Six Trends in Family Philanthropy

Long gone are the days when a family who wanted to make a positive impact on the world and leave a lasting legacy had only a few avenues to set their philanthropic goals in motion.

Today, the options to make a philanthropic impact are more varied than ever. It’s an exciting time to be sure, but it can also be bewildering. Throw in the complexities of the new tax law that was enacted late last year, and many families are scratching their heads as to what it all means and what’s available to them.

“The good news is that families are looking for more ways to give, and there continue to be more and more opportunities available to them today to make a real impact,” explains Scott Winget, Senior Managing Director, Head of Family Enterprise Consulting for Cresset Family Office. “Once a family understands all of the different ways available to them to give back (and forward), I find that they are incredibly enthusiastic about putting their philanthropic vision into action.”

Winget highlights the following six trends in family philanthropy:

1. Multiple Mechanisms to Give Back

There is a strong desire among families of significant wealth to utilize new and different ways to use their resources to make an impact. Fortunately, the number of vehicles to make that impact has exploded. The following are just some of the options available to families:

  • Direct Gifts and Pledges
  • Private Foundations (operating and non-operating)
  • Donor Advised Funds
  • Charitable LLCs (such as the Chan Zuckerberg Initiative)
  • Community Foundations
  • Supporting Organizations (Type I, II and III)
  • Charitable Lead Trusts (CLT)
  • Charitable Remainder Trusts (CRT)
  • Impact Investing (Notes, Equity, Funds, etc.)
  • Qualified Opportunity Zone (QOZ) Funds

“Families should not be intimidated by this diversity of giving and impact options. It’s a very good thing, as it gives families the flexibility and creativity to develop a philanthropic approach that closely aligns with their vision and values,” Winget says. “Simply put, it’s causing families to think more creatively about how they give back.”

2. Making an Impact AND a Return

To put it bluntly, it used to be that for a family to make an impact on the causes and communities they cared about, they had to give away their money. That’s still a noble approach, but many families are now putting their money into “impact investments”, which allow them to make the sort of social / environmental impact they want to make, but also make a return on those investments and then redeploy the capital over and over. Examples include investing in affordable housing developments, renewable energy companies, or clean-water technology firms.

“More and more families are viewing charitable gifts as just one element of the impact they can make,” Winget explains. “Yes, there was a time when charitable gifts were seen as really the only way for a family to make an impact for the greater good. Now, they are looking at impact investments, and it’s very exciting, especially the ability to leverage the capital again and again. I think of it as a truly win-win scenario.”

3. Thinking Globally

Unlike their parents or grandparents, many millennials and Gen Xers view philanthropy from a much more global perspective. That is, they are less focused on making an impact on their immediate communities, such as funding a local college or university that they attended, but rather are exploring the most pressing needs at a global level. That could be supporting malaria elimination efforts or sustainable agricultural practices in third-world countries. In addition, they are also more hands-on in their desire to make a difference in person rather than just a cash gift.

“They want to get their hands dirty, literally. They want to see, feel and be involved with the impact of their philanthropy,” Winget explains. “It makes it much more real for them, and consequently they are much more personally vested in the cause they are supporting.”

4. Measuring the Impact

In our hyper-connected world, data is ubiquitous. Whatever can be measured is measured, and that data is available to anyone with a smart phone in their pocket. That availability of information is not lost on families with a philanthropic vision. More and more, they are demanding that the charities and causes they support very clearly demonstrate the results of their work. They want to make sure those nonprofits are effective and efficient with their money. The overall effect is positive in that it creates accountability and better philanthropy. The following are a few resources that can help families evaluate and measure the charities or causes they want to support.

5. Technology

Of course, what is driving the ability and appetite for families to measure the impact of their philanthropic ventures is technology. When it comes to philanthropy, technology has truly been a game changer for families. Not only can they determine the effectiveness of the charities they want to support with the swipe of their finger, but they can also engage and relate with the people and initiatives they care about, which would have been impossible in the past.

“In might seem counter-intuitive, but technology actually helps families feel closer and more involved with the causes they care about,” Winget says. “It makes it more real. They can connect in real time with the people they are helping and the causes they are supporting. Technology truly makes the world smaller and more interconnected.”

6. Coming Together

All of the above come together in a final trend in family philanthropy that is particularly heartwarming. Because of technology, because of our global mindset, because of our desire to feel and live the impact of our philanthropy, more and more of us are coming together to collaboratively make a difference. Whether that be through matching gifts, giving circles, crowd-funding, public-private partnerships, we are thinking and acting more collaboratively in terms of how we give. The result is inevitably a much greater impact.

“It’s a great time to be a philanthropist. Not only because of the options we have to make an impact but also because of how we are coming together to achieve a greater good,” Winget concludes.