Investment Policy Statements: An Old Tool for New Purposes

By Kirsten Andersen and Nancy Reid

We hear this story over and over again.  An investor – let’s call her Janice – wants to make an investment in a social or environmental initiative she’s heard about.  Maybe it’s a solar energy project, a community loan fund, or a small venture fund backing entrepreneurs of color reimagining the future of work.  She doesn’t want to make a mistake, though, and so she runs the investment by her financial advisor.  And that’s where the conversation ends, because the investment turns out to not be a good fit.

Sometimes an investment truly isn’t a good fit. It’s too risky, too illiquid, or too weird to fit nicely into an existing investing framework.  Maybe it really isn’t a good idea for Janice to pursue this idea.

But often, the reason Janice’s financial advisor won’t approve an investment with a social or environmental focus – an investment that seeks to do well and do good – is that her advisor is following a set of instructions that prohibit them from doing so.

Ironically, Janice probably signed off on those instructions herself. They are part of a document called an Investment Policy Statement (IPS). An IPS is where investors and their investment managers document their agreed-upon investment objectives, risk parameters, liquidity needs, and asset allocation.  It’s the job description for your wealth managers, a guiding document for difficult decisions, a communication vehicle between a client and their advisors, and a decision-making tool.  

You probably have an Investment Policy Statement (IPS) too. We recommend digging your IPS out of your files, or requesting a copy from your financial advisor. What does it say? It probably says roughly the same thing everyone else’s says: maximize profit, minimize risk.

You may be thinking that maximizing profit and minimizing risk is good! And it is – especially if these instructions govern money you’ll need to retire on, or money that is being invested for the benefit of a special needs child.  

For many investors, though, these instructions are incomplete. What’s missing from these statements is as important as what is present. By omission, your IPS says that you prioritize maximizing financial return at any expense. And because of this, our economy churns forth according to the default settings of the financial industry, often at the expense of people and planet.

Of course, profit is the basis on which our entire economy is built, and everyone has their own ideas and feelings about where tradeoffs can and should be made. Contributing to this complexity is a culture that does not encourage us to discuss purpose and profit in relation to one another. But we can make progress through an investment policy statement that integrates all of the outcomes that matter to an investor, not just the financial ones.

Aligning purpose and profit 

Purpose and profit can co-exist in a broad array of ways. From pension funds recognizing the climate risks inherent in traditional oil and gas investing, to investors buying laddered Certificate of Deposit (CD) portfolios from Black-owned banks, each investor has their own sense of what risks and outcomes matter most to them.

Our work is focused on helping investors craft investment policy statements that reflect the precise ways in which they choose to integrate their philanthropic values into their investment approach. Many investors find it strategically essential to revisit and update their investment policy statements, including:

• Families whose kids and grandkids are alienated by the idea that their inheritance funds political lobbying, fossil fuels, or private prisons;

• Foundations wanting to avoid the reputational risk associated with certain investments in their publicly available 990 forms; or

• Individual investors simply seeking to create integrity and harmony on both sides of their financial life. 

Some of these investors may have philanthropic plans, mission statements, and strategic support teams to maximize the positive outcomes of their philanthropic giving. But the people who make decisions about the core assets – which may be 95% of a family’s wealth – are reading from a very different page. As long as your philanthropic intent remains documented in a vision statement instead of being integrated into your investment policy, it won’t change how decisions are made on your behalf.

One family foundation’s journey

In the wake of the Black Lives Matter movement in the summer of 2020, one family foundation signed a pledge that called for racial equity across the investment industry. In part, signatories pledged to take racial justice into consideration when making investment decisions. But like so many other organizations, the question for the family foundation became: how do we implement this?

The answer was simple but not easy: update their investment policy statement, integrating their racial equity values into the decision-making framework from which their financial advisors work.  

In collaboration with the foundation’s executive leadership and investment committee, we integrated the ideals and aspirations they had for their investments alongside the very real constraints of how their investment committee interpreted their fiduciary obligations.

