From the April 2009 issue of Wealth Manager Web • Subscribe!

Living the Legacy

Today's philanthropy is not your father's philanthropy. Just as modern entrepreneurs and wealthy individuals no longer wait for retirement to enjoy the fruits of their labor, neither are they content to create posthumous legacies. Advisors must be prepared for the spirit with which this new generation tackles its charitable giving. These 21st century donors are actively engaged in philanthropy that pushes creative boundaries and involves multiple generations of family, as well as friends. As the pace of these changes accelerates, advisors will have a strategic opportunity to show true leadership by helping their clients link living and giving.

Evolution of American philanthropy

Today's charitable giving represents the latest chapter in the ongoing interplay between philanthropy and society. America's philanthropic tradition is commonly traced to the early capitalists, who supported the development of universities, hospitals, museums, theaters and an array of programs to help the less fortunate. They created opportunities that launched the next generation of successful entrepreneurs, who in turn forged their own philanthropic legacies.

More recently, philanthropy's culture has been shaped by the values of those who came of age during the Great Depression and World War II. This generation of American philanthropists--the "traditionalists"--gladly gave to well-known "pillar-of-society institutions" such as the symphony, a museum or their alma mater because it was "the right thing to do." Many of these funders gave with no concept of a grant-making portfolio; impact and strategic outcomes received little attention.

Today charitable giving is more complicated. Family philanthropists depend on a wide variety of structures to distribute a range of assets as part of countless giving strategies. And with more than one million charitable organizations in the United States vying for philanthropic support, willing recipients are not hard to find. Faced with this complex environment, today's donors--from Baby Boomers to up-and-coming Millennials--are ready to fashion their own legacy as a part of America's philanthropic heritage.

The Baby Boomers were the first to signal that substantial change was on the horizon. They came of age in an era of protests, political assassinations and global competition. Just as financial firms have adapted to the more self-realized, entrepreneurial Boomers, philanthropy has grown from check- writing (as an alternative to taxes and means to give back) to a highly engaged, results-oriented endeavor by knowledgeable practitioners who want to live their legacy now rather than leave it behind.

A decade ago, it wasn't uncommon to hear traditionalist donors say that their children weren't yet ready to participate in the family's philanthropic initiatives. Now, as more and more Boomers have taken over their families' philanthropies, they haven't waited to involve their children and grandchildren. But even the Boomers' shakeup of traditional philanthropy may soon be dwarfed by what their children do.

Members of Gens X and Y came of age during a time when the job market and economy seemed unpredictable and irrational. As a result, they're less certain that hard work is always enough to lead to a better way of life. As donors, these generations can be both practical and thoughtful; they are "social change" activists who want to empower people to succeed. They seek systemic change rather than immediate solutions.

Next come the Millennials, whose intuitive use of technology already drives philanthropic decisions that are virtual, viral and dynamic as seen on sites like Facebook Causes, Kiva and Donors Choose. At the same time, technology continues to reshape how the philanthropic community addresses social issues and how donors connect with the people and organizations they support. Accustomed to rapid access to information and instant communication, Millennials are as likely to fund a social entrepreneur in India as to create their own nonprofit organization to tackle a homegrown issue.

A multigenerational approach

As these generations begin to work together, they influence one another and the pace of change accelerates. Yet, integrating generations is not always easy. For example, the parents in one of our client families feared their children weren't interested in philanthropy because they didn't share parental concerns for the symphony and other traditional causes. In fact, the children's philanthropic interests are strong, but focus on protecting the coastlines they've come to love through surfing and sailing. Enabling younger generations to connect to their own tangible issues cultivates their philanthropic zeal.

The modern multigenerational approach to philanthropy holds much promise despite its complications. As giving trends shift from low to high engagement and from passive to active philanthropy, wealthy families and their advisors need to harness the energy of each generation. One family we know not only identifies organizations they want to fund online but, despite initial misgivings, also allows the Millennial children to videotape site visits for posting on YouTube.

Change is also evident in the desire of today's donors to measure effects, not just activities. Consider a halfway house whose mission is to help individuals transition to more productive lives. It's not enough to measure the number of clients served. The organization--and its donor--also must look at how clients fare once they leave the program. Similarly, a conservation effort to save an endangered species must do more than buy land or ban hunting. It must also ask whether those actions contribute to the species' long-term survival.

This higher engagement, impact-oriented giving fits perfectly with a multigenerational approach, harnessing Baby Boomers' creativity and focus on the bottom line, while using later generations' strengths in accessing information, rapid communication and interpersonal community involvement.

Getting help

Getting the right support is critical to making family philanthropy a joy rather than a burden. Wealth managers who recognize these shifting trends are uniquely positioned to serve philanthropically-minded clients by developing their own skills or by partnering with other professionals experienced in giving money away both wisely and effectively. Start by helping your clients identify some or all of the following:

? Legacy or impact the family hopes to create ?

Causes it hopes to influence ?

Strategies to effectively achieve that impact ?

Means to incorporate the voice of several generations?

Nonprofit partners who can help implement these strategies ?

Results the family should expect to see ?

A realistic timeline and process for assessing impact.

This multigenerational approach has great potential to effect the ultimate definition of the 21st century donor: A conglomerate of generations that seek innovation and social impact, expect accountability and want to see a quantifiable social return on philanthropic investments. Effective philanthropy--making gifts that make a difference--is as challenging as finding investments that offer a substantial return, and it requires a similarly disciplined approach.

Holli Rivera (Holli@ArabellaAdvisors.com) is director of family philanthropy at Arabella Philanthropic Investment Advisors in Washington, D.C.

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