GUEST ARTICLE: Engaging Philanthropy’s Next Generation: What Wealth Advisors Need to Know

Sharna Goldseker and Michael Moody September 26, 2017

GUEST ARTICLE: Engaging Philanthropy’s Next Generation: What Wealth Advisors Need to Know

Next gen donors are not only earning, inheriting, investing, and giving at younger ages, but they are proactively discovering who they are early on as well, the authors of this article say.

Philanthropy is as readers know a regular talking point in these pages and one subject that comes up is how philanthropic endeavors can help bind the future generation towards the intelligent stewardship of wealth and talent.  Sharna Goldseker and Michael Moody are coauthors of a book examining this issue: Generation Impact: How Next Gen Donors Are Revolutionizing Giving (Wiley, to be published October 2.

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For decades, wealth advisors and their firms have been building their clientele one successful patriarch or matriarch at a time. Imagine their dismay when, after the client passes away, they discover they have rarely (if ever) met that client’s beneficiaries, let alone talked to them seriously about money or giving.

These advisors then watch as the money they’ve been investing and the relationship they’ve been painstakingly managing for half their career walks out the door. In fact, research shows that only 45 per cent of children stay with their parent’s advisor after their first parent passes away, and only 2 per cent remain after the second parent passes away.

Plenty of advisors tell themselves that they will retire when their clients retire. While this strategy has worked for many, average life spans are increasing in the United States, and advisors as well as their clients are living longer, retiring later, and bringing their children into their business, philanthropic, and financial affairs at earlier stages. In fact average life span in the US rose from 47.3 in 1900 to 76.8 in 2000. To be successful today and in the future, advisors need to actively build relationships with next generation clients, decode their interests, and become their trusted partners as they give away unprecedented amounts of money in the coming Golden Age of Giving.

The Center for Wealth and Philanthropy at Boston College estimated that $59 trillion will pass from older generations to their Gen X and Millennial children - a historically massive wealth transfer that is already underway, continuing through 2060. This inherited largesse, coupled with the extraordinary new gold rush occurring in places like the tech mecca of Silicon Valley and the hedge fund headquarters of Wall Street, have created a new market the likes of which the financial advisory field has never seen before. 

Rather than waiting until the sunset of their lives to amass their fortunes, plan their estates, and begin to contribute to charity, Generation X and Millennial adults are accumulating wealth at younger ages and eagerly investing and donating that wealth now, not later. In our forthcoming book we reveal the changing insights and giving strategies of these significant yet little known next gen donors - those who will be the clients of advisors for decades to come. We surveyed 21-40 year olds from high-capacity families first-hand, and interviewed 75 next gen earners and inheritors to capture, in their own words, how they approach giving.

The majority told us they were proud to inherit a profound legacy from their predecessors and many are actively engaged in family enterprise activities. While a previous generation of clients and advisors used to prepare to pass the baton to the next generation, waiting until elders passed away or stopped making active decisions about their assets before transferring control to their next generation, today elders are living longer and engaging their children – and even grandchildren – in asset management and multigenerational philanthropic boards during their lifetimes. 

Often this is at the strong urging of that next generation, who want to learn and engage alongside their elders while they are still around. In many cases, the next generation have been engaged in conversations with their elders about responsible stewardship since they were young. In a few cases, advisors have facilitated these multigenerational partnerships and conversations for their clients. But this a role more advisors need to play.  As wealth advisors grapple with navigating generational differences and family dynamics on top of their usual duties of investing funds, producing returns, and meeting the family’s financial goals, they are looking for resources to help them tackle these new demands.

Advisors who once measured their success in number of new client transactions and rate of return are beginning to realize that they need to build the “soft skills” to serve the whole family’s needs - not just invest in and manage portfolios.  Those who can facilitate not only the wealth but also the human side of wealth are truly excelling. They are not only selling products and services, but are asking questions, hearing what families need when other advisors aren’t listening, and building relationships with the next generation of a client family – or in other words, their future clients. 

Of course, the next generation of donors and advising clients are not all inheritors. There are plenty of Gen X-ers and Millennials earning their own wealth – often in staggering amounts – and they too are eagerly looking to use that wealth for the public good earlier than previous generations. The advising industry has always been acutely aware of the need to cultivate those with new wealth, but doing so now requires a better understanding of what the next gen wants to do with their wealth.  For example, our research shows that one passion shared deeply and widely across both next gen earners and inheritors is impact investing.

Gen X and Millennial clients are keen to make values-driven decisions in all aspects of their life. On the investment side, this means they are looking for investments with double and triple-bottom line returns, asking their advisors to screen out industries which negatively impact society and invest in industries with positive social and environmental practices, as well as financial returns.

Those advisors who can respond to these requests are bringing new meaning to the term value investing and attracting the next generation of clients. One thing is for sure from our discussions with next gen donors: impact investing is here to stay.  One way advising firms and established advisors are trying to better serve next gen, philanthropically-minded clients is by hiring next generation advisors. These younger advisors are building their books of business squarely on relationships with their peers geared to the interests and passions of those peers. But the need is too great for this to be the only solution. Older advisors need to learn and deploy those skills that best meet the needs of next gen clients. 

Those professionals who are most skilled at facilitating purposeful conversations about life, presenting options for doing good with both investments and gifts, and understanding the unique lifecycle stage these next gens are experiencing, will be the ones who build lasting bonds as trusted advisors in this new Golden Age. Next gen donors are not only earning, inheriting, investing, and giving at younger ages, but they are proactively discovering who they are early on as well. Successful advisors will be there to help them along the way. 

About the authors

Sharna is executive director and founder of 21/64, the nonprofit practice serving philanthropic and family enterprises, offering Multigenerational Training for Advisors and other industry-leading tools to help families who give to define their values, collaborate, and govern. Michael is the Frey Foundation Chair for Family Foundations at the Dorothy A. Johnson Center for Philanthropy at Grand Valley State University, the nation’s first endowed chair in family philanthropy. Leading experts on multigenerational and next generation philanthropy, their work has been featured in The New York Times, Washington Post, Forbes Stanford Social Innovation Review, and Chronicle of Philanthropy.

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