The resulting document introduced the foundation’s values into a tool that investment advisors are familiar with and utilize in their work. By building a common language with their advisory firm, the IPS served as a place from which to begin conversations about the social or environmental good the foundation wanted their assets to create in the world.

Why it matters

Equipped with an updated version of an Investment Policy Statement, investors are ready to have grounded and sometimes challenging conversations with their financial advisors about their portfolios. Should these conversations reveal major differences, the IPS can also guide a search to find an advisor who can implement the ideas that matter most to any particular investor.  

We are not evangelists for any particular issue or investment approach. What we listen for are the specific issues you want to use your power as an investor to influence: climate solutions, the governance or employment practices you care about, the people are who make money from your money, or something else entirely.  

Because whether we like it or not, the world is shaped in large part by businesses, and businesses report to their lenders and shareholders. If you want to take responsibility for the decisions being made on your behalf, taking responsibility for your investment policy is a great place to start.

Nancy Reid CTFA and Kirsten Andersen PhD bring a breadth of experience with families and foundations to their work as independent consultants. Kirsten Andersen has a doctorate (PhD) in economic sociology, bringing a research-informed methodology to investment policy design. Nancy Reid puts her Certified Trust and Fiduciary Advisor (CTFA) certification and mediation training to work helping families and investment committees reach agreement on investment policy.  Their bespoke process helps clients navigate the sometimes confusing world of impact investing.

Empowering Change: A Transformative Journey with The Share Fund in Participatory Grantmaking

By Lauren Janus

The Share Fund Team (from top left: Bill Marklyn, Holly Marklyn, Emily Washines, Rashad Norris, Stephanie Ellis-Smith, Sewheat Asfaha, Bridgette Hempstead, Estakio Beltran. Not pictured: My Tam Nguyen, Vivian Phillips, and Lauren Janus)

In the ever-evolving landscape of philanthropy, traditional approaches are being challenged by new, innovative models that prioritize transparency and community engagement. Participatory grantmaking, by including people closest to the issues that philanthropy is working to address, has brought fresh perspective to the design of charitable initiatives and funds. One shining example of this radical approach is The Share Fund, a Seattle-based family fund that is redefining the dynamics of philanthropy through its commitment to empowering communities and redistributing wealth. 

Phīla Engaged Giving has collaborated with The Share Fund since inception, and we helped the Marklyns publish their learnings from the first year of the Fund in this new report. Below, I share our journey and the valuable lessons we've learned from working alongside Bill and Holly Marklyn and the Funding Committee members who have helped shape the Fund.

Prioritizing Community

The Share Fund’s journey began with two simple yet transformative ideas: What would it take for high-wealth individuals to redistribute all of their wealth within their lifetimes? How could this be done in a socially-just manner? 

These questions led to the birth of The Share Fund, a grantmaking body created in 2021 and focused on supporting racial and gender justice in Washington State. Working with the Marklyns, Phīla Giving established and continues to support all administrative aspects of The Fund. This included identifying and onboarding Black, Indigenous, and people of color (BIPOC) leaders to conceptualize and help make The Fund’s vision a reality. Today, this same concept still stands—a group of BIPOC leaders with deep community connections and expertise in racial and gender justice is responsible for the selection of grantees. For a deep dive into how this work was done, I invite you to read Bridgette Hempstead’s opinion piece for Philanthropy News Digest.  

The early stages of The Share Fund broke away from the traditional models of philanthropy where a donor-centric framework positions high wealth individuals to make decisions on behalf of the communities they aim to serve. Instead, The Share Fund handed decision-making power to the communities and individuals who are directly impacted by challenges like underinvestment, systemic racism, and lack of access to opportunity. By doing so, The Share Fund ensures that the needs and the aspirations of the community are prioritized.

