Understanding Family Philanthropy
Philanthropy can be a crucial building block for generous donors seeking to create multigenerational wealth within their family. Engaging in collective philanthropic actions can have many benefits: from enhancing family leadership and governance, to defining a family’s long-term identity through creating purposeful family legacies.
When done strategically, family philanthropy can be a cornerstone to establishing a legacy of generous donors. A thorough understanding of how wealthy families engage in collective philanthropy is helpful for nonprofit organizations to secure longevity in their major gifts pipeline.
ENHANCING FAMILY LEADERSHIP AND GOVERNANCE
Philanthropic endeavors provide significant insight into a family’s dynamic by providing family members with a platform to learn about their own interests, passions, skills and preferences within the family context. Some members might be visionaries, networkers or organizers, while others are researchers, evaluators or case promoters – philanthropy draws on all of these skills.
Family foundations, charitable trusts or Donor Advised Funds (DAFs) can therefore be great precursors to practicing family governance, serving as a relatively “neutral” ground for exercising family interactions and learning about each other. They allow an opportunity for better mutual understanding: how to deal with challenging family relations, manage conflicting viewpoints or how to make room for collective decision-making.
For older generations, philanthropy provides a meaningful venue to stay involved in family matters by helping younger generations build their identity and prepare to fully participate in family decision-making. All of these elements support family integration and cohesion by aligning a family through a common cause that becomes a source of pride.
STRENGTHENING FAMILY IDENTITY
Aside from facilitating governance, family philanthropy is a great tool for synchronizing values across generations. According to many seasoned wealth planning experts, families too often focus on technical aspects of the process, such as tax planning, portfolio management and estate planning, when building a wealth continuity strategy. Yet, “the best planning occurs when the family anchors itself in knowing the purpose and goals for their wealth. These are questions less about managing a portfolio’s value than about cultivating and preserving the family values”. 1
Values are an important part of family identity since they act as guiding principles in difficult situations. Family philanthropy taps perfectly into these evolving values, which guide wealth decision-making.
Philanthropic engagement also allows the elder generation to share family history, beliefs and basic principles, thereby passing on family values from one generation to another. At the same time, it provides an opportunity to incorporate the NextGen’s perspective — to hear their voices, allow them to challenge existing organizational systems and confront the family with new ideas or technological solutions.
It is this multigenerational interaction that ensures family continuity – anchoring the family identity in the past while orienting it to the future.
ADDING MEANING TO LEGACY
Philanthropy also contributes to creating an ethical and “spiritual” continuity of the family. Philanthropic legacy in the context of multigenerational wealth is a passing torch – an element linking the past with the present and future. Engaging family members in charitable activities that are in line with the family history, beliefs and passions creates an intangible and transcendental continuity between multiple generations of the same family.
In a broader sense, philanthropic legacy is a social impact footprint left by the family on the community in which it operates. By choosing the level of commitment and type of actions taken to improve matters on local to global levels, families can define how they would like to be remembered by the communities they serve.
Philanthropy can be a useful tool for creating family wealth continuity. It helps to strengthen family leadership and governance, reinforces family identity and allows for creating meaningful and lasting legacies. Philanthropy is worthwhile for any family concerned with family wealth continuity when developing a multigenerational wealth strategy.
ENGAGING A FAMILY OF GENEROUS DONORS
For fundraisers working with affluent multigenerational families, it is important to understand the fundamental functions that philanthropy fulfills in the context of wealth planning. Nonprofits seeking to engage major donors can tap into the passions that drive a family of philanthropists, and in turn create opportunities for dialogue with prospect families that build durable relationships.
When engaging potential major donors as a family, nonprofit organizations also have the opportunity to help shape the identity and legacy the family wants to create. One approach is through education campaigns or bespoke events and experiences that evangelize a family to a specific mission. Another would be to identify and create suitable and effective philanthropic vehicles that are unique to that family, perhaps naming an award or initiative in their honor so the family feels a distinct sense of ownership.
Above all, a family of generous donors can offer nonprofit fundraisers sustained support, both as a major giver and as a champion of the organization’s mission. An understanding of what drives a family and how those passions align them collectively as a unit are crucial to establishing a robust pipeline of major donors for generations to come.
1- Mark Haynes Daniell and Tom McCullough, Family Wealth Management. 7 Imperatives for Successful Investing in the New World Order, Wiley, 2013.
For further information go to: www.philanthropoid.it
This article was written for Wealth-X, a global information company focused on the wealthy.