According to new global research from Ocorian, the global provider of services to HNWIs and FOs, rising wealth managed by FOs is driving an increase in philanthropy. Out of 134 Family Office investment managers, globally responsible for around USD 62.425 billion in assets under management (AUM), 46% strongly agree that as FOs increasingly manage significant wealth, there is a growing realisation for succession planning. Moreover, 91% of FO professionals said charitable giving is set to increase over the next three years.
However, only 25% of those questioned are currently receiving support from third parties through philanthropy. This is set to increase in the future, with nearly two-thirds (62%) expecting more outsourcing for philanthropy over the next three years and 23% expecting it to increase dramatically.
Still, FOs are often tasked with facilitating the family’s philanthropy despite limited knowledge and resources. What are the best practices for the philanthropic function in the Family Office? The US consultancy Plante Moran outlined some of them.
01 Finding a common Purpose and Focusing philanthropic Efforts
The goal is not to shine a spotlight on individual differences but rather to find areas of consensus and agreement. For some families, these discussions flow naturally, while others find it helpful to have a third party facilitate them. Some focus on family legacy and allow for support across geographies and programmatic themes, while others target specific places and community needs. There is no right or wrong; the process of having the discussion is often as valuable as the statement itself. It is good to remember that while the family’s core values might remain constant over time, the philanthropic mission and its execution likely will evolve.
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02 Engaging the next Generation
Younger family members, in particular, may struggle to understand and contribute to broader family objectives. Stewardship means more than just sending money to organizations. An increasing number of families are giving both their money and time to charitable causes. This is a creative process; there are many ways in which families encourage service to achieve broader participation in charitable activities while also providing clear guidance to family members.
03 Teaching Children about Stewardship early
At a relatively young age, let´s say adolescents, children can and should be exposed to the family’s stewardship process. This can easily be turned into a simple exercise in which kids brainstorm how they currently—and could potentially—help others using these four resources. Older family members can share how they do the same. Other activities to engage young people include sharing the family mission as well as examples of meaningful ways the family has provided community support—not only in terms of large gifts. It is worth considering giving each child a modest amount to donate to an organisation of their choice. The key is to get started, to be gracious as missteps occur, and to learn from the process.
04 Embracing philanthropic management activities
Most FO offices must manage multiple philanthropic buckets, including donor-advised funds or private foundations. The best practice is to embrace the most compelling activities and delegate the other tasks. The goal is to simplify the management process while ensuring the foundation and its directors both fulfill their fiduciary responsibilities and enjoy their philanthropy.
05 Aligning philanthropic investments with core values
Many families take a more passive approach and make charitable contributions through their private foundations to public charities. Mission-related investments (MRI) could be a better solution. They have many forms, from socially responsible investments focused on environmental, social, and governance practices to programme-related investments that complement the family’s philanthropic contributions. One example would be funding programmes that support the homeless while also investing in low-income housing. One is a grant, while the other is a long-term investment, both of which address housing insecurity.