Adjusting as Concerns Arise 

Phīla’s collaboration with The Share Fund was a well-made match as we understand the need to lean into community and evolve as needed. For example, in the early stages of The Share Fund, Committee members spent too much time on administrative work—taking away from their purpose of designing the participatory process of The Share Fund. Once this concern was raised, The Fund’s administrative tasks shifted to us at Phīla. 

Moving at the Speed of Trust

Building trust between funders and communities is essential for successful participatory grantmaking. The Share Fund's emphasis on collaboration and transparent communication demonstrates the importance of creating a safe space where open dialogue can flourish. The Marklyns and The Share Fund model a hands-off approach that serves the community without strings attached. In fact, Bill and Holly are not on calls where funding discussions, and ultimately, decisions happen. The Marklyns entrust the Funding Committee members with all aspects of the grantmaking process, only giving the parameters that grantees must focus on race and gender justice in Washington State. 

When new Funding Committee members join The Share Fund, they are often surprised by the loose structure of The Fund. It simply isn’t their experience (especially for those who are leaders of nonprofit organizations) to have full control. Yet working in this manner has yielded incredible outcomes. Since inception in 2021, The Share Fund has made more than $1.1 million in grants to organizations on the frontlines of change. This includes our most recent round of grantmaking, which wraps up this month. By relying on the insights of a Funding Committee, the Share Fund strongly reiterates what seems obvious but is often lost: Trust is the cornerstone upon which impactful partnerships are built.

Reshaping the Philanthropic Landscape

As our collaboration with The Share Fund continues, we are excited by the potential of participatory grantmaking to reshape the philanthropic landscape. This revolutionary approach reminds us all that there is a great reward when we relinquish control and embrace a new era of inclusivity, collaboration, and empowerment.

The Share Fund's journey exemplifies the profound impact of participatory grantmaking on the lives of individuals and communities. Their dedication to transforming philanthropy from within serves as an inspiration to all those who seek to create meaningful change. As we move forward, we are committed to applying the lessons we've learned from The Share Fund to our own work, and we invite fellow philanthropic organizations and families to join us in this transformative journey toward a more equitable and just world.

Want to learn more about the Share Fund and its approach? Download “Letting Go of Power, Centering Community: The Share Fund’s Story of Incorporating Participatory Grantmaking in Family Philanthropy” today!

Tough Talk

By Stephanie Ellis-Smith

Having tough conversations are often a necessary part of social change -- both in funding it and in carrying it out. But how do we have a tough discussion that gets our point across without it coming across as a personal affront? I was recently asked to present a webinar for the National Center for Family Philanthropy on how to navigate difficult conversations. I found preparing the material to be a fascinating exercise because it forced me to think in clear and in no uncertain terms how exactly that is done. As a result, I thought I might share a few tactics I’ve learned with you and hope you will find some of them useful. 

But before I get to the tips, I want to linger on the conversations themselves. From where do they arise and what exactly makes a conversation difficult? There are a few key elements that come together to make for gnarly conversations. The first is simply two people having differing perceptions. We each see our reality as right and rational and we have different interpretations of the same event or issue. But our interpretations come from different life experiences that have shaped the lens through which we view others, issues, or conflicts. Those differing views can clash.

We assume others’ intent but we do not know what a person’s intentions are. Only they know that. Unless someone explicitly states their intention, again, we do not know their intentions. We cannot assume. Yet, we do.  

We also come with impassioned feelings. Oftentimes the main reason why conversations go off the rails is because of the intense emotions that are behind the topic-big or small: race, politics, children or even things as mundane as the timing of a family gathering. They can affect our ego, sense of belonging; they make us feel vulnerable at the wrong time and then emotions run high.

Finally, we search for someone to blame. Someone has to be at fault. Blame is about making judgments, but effective conflict management is about learning from mistakes, understanding different perceptions of the same reality, and adjusting one’s behavior for better results in the future.

