Judy Spalthoff, head of business development for UBS Americas’ private wealth management and wealth management advisor group, explains the Swiss bank’s approach to bonding with next generation clients through philanthropy.

Judy Spalthoff, head of business development for UBS Americas’ private wealth management and wealth management advisor group, explains the Swiss bank’s approach to bonding with next generation clients through philanthropy.

UBS Wealth Management Americas, along with a number of its peers, is putting philanthropy front and center in its efforts to connect with next generation clients – aware, no doubt, that various studies have identified charitable giving as a real priority for them. But while the notion of a next gen philanthropy program certainly warms the heart, firms need to put much more thought into their implementation than first might appear, a top UBS Wealth Management Americas executive told Family Wealth Report in a recent interview.

Judy Spalthoff, who has held her current role since 2008, oversees the Swiss bank’s efforts  in the Americas to connect with the children of clients, and a big part of this program is helping younger clients to channel their philanthropic inclinations and join forces with like-minded individuals. But, while they are certainly rewarding - both on a business basis and more widely - philanthropy-focused next gen programs are clearly no easy option, Spalthoff warns.

Merely paying lip service to good causes is not the way to really connect with younger clients; they certainly seem to be more engaged with philanthropy, but the very reasons why they are more interested mean that they are engaged in a different way to preceding generations, in Spalthoff’s view. This means that wealth managers have to be very thoughtful in putting their programs together.

Many senior executives have spoken to Family Wealth Report (and sister publications WealthBriefing and WealthBriefingAsia) about how powerful philanthropy can be as a “hook” to forge deeper connections with younger clients, but a question which crops up again and again is why younger clients are so “into” helping good causes. The question is of paramount importance since it underpins how to make a next gen philanthropy offering really appeal and fulfil its ultimate business purpose: to build bonds early on and head off the outflow of assets which often occurs when wealth transitions to the next generation.

For Spalthoff, like many of her peers, the explosion of social media has been the main driver in establishing philanthropy at the forefront of next gen clients’ minds. Put simply, she says that social media (along with today’s internet culture more broadly) has “made the world a smaller place” where it’s far easier to form an understanding of the plight of people perhaps thousands of miles away. Whereas for older generations it may have been easy for issues to have slipped completely below their radar, today’s young philanthropists get “minute by minute” updates on issues in powerful images, Spalthoff explained. The democratization of information wrought by the pervasiveness of the internet goes a long way to explaining why younger clients do seem to be so much more involved. The older wealthy generations have of course always been generous to charities, but “there’s just more awareness now”, she notes.

Taking action

But as well as being more informed about global problems, social media also makes it easier for next gen clients to actually do something about them, Spalthoff continued. In essence, social media enables budding philanthropists to “rally peers to a cause”, she explained, adding that a real sense of community quickly builds up around charitable initiatives; while sharing their efforts with others is certainly not “showing off” it can “create a groundswell of support very quickly” and young philanthropists are keen to leverage models like crowd-funding to bring good works to fruition. Wealth managers take note.

Underpinning the success of these approaches is the notion of creating an “aspirational peer group” – a technique which can be used to great effect for sales, but which can also be harnessed to create the kind of emotional resonance which wealth management brands need to establish long-term loyalty. (Creating an emotional connection to a financial services brand is of course far harder than for, say, luxury cars or gadgets.)

While older generations of client would probably have either bequeathed a large sum to a well-known charity, or establish a foundation or endowment in their name, for younger clients philanthropy is a far more hands-on affair, notes Spalthoff. “A lot of the next gen that we’ve got to know really well and who have attended some of the events we’re run are absolutely hands-on. That’s a big difference between them and their parents, if their parents wrote a large check to build a church in Uganda or something like that, these kids - if they had the same passion for that - would want to go help build the church,” she said. “They want to be active…they want to understand what’s going on, they want to meet the people who are benefiting.”

Thirsty work

UBS itself clearly has hands-on philanthropy very much in mind as a next gen event with one of the bank’s philanthropic partners, charity: water, illustrates. Having heard the charity’s founder Scott Harrison talk about the charity’s work in providing drinking wells (predominantly in Africa), 30 attendees were challenged to carry ten 40lb jerrycans of water to a dinner half a mile away – a feat which they carried out in 30-degree heat and which won them a $10,000 donation to charity: water. Despite the difficult nature of the task “many attendees actually said that that was their favorite part…and it really made them understand how painstaking it is, even when there is a well built, to move water from one village to the next,” Spalthoff explained.

UBS is clearly putting its money where its mouth is, but it’s also making big inroads in establishing that all-important emotional connection. As well as positioning itself as a socially responsible business which is committed to helping clients achieve what Spalthoff calls their “personal missions”, initiatives like the charity: water event also provide another invaluable service to younger clients: helping them to mature and develop their own international networks of like-minded peers. As Spalthoff explained, it is common for attendees at the bank’s events to quickly join forces on issues drawn to their attention; the bank also helps those who already have a cause in mind to form networks to further their aims. “A lot of the interest that we’ve seen is next generation really rallying around and really putting their money to work in a more substantial way, understanding that their million dollars will go far but that the other nine million which can come from other partners or people like them will create a group of $10 million which is absolutely going to be more effective,” she said.

Not only are such networks good for the charities in question, but they are also boon to younger clients socially. It is an often over-looked fact that extreme wealth can be extremely isolating – particularly for the young – and so anything which wealth managers can do to help with this will doubtlessly go over very well. Philanthropic programs for the next generation will also play well with parents, many of whom will be rightly very worried about their children’s imminent wealth warping them. In a recent interview with Family Wealth Report, Sharna Goldseker, director of 21/64 - a program that specializes in engaging the next generation in charitable giving - pointed out that philanthropy can help Gen Y-ers overcome  a “paralysis of prosperity and possibility” and to develop a more positive wealth identity. Indeed, a recent US trust survey found that 65 per cent of HNW parents would rather their children grow up to be charitable than wealthy and there is a growing recognition that wealth managers need to be fulfilling a wider role in terms of client families life goals, both financial and non-financial.

It seems then that the kind of philanthropic efforts that UBS and others are making are right on the money - and not only in terms of boosting their own reputation and bonding with future clients in a “non-salesy” context well before wealth transfer occurs. Several commentators who are somewhat skeptical of the value of next gen programs have in the past pointed out to this publication that banks should perhaps focus on the clients they currently have rather than eyeing those of the future so much. However, it is easy to see how wealth managers’ philanthropic programs actually do just that by helping wealthy parents to achieve invaluable peace of mind over the future course of what is for most of them their most precious “asset” of all: their children.