“PAM” Article – A New Approach to Giving Back


Categories: News

Printed in Private Asset Management

by Page Snow, Chief Philanthropic Officer, Foundation Source

Many advisors are aware that over 98% of high-net-worth (HNW) clients donate to charity, and they are increasingly incorporating philanthropy into their client conversations. However, they may not appreciate that discussing philanthropy is no longer an optional ‘extra.’

These days, most clients expect their advisors to discuss philanthropy. In fact, a 2013 US Trust & Philanthropic Initiative study found that 90% of clients want this discussion to occur within the first several meetings with an advisor, and 34% feel that the topic of philanthropy should be raised during their very first meeting. The same study found that advisors stand to gain from meeting this expectation: 64% of financial advisors found that discussing philanthropy with clients has helped them build relationships with other members of the clients’ family.

Although incorporating philanthropy into client conversations is clearly a must, the content of these is also important. Advisors frequently assume that clients are primarily interested in the tax implications of their giving, but our experience suggests that HNW clients approach philanthropy through ‘softer’ issues such as legacy, how they’d like to impact the world, and their hopes for their family. Although tax implications are certainly important for a client considering a private foundation, we fi nd that the following concerns predominate:

  • Legacy: Older clients often think about how to leave an enduring legacy. A private foundation that bears their name and exists in perpetuity may be very appealing as it confers a piece of immortality— a repository for their memory, values, and ideas that will be passed down through generations.
  • Second career: Baby Boomers are often ready to leave their business careers, but not ready to retire completely. Starting a private foundation opens the door to a new and rewarding career.
  • Giving back: It sounds obvious, but it bears remembering that successful individuals of all ages want to give back to the regions and institutions that nurtured their success.
  • Family: For families of wealth, a private foundation meets a multitude of needs. It provides a way to pass on core values, and helps families overcome geographic (or emotional) distance by providing a ‘non-Thanksgiving’ reason to meet on a regular basis. A foundation also builds life skills because the competencies needed to run an effective foundation (investment management, due diligence, measuring results, etc.), are the same ones children will need to responsibly manage their inheritance and become successful adults.
  • Satisfaction: After your client has completed an estate plan, bought all the toys, and traveled the world, the one thing left that gets them really excited is doing something significant for society. These individuals want to move beyond writing checks to their favorite causes and become problem- solvers like Bill Gates, who might one day be better remembered for eradicating malaria than Microsoft. A private foundation supports almost any charitable strategy, enabling clients to give directly to individuals, make program-related equity investments and loans, award scholarships and prizes, etc. Whether they want to develop a Zika vaccine or an inexpensive way to remove lead from drinking water, a private foundation provides the ideal vehicle for clients to leverage their business skills, contacts, and life experience to try out bold, innovative solutions.

To meet any and all of these primary drivers, advisors should be aware that there are now third-party administrators that relieve the administrative burdens historically associated with private foundations. Foundation management companies can establish a private foundation in less than a week (with as little as $250K in initial funding) and provide a complete end-to-end philanthropic solution that takes care of all your client’s needs. The client gets the fulfillment and enjoyment of effective philanthropy, and the advisors get to focus on their core competencies of investment management.