The past two decades have given us no shortage of opportunities to have difficult conversations. Whether they’ve been at the dinner table with friends or family, in the office with colleagues, or even in the grocery store with a total stranger. The worst are those when you find yourself in a confrontation with someone you actually care about or with someone with whom you’re in a relationship that you would like to preserve. How do you get your point across yet still honor the relationship, be liked, loved, and cared for? Here are a few tactics I use if you find yourself facing a tough conversation. 

Prepare. These are not conversation to go into haphazardly. We need to prepare for them. First by reflecting on what you really want or need from the conversation. Keeping the purpose clear will aid you if things turn sour. You can always recenter yourself in purpose if you lose your way.

Define what success will mean. What it will look like will be different for every situation. Sometimes success will be getting someone to change their mind or do what you want. Other times it may be as simple as awareness of a differing point of view. Manage your expectations by going into the situation with this point clear.

 Don’t avoid it. Remember, it’s conflict management, not conflict avoidance. While it may be tempting, avoiding the issue will not make it go away. In fact, small issues simmering in the background can grow into bigger, more intractable problems if left alone to fester. 

Make it safe to talk. Having a “safe” conversation means the other person feels they can trust you. You can build that trust by acknowledging your mutual purpose—you’re both there because you’re upset and want to leave feeling better. 

Listen. “Seek first to understand and then to be understood.” Good listening in a conflict situation requires an open and honest curiosity about the other person, and a willingness and ability to suspend judgement. Listen because you care, not to prove them wrong.

 Ask open-ended questions by beginning with “Help me understand…” or “Tell me more about…” To make sure you are getting the accurate meaning, you can paraphrase what you heard back to them. And finally, acknowledge feelings. I mentioned earlier that it is a key component to what causes these interactions in the first place, so you don’t have to ignore them!

Separate intent from impact. We all come into situations with our own narrative. Be honest and check what assumptions you’re coming in with. The authors of the book Difficult Conversations: How to Discuss What Matters Most (Viking Press, 1999) said it perfectly: “It is common during a difficult situation to make an attribution about another person’s intentions based on the impact of their actions on us. We feel hurt; therefore we believe they intended to hurt us. We feel slighted; therefore we believe they intended to slight us. Our thinking is so automatic that we aren’t even aware that our conclusion is only an assumption.” 

Use “I” statements. Sentences that start with “I” are less inflammatory and they keep responsibility for what is expressed with the person doing the speaking. 

Attempt a solution. I use the word “attempt” here purposefully. Some difficult conversations, like those about race, may not have an immediate solution. Expect and accept that there may not be closure. It is not likely that you will resolve your personal understanding about discrimination or another person’s life experience that drove them to hold a certain view in a single conversation. Authentic and productive conversations about anything difficult are continuous and always evolving. We don’t always get closure. 

Follow up. If this is a relationship that needs to be nurtured, following up is always a nice gesture. Was there any unfinished business that can be taken care of? Is there an opportunity to reset casually on the phone or over e-mail (a little distance). If it feels right, do it.

 All of these tips require a high EQ and an ability to have self-knowledge. Not only must we know ourselves, we also must tap into the spirit of our partner in dialogue. What moves them, what triggers them, what kind of delivery are they most apt to hear and respond to? (story or data?). It requires energy, thought, and time, but the effort is usually worth it. And, you will find that it does get easier with practice.

Bringing the Family Business into Philanthropy

by Stephanie Ellis-Smith

I’ve been reading a lot about what has become of all the pledges business and corporations made to racial justice and economic equality after the reckoning of 2020. According to one statistic, of the $50 billion dollars pledged, only $250 million was actually given. Yikes. While that stat is almost entirely about large corporations like JP Morgan Chase, Google, and others, smaller family businesses can take a lesson from it. Today, more than ever, the world is watching not just what you say, but what you do--or don’t do, as the case may be!

So how does a business make good on its desire to give back at a time of great need? This blog post offers a few ideas to help you get started. And of course, we are always happy to have a conversation, if you have specific questions.

