In our last blog written as part of this series, we introduced you to Centennial Families – families who have retained their wealth (or grown it) across over 100 years. Given that 70% of families lose their wealth by the 2nd generation and 90% by the third[1], these Centennial Families must be doing something right!
Michael Cole of Ascent Private Capital Management (which only has clients worth >$75m) believes 60% of the wealth disintegration is due to a lack of communication and trust, 25% to a lack of preparation for how to handle the money; and about 10% to a lack of a shared vision about family goals around money.
The Centennial Families study concluded that families lacking clear values and a purpose for their wealth tend to fragment and split up, and families who engage in values-driven social impact activities flourish in a manner that goes beyond mere successful wealth transfer. According to the authors, the most surprising findings included “social impact projects were most often introduced by younger generations, but they connected to the legacy values of their parents and took the family in a new direction that blended that legacy with new, innovative social concerns”.
In my experience, many philanthropists tend not to fully engage with the next generation, perhaps through a sense of family philanthropy being their “baby”. However, the evidence is all around us that diversity of thought and approach ultimately results in better outcomes.
All you need to do is look at the differing generations to see how they might approach philanthropy:
- Baby Boomers (1946 - 1964)
- Largest group of philanthropic donors
- Leaders of many family foundations and charities
- Generation X (1965 - 1980)
- Social entrepreneurs
- Passionate about causes close to them
- Millennials (1981 - 1996)
- Want to see a world free of danger and create a better life for everyone
- Deep sense of civic responsibility to vote and volunteer
- Generation Z (1997 onwards)
- Concerned about humanity’s impact on the environment
- Optimistic yet realistic
- Very independent
- Volunteers
If a family’s philanthropic efforts are to evolve and flourish, seeking input from younger generations could have a massive impact on the outcomes seen by the family’s efforts.
Hopefully you’ve been convinced that engaging the next generation is valuable – not only in terms of better outcomes for the philanthropy itself, but in ensuring the family’s ongoing success. How do you do it though?
There’s no easy answer, but the general rule of thumb is to start early. Encourage volunteering, allocate a pot of money that the next generation can give to causes they feel passionate about. This could be anything from a couple of pounds a week when very young, increasing relative to their age/family wealth.
Moving on to engaging them in conversations about the family’s own philanthropy and seeking their input might take you in surprising directions.
Engaging with the next generation on philanthropy should not only ensure you develop a more socially minded next generation, but might have added advantages such as:
- The ability to share the burden of family philanthropy
- Getting an early indication of skills that might benefit a family business
- Developing a deeper relationship with the next generation and a mutual respect of each other’s point of view
If you require any further guidance please feel free to get in touch with me or a member of our charity Team to discuss further.
[1] Williams Group wealth consultancy
