Long seen as the exclusive purview of ultra-high net worth families (UHNW), strategic philanthropy is now a mainstream concept. For those families and individuals involved in philanthropy, even at modest asset levels, conversations between donors and recipients are changing dramatically. Families are evolving in how they view their philanthropic efforts and goals, as they seek to make more of an impact on the causes that are important to them.
Establishing a strategic, flexible and functional approach to philanthropy is also essential for long-term family unity and legacy preservation. An experienced wealth manager can assist you in developing a plan that puts your philanthropic vision into action and helps your family achieve its goals.
THE EVOLUTION OF PHILANTHROPY
Beyond the growth in global giving, philanthropy has evolved in structure and ambition. Many families are moving from short-term, organization-specific grants towards multi-year, flexible capital designed to address systemic challenges. Increasingly, philanthropy is deployed as catalytic capital, absorbing early-stage risk to unlock broader social and financial participation.
Philanthropic giving by wealthy individuals around the world has expanded markedly in recent years and now represents a major share of global private giving. Industry research shows that UHNW donors contributed an estimated $190 billion to charitable causes in 2022, nearly 25 percent more than in 2018.1 That giving accounted for roughly 38 percent of all philanthropic donations globally. While North America and Europe have historically led the way in UHNW giving, other regions are emerging as important sources of wealth and philanthropy. In the Middle East, for example, deep cultural and religious traditions of generosity help steer capital towards charitable causes and complement private giving by individuals and families, shaping a distinct profile in the region.
In the past, donors typically spread their wealth around by giving smaller grants to multiple organizations. These days, donors have become more skilled and tend to give larger grants to a few select organizations. Donors now take a greater interest and role in the organizations they give to and are more interested in focusing on those that have the greatest impact within their specific community or region, or that address the issues that they care about the most. In many cases, the impact they are looking for may involve finding new ways of funding and structuring philanthropic solutions.
Instead of simply making a donation, families are asking, “What am I funding and why?” Strategic philanthropists think of their donations as investments in a project and seek greater control over how they are used. Rather than trusting the operational capacity of public charities, many families opt to establish private foundations.
They seek to use their capital to drive change, both in grant-making and in the investment policy of the foundation’s assets.
When strategic philanthropists do work with public charities, they ask more incisive questions than donors have in the past. They want to know how the public charity operates, what works well, what needs improvement, and how to measure both success and risk. They are not afraid to fund overhead costs for the right model and goal.
A WAY TO UNITE A FAMILY
Strategic philanthropy presents families the opportunity to create a unifying legacy.
Allowing children and grandchildren to contribute to the family’s philanthropic vision can help ensure that the younger generations feel connected to the family’s values and makes it more likely that they will preserve and maintain the family’s legacy in the future. Younger family members should be involved as early as possible, as philanthropic planning can serve to educate them about the importance of entrepreneurship and how critical it is to grow and replenish the family’s wealth.
Sustained family unity in philanthropy often depends not only on shared values, but on clear governance structures. Defined decision-making processes, phased delegation of responsibility and transparent criteria for funding decisions can help prevent conflict and ensure continuity across generations.
It’s never a good idea for older family members to establish philanthropic goals on their own or to choose goals that are important solely to them. When it comes time for the next generation to take control, they may not be interested in maintaining what the older generation started. Family unity dissolves because the next generation has no stake in the core philanthropic values or in the methods of managing the foundation or philanthropic efforts. The inevitable result of such limited thinking is the abandonment of the foundation, neglect of the management of assets and returns, and, potentially, permanent discord between family members.
THE ROLE OF YOUR WEALTH MANAGER
In today’s environment, a wealth manager supporting philanthropic families must also consider governance risk, reputational exposure and cross border regulatory complexity. Increasingly, advisors help families align philanthropic capital with broader investment strategies and establish frameworks to measure impact and refine strategy over time.
A wealth manager can work with you to shape your approach to philanthropy and develop a plan for strategic giving that also preserves your family’s wealth. Wealth managers working with philanthropic families do more than just determine the most appropriate vehicle for family giving. They can become a long-term partner, working with your family to discover appropriate philanthropic opportunities and to implement your plan.
Part of this process involves educating your family on the state of philanthropy today, why it is significant, and how they can help. A wealth manager guides the entire family and helps build the vision from the ground up. He or she may offer potential paths to take, recommend best practices and suggest other individuals in the community with whom you can collaborate. A wealth manager serves to direct the practical application of your values. For many families, strategic philanthropy becomes a way to feel good about their wealth, to become more comfortable with it and to better understand it.
To accomplish this, a wealth manager must understand your family’s values well enough to make sound recommendations for networking opportunities in your community. He or she should be able to introduce you to non-profit and foundation executives or social entrepreneurs and point you toward helpful academic resources.
Some important questions your wealth manager may ask to start this conversation include:
- What issues in your community would you spend money on to change and improve?
- What topic or problem most angers you?
- Where do you find the most joy in life?
- What innovations or threats do you see impacting the quality of life of your grandchildren and great‑grandchildren?
Building a personal relationship with a wealth manager who you can trust and rely on sets your family up for long‑term success in reaching your philanthropic goals.
BUILDING A TRUE PARTNERSHIP
Opening a philanthropic conversation with your wealth manager will reveal values, goals and issues that you wouldn’t typically discuss when speaking with an investment advisor or private banker. When determining the best ways to help preserve wealth and strengthen familial relationships, the philanthropic conversation takes this assessment to a deeper level.
It is also important to select a wealth manager who can go beyond the typical rhetoric of traditional philanthropic discussion in banking and investments, which focuses solely on identifying and setting up the appropriate charitable vehicles (e.g., Donor Advised Fund versus private foundation, which charitable trust type is best in certain situations, etc.). A wealth manager who can bring real knowledge of this sector and execute on it is best equipped to serve your family’s long-term, philanthropic vision.
In many families, philanthropic decisions surface differing priories across generations or branches of the family. A trusted wealth manager can play a neutral convening role, helping structure dialogue and preventing philanthropic strategy from becoming a source of division.
At BNY Wealth, we are already taking this approach to strategic philanthropy. We are building relationships with our clients and their families and working closely with them as they craft their philanthropic vision. By thinking beyond the numbers and risk analysis, we are tapping into the driving force behind philanthropy – to make a positive, lasting impact on the legacies of our families and communities.