First, some data to set the scene. A study published in the Harvard Business Review found that family businesses maintain high levels of corporate social responsibility (CSR) regardless of what the business environment is. Additionally, an impressive 81% of the world’s largest family businesses are engaged in philanthropy, which shows just how important CSR is to family enterprises. 

Why do family businesses focus on philanthropy, corporate responsibility and giving back? Here are three key reasons:

1. To attract talent: millennials, as the largest generation, and Gen Zs moving into the workforce, all want to work at places that contribute to the common good. It’s a great tool for employee engagement and retention.

2. To deepen family legacy: this one is really important. The desire for an owner to pass on the business within the family is a significant driver behind an organization’s philanthropic goals. Ernst and Young’s recent Family Business Philanthropy report indicated that family business owners with strong trans-generational intentions are particularly concerned about the well-being of future generations, and are therefore more motivated to address long-term social and environmental issues by engaging in philanthropy. And further, participating in philanthropy as a family (at home or in business) helps to keep the bonds of family strong over generations. Giving together publicly demonstrates a family’s core values and unites them behind a common cause.

3. To strengthen their voice: organizations with a clearly defined purpose, often exemplified by a philanthropic strategy, typically experience more growth, have higher customer satisfaction, and have a reputation as champions for their community. Philanthropy is increasingly a key component to a strong brand.  Now that you have an idea of what motivates family businesses to do this work, we can talk a bit about how it can be done successfully.

First, start with WHY. As I always say to our clients, no one has to engage in philanthropy. Getting comfortable with doing a deep dive into motivations is key. What exactly are you looking to get out of it? Do you want to financially support some really incredible work that's already happening in your community? Do you want to engage your employees with volunteerism? These kinds of questions are important to ask yourself, because they will determine what type of nonprofit organizations you might work with, who should be involved, and what level of engagement will be necessary. 

You can find lots of advice and advisors who will tell you how to develop a CSR program in a quick and easy fashion that has a big return on investment, but Phīla does not believe in shortcuts. In this day and age, insincerity and slapdash programming are easily detected and you could end up doing more harm than good to your business. Take your time to ask yourself the right questions.

Decide on your goal or vision. When deciding on where you will have impact, it is not enough to simply settle on the vision that your CEO or founder is partial to. Vanity projects will only get you so far. Instead, create a thoughtful and intentional process that brings together family, customers, and employees to determine which issues lie at the intersection of the business’s mission and the unmet needs of your community. Spending time on deciding how the values the business espouses connect with your philanthropy will make it easier to make decisions in the long-run.

The objective of this exercise isn’t to arrive at a goal that sounds impressive. In fact, the simpler it is, the better. The goal is to arrive at a vision for your community that your company is best equipped to play a part in creating. The temptation is to jump right in to picking issues and organizations to support, but in reality, having a program you can be proud of and that has longevity requires learning about your community, listening for understanding from your stakeholders, and building trust. It takes time.

Don’t be afraid to take a stance. At this moment, during the ongoing uncertainty of the pandemic, a fragile political environment, and calls for racial justice growing by the day, taking a stand means it’s likely that you won’t make everyone happy. The company must be prepared to decide if it is okay with losing business from certain groups since taking money from those groups would run counter to its philanthropic values and strategy. Being consistent and knowing the issues at hand are as important as ever. A couple of examples of how businesses take a stand on issues important to them are restaurants that make public that they’re discontinuing their use of plastic straws and telling customers why; or retailers who actively reach stock suppliers of color and state why they find it necessary. You get the idea.

Establish mutually beneficial partnerships with nonprofit organizations by doing the legwork to understand your company’s role in the broader ecosystem surrounding that goal. Get to know the community on a deeper level and learn how the issue you care about has had an effect, past and present. Think about what you really want to get out of your relationship with the community. If it's a big employee-driven, social justice initiative that the company really wants to step into -- like what Starbucks or Patagonia did with their environmental focus --  then that affects the kinds of conversations you have with nonprofits. You're not going to be working with a small community-based organization. They don't have the wherewithal to respond, they don't have the data, the metrics that a marketing team is going to need or want to justify it. That's going to be your much larger, maybe national, organizations that can meet you eye-to-eye, head-to-head, and give you the types of things that you really need. Conversely, if you're looking to be embedded in a community, then that's a different kind of conversation with maybe smaller organizations.

