It’s often said that family and money don’t mix well. However, I would challenge the notion—I literally wrote the book, A Passion for Giving, on the topic, providing practical guidelines to leverage family wealth for impactful philanthropy. Giving is not just good for the world, but also integral to nurturing healthy family dynamics—and may even be the secret sauce to preserving multi-generational wealth.
Values Alignment Strengthens Family Bonds
There is a trend known as “shirtsleeves-to-shirtsleeves,” which describes the tendency for the next generations of wealthy families to overspend, resulting in wealth reduction. I believe, however, that giving may be the key to disrupting this cycle. Incorporating philanthropy early on disrupts that paradigm. Future generations are less likely to squander wealth when they see themselves as stewards of their family legacy with a greater purpose. When families have a stated mission to give back—with serious, intentional, mindful philanthropy—it has been shown that these families build their wealth alongside their charitable giving.
Philanthropy and values alignment—shared giving values—can be a powerful way for families to connect on a deeper level. Multi-generational families can come together to support causes that resonate with their collective beliefs. By coming together to support causes or engage in charitable activities that reflect their shared values, families not only make a positive impact on the community but also strengthen their own relationships in the process. However, the key to successful and impactful giving requires a strategic plan.
Identifying Shared Values: Mission Philanthropy
The first step is crafting a philanthropic family mission statement. Families can get started by gathering multiple generations together in a values-oriented conversation. Discuss the problems that spark passion amongst members of the family. We use a Venn diagram tool to map out the intersecting values of those seated at the table. To facilitate a constructive conversation, pose some of these questions:
- What does the family stand for, i.e., what’s your DNA?
- Are you focused on identifying a solution to a particular issue? Example: A disease a loved one suffered through, environmentalism, social justice, etc.
- What legacy do you hope to leave through your philanthropic efforts?
The resulting statement should be a tool that clearly, simply, and directly answers the question, “What do your family’s philanthropic efforts work to accomplish?” It should ultimately serve as your “elevator pitch” and help everyone stay on the same page.
This exercise can also serve as a valuable investing tool. Take these values and apply them to guide which sectors to invest in. If, for example, you’re focused on environmentalism, you’re less likely to have mining and oil companies in your portfolio.
Passing Down the Family Giving Formula
There’s no one-size-fits-all formula to achieving harmonious family working relationships, but there are some practices that can help:
1. Craft an Investment Policy Statement
Essential to every family foundation, an investment policy statement serves as an addendum that outlines the ideals, values and ethics that guided the organization’s founding. Complement this document with a video recording that communicates the family vision so that future generations can continue to do work in alignment with those goals.
2. Unlock the Language
The foundation’s structural language should be written broadly enough to allow for growth. As an example, a foundation formed in the 1850s specifically focused on helping families in covered wagons settle the west. Years later, the mission was obsolete, but that language was locked, and it took decades before the courts would allow the foundation to shift its focus.
3. Find Common Ground
It’s not uncommon for families to have conflicting priorities. Where one family member sees the value of a blue-chip company, another may hone in on the company’s lack of sustainability. In those cases, you might take a closer look at a company and find that it is, in fact, investing a large portion of its income in renewable work or substitute it with a more sustainable option in the same sector. The key is finding space to agree and compromise.
4. Circulate a State of the Union
A letter that provides a briefing on the foundation’s operations, metrics, and impact should be regularly distributed to family stakeholders of all ages to communicate accomplishments as well as the goals you are working toward.
5. Do Your Due Diligence
Ensure the nonprofits you support are 501(c)(3) organizations and consult with resources like Guide Star and Charity Navigator to dig deeper. To encourage family buy-in, it’s crucial to get the younger generations involved from the get-go. Conduct site visits at the organizations you support and engage in active volunteerism to strengthen those ties.
Values-based philanthropy is not just about giving money; it’s about giving with purpose and intention. By embracing this approach, families can strengthen their bonds while creating a lasting legacy that reflects their shared values and beliefs. Making donations is nice, but it’s not to be confused with philanthropy. Philanthropy involves a mission to focus on. It means drilling down, doing the work and tasking nonprofits to be accountable to meet specific metrics. When the entire family works together to solve a problem—that’s beautiful.
About the Author
ALINE Wealth is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. ALINE Wealth and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. ALINE Wealth and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information.