nevertheless, we see that the second generation is generally highly focused on philanthropy, and they tend to run the activities of their philanthropy in conjunction with (or through) their single-family offices.<\/p>\n\n\n\n

Looking forward, nearly eight out of ten of the senior executives at these single-family offices who were surveyed said they expect the families to become even more involved in philanthropic pursuits than they are today (see Exhibit 7). Here again, there\u2019s a stronger trend among the second-generation family offices.<\/p>\n\n\n

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The upshot:<\/strong> It may be that younger members of today\u2019s highly affluent families are especially philanthropically inclined. Ask yourself how this dynamic plays out in your own family: Are the younger generations particularly interested in making a charitable impact?<\/p>\n\n\n\n

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Use of philanthropic advisors<\/h1>\n\n\n\n

We also see some clear differences in the extent to which the Super Rich seek help and guidance with their philanthropy.<\/p>\n\n\n\n

For example, a sizable percentage\u201429.1 percent\u2014of the senior executives at single-family offices engaged philanthropic advisors at one time or another. Philanthropic advisors are professionals who assist people and families in thinking through which charitable causes and nonprofits to support.<\/p>\n\n\n\n

(Note: Philanthropic advisors are rarely the professionals who will help them address the tax implications of their giving. To deal with the tax considerations, wealth managers, accountants and attorneys are usually the go-to professionals.)<\/p>\n\n\n\n

However, while more than two out of five (41.9 percent) senior executives of first-generation single-family offices have engaged philanthropic advisors, a mere 8 percent of senior executives at second-generation single-family offices are using these professionals.<\/p>\n\n\n\n

Why the significant generational difference? Although it\u2019s not entirely clear, it\u2019s possible that many of the wealth creators\u2014the founders of single-family offices\u2014are more focused on creating the family fortune than on philanthropy. Therefore, they tend to enlist philanthropic advisors for guidance.<\/p>\n\n\n\n

In contrast, the heirs\u2014the second generation\u2014may have had more opportunities to develop strong opinions about (and experience with) charitable giving. They may have even learned from the philanthropic advisors hired by their parents and decided to move forward on their own.<\/p>\n\n\n\n

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The appeal of private foundations<\/h1>\n\n\n\n

In our experience, a lot of people\u2014including the affluent\u2014engage in checkbook philanthropy, where individuals send cash or checks to the not-for-profits they care about. Often there is little to no planning surrounding this type of giving\u2014donations are made sporadically and without regard to other financial issues and needs.<\/p>\n\n\n\n

In contrast, we see that the Super Rich tend to be more formal and systematic about their giving.<\/p>\n\n\n\n

Example: Nearly seven out of ten of the family offices surveyed have set up formal private foundations (see Exhibit 8). This is proportionately more the case for the second generation than for the first generation.<\/p>\n\n\n

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We see that people create private foundations for many reasons, including:<\/p>\n\n\n\n