Family businesses understand the need to partner with nonprofit experts on the issues they care about, and even more so if they are looking to engage with communities of color. It is important to ensure that these are not token partnerships, but authentic and mutually beneficial for both the business and the local partner. (For a deeper dive into embedding racial equity into corporate social responsibility, check out a webinar I participated in called Turning Statements Into Action.)

Kristin Jarrett, a community and social impact strategist at Booz Allen, advises large and small businesses to meet with nonprofit organizations and ask them about what big problems they are trying to solve and how you can help. She wisely suggests that businesses stepping into the social sector should plan to “do some backwards planning and create ideas around how you could collaborate to really support them (i.e., nonprofits) in their mission.”

Regularly check in on your progress. Philanthropy is an ongoing commitment to achieve a vision of justice or equity in partnership with one’s community. Build accountability into the process from the start. The same diverse group of stakeholders who help set the vision for the program can also set the metrics by which you’ll measure your performance. While there is no legal obligation to meet these metrics, relationships with stakeholders — especially employees and external communities — are regulated by trust. Continued failure to meet stated goals damages this trust and sours the brand. Better to not do it at all if you can’t dedicate real time and energy to this involved yet potentially very rewarding process. 

In its best form, philanthropy in a family business environment is a healthy and mutually beneficial relationship between the business and the communities with whom they interact. The dynamic is also driven by the growing desire of socially-aware consumers and employees to do better for their stakeholders and the world at large.

As you consider embarking upon this work, you will no doubt find joy in connecting your family business with your community in new and meaningful ways. 

Addressing the Emotional Aspects of Wealth: Five Tips for Families

Talking about wealth is almost always emotional exercise. It can bring on a whole range of feelings, many in conflict with one another: guilt and pride, anger and happiness, connectedness and isolation. Yet one of the most common emotions that wealth (or the lack of it) elicits is fear—fear of being taken advantage of, fear of not being liked, fear of not having enough. The list goes on. And further, the devastating effects of the COVID-19 pandemic has blown the cover off of the United States’ stark inequalities. Over 3 million people are out of work, and many more are without reliable access to healthcare. The 2020 COVID metaphor is apt: we are all navigating the same stormy sea, but we’re in different boats. When your boat is large, sturdy and comfortable, it can feel doubly isolating to have so much security when others are struggling for basic needs.

For people with children, these conversations are especially challenging. Just as you are trying to sort out your own feelings, you also must tend to young people who are acutely aware of social inequities and often have excellent questions wondering why they exist. And it’s not just about those who have less. Even for those who have objectively "made it”, all it takes is one look up the social ladder to see that you are still far from the top. In fact, in our climb up the wealth ladder, our gaze is nearly always upward, toward those who have still more, and it fuels desire to join their ranks. But in reality, it’s a losing battle. I once read a Wall Street Journal article that said the difference in assets held by the top .01% versus the top 1% is greater than that between the 1% and the rest. It’s an incredible perspective, yet we rarely turn around and look at those behind us. We tend to focus on what we lack. Children notice these differences too. While we can’t dispatch with these emotions entirely, we can mitigate their influence in our lives by shifting our focus. Here are five ways that might help you navigate these feelings:

1. Struggle is OK. All parents want to see their children succeed and not experience hardships in life. That is normal. However, when a family is the steward of significant wealth, that natural desire takes on much more weight. How do we allow for the natural instincts of parenting while also not becoming “snow plow parents”, i.e., parents who plow every obstacle out of the child’s way to create a clear, unobstructed path to success? Allow your children to try, fail, and learn from failure. 

2. Share family stories that do not involve money. Create a family narrative around who your family is that does not involve what you own. Perhaps it’s your family genesis story, or how it came to be rooted in the city you’re in. We inherit more than money. We inherit a set of mores and values that define our family and ourselves as its members for generations. Share the sayings and anecdotes that make your family unique and bind you to higher ideals.

3. Re-evaluate the purpose of work. If you had the chance to do what you love and not have to worry about being paid for it, would you do it? Most would automatically say ‘yes”, but looking deeper, it may not be so easy to do. We live in a society that says “you are what you do”, and being paid lots of money for your work says what you do is valuable. With wealth, you have the opportunity to rethink the nature of work. While for most, work is a means to an end, but it can also be about purpose, pride, and satisfaction. There’s a prestige to certain professions, but the real challenge is to move beyond social status and focus on what’s right for your child. Be open to their exploration of pursuits that aren’t highly paid. Allow your children to explore work (paid or unpaid) that brings them satisfaction, a sense of purpose, and joy.

4. Acknowledge your privilege. Regardless of how it came to you, there is an undeniable privilege that comes with having money. While money can’t buy happiness, it does buy convenience. Maybe your kids don't need to work during high school. Or they won’t have student loans while their friend is on work-study or is graduating with debt. Recognizing the ease that having wealth affords won’t make your situation similar to your peers, but being more aware of your advantages also recognizes others who have a different experience. No, not everyone will appreciate it, but there is integrity in honesty.

5. Philanthropy benefits the giver as well as the receiver. Philanthropy can be a great tool to help raise children with values and position them to have a healthy relationship to wealth. Giving to others reminds them (and us) of how a strategic yet moral deployment of philanthropic dollars can benefit a family for generations. As Charles Collier stated, “wealth itself is morally neutral, but how it is used is what matters.”

While these tips were written with raising children in mind, they apply to anyone struggling with how to make sense of wealth. And there are certainly more. One of my roles as a philanthropic advisor is to help my clients come to terms with what they have so that they can make good decisions in giving it away. If you find yourself wanting to become more engaged in the public sector in general and philanthropy in particular, but are struggling with how and where to plug in, let’s talk.

Additional recommended reading on this topic:

We Need to Talk, by Jennifer Risher

Uneasy Street: Anxieties of Affluence, by Rachel Sherman

Classified: How to Stop Hiding Your Privilege and Use it for Social Change, Karen Pittelman

Connecting Family Philanthropists Across Generations

There’s a danger in making generalizations about any group of people, however, this blog post aims to share trends within the “Millennial” or “NextGen” demographic and to offer some tips on how to bridge the generation gap between the old(er) and young around philanthropic giving. This post is for parents who are looking to incorporate their adult children in a cohesive family philanthropy program and for professional advisors in financial or legal service as well.

 Millennials, edging out Baby Boomers as the largest generation by size, are generally defined as between the ages of 23 and 38 in 2019. They have come of age during the Great Recession and are thought to be more circumspect about the ability of government and the economy to work on society’s behalf than Boomers or the earlier “Greatest Generation.” 

 Also important is their being the first generation to come of age in the era of digital technology and social media. As a result of 24/7 connectivity, their interests span the globe and their relationships, built in person or online, are vitally important to their sense of self. This generation’s need for information and connectivity drives their decision making and has had a profound influence on the charitable sector this past decade. Research shows that as a whole, this generation is passionate, result-oriented, and ready to engage.

 Knowing all of this, it’s crucial that if multi-generational philanthropy is to be successful we must know how to connect with each other effectively in order to harness our passion and resources, for this is the only way to make a true impact on the issues that animate us.

The Millennial Wealth Transfer

If your family has plans to pass wealth onto your adult children, you are far from alone. Some $58-trillion, including $6.3-trillion in charitable bequests, will change hands between 2007 and 2061, according to an updated version of a study by the Boston College Center on Wealth and Philanthropy. By talking with your kids now to explore their philanthropic passions, you are not only preparing the next generation for their coming wealth, you are also deepening your relationship with them around the values and ideals that make your family unique. This is a foundational step in family philanthropy. Incorporating meaningful discussions (beyond the technical details of money) as a part of family gatherings can bind and solidify ties across generations. 

The ”NextGen” Approach to Philanthropy

In general, Millennials are more than twice as likely to donate to a charity than those aged 55 and older. But that doesn’t mean that this generation is interested in giving the same way their parents and grandparents do. There are three ways in which they differ: 

1.    They are the most likely to choose a charity based on a recommendation from their peer network. Fundraisers, crowdsourcing, and social-media event challenges are examples of the power of Millennials to raise millions using influence campaigns.

2.    They want more than glossy photos and vague promises of ‘good work’ done by charities. Instead, they are more focused on data and impact than earlier generations and have strongly influenced the data trend in philanthropy: “Young people want impact they can see, and they want to know that their own involvement has contributed to that impact,” according to the 2012 NextGen Donors Report.

 3.    They are also more willing to give to those outside their social and economic class. While the older generations typically give to organizations that have a direct impact on their daily lives, NextGen donors are more likely to give outside their sphere of influence (e.g., global giving, race and social justice).

Starting the Conversation

If you’re reading this blog, you are likely more philanthropic than most. Your 20/30-something children may also already have some ideas of their own regarding philanthropy. Get on the same page by reading some of the latest ideas on this generation’s approach to giving, such as Generation Impact: How Next Gen Donors Are Revolutionizing Giving by Sharna Goldseker and Michael Moody. Then, sit down for a conversation about where your values align.

For those who aren’t so keen on philanthropy yet (or just aren’t at the stage in their life to think about it much), remember to take some time to get to know them as unique adults as well as their current interests. By engaging with them about who they are as people beyond your experience of them as small children, you are much more likely to set the stage for more thoughtful conversations as you begin working together.

You can also encourage them to become involved in philanthropy by encouraging them to volunteer or follow a few organizations on social media; you can even offer to make financial contributions in their name to groups that they are developing an interest in. And finally, be sure to let them know that you’re there for them when—and if—they want to talk more about charitable giving.

For those who are ready to think about giving more intentionally, your conversation with them will be a bit different. You might start by asking them questions like:

Are there issues you’re particularly passionate about? How are you involved in these issues right now? Is there a way I can be involved to support your efforts?

Tell me about a charity you donated to in the last couple of years. What attracted you to them?

 Are you giving just money to the organizations you care about? Are you also interested in sharing your talents and time as well?

Organizations like National Center for Family Philanthropy offer excellent opportunities for multi-generational families to network and collaborate with like-minded peers.

Philanthropic Advisors Can Help

Before launching a philanthropic program for your family, you will want to clearly outline your family’s values and general objectives. For many, giving is an emotional response to a particular appeal or an exciting new approach to getting involved in something larger than themselves. There’s nothing wrong with letting your heart guide your charitable wallet, but at the end of the day, a person who gives haphazardly, particularly if they have significant resources, can be left to wonder what their overall charitable impact has been. And as we know, younger generations are especially attuned to assessing impact. 

 Philanthropic advising is increasingly being integrated into the wealth planning of high-net-worth individuals. We can help you define your philanthropic goals and understand how the charitable sector is addressing specific causes. Better informed givers are more impactful givers, after all. Phīla can serve as a trusted advisor on your service team to help you discern your philanthropic strategy and create long-term social impact.

 Our work focuses on what inspires your family and finds ways to connect the various passions of each member or generation and fuse them to create an overarching giving plan for the family unit as a whole. Our aim is for our conversations to leave you feeling hopeful and excited about the work ahead. The best outcome for family philanthropy is seeing everyone ready to move forward with clarified goals and bold new ideas that will speak to multiple generations now and those to follow.