Although Millennials are busy accumulating wealth, they're also looking to make a positive impact on the world, in some cases by seeking out careers with companies that uphold a triple bottom line. And they're increasingly asking their wealth advisors for guidance on how to best manage their assets so they can ensure the growth of their charitable contributions over the years.
Giving back enhances an individual's quality of life by contributing to their sense of purpose. Philanthropy isn't something that's only reserved for the ultra-rich. It should be a prioritized conversation between advisors and their Millennial clients who seek to align personal values with a solid philanthropic strategy.
A UBS Investor Watch report found that in 2014, 91% of clients had given to charity but only 9% reported discussing the topic with their advisors. This could help explain why merely 20% judged that their giving was extremely effective or very effective, while only 40% said they felt satisfied with the impact of their giving. A Reason-Rupe poll cited by the "Washington Post" surveyed over 2,500 Millennial employees, concluding that fewer Millennials are giving through work-sponsored corporate social responsibility programs. Out of the 84% of Millennials who donated to charity, 78% made the contributions on their own.
In an interview with Think Advisor, Sameer Aurora, head of client strategy at UBS, said that clients with under $5 million in assets tend to work less with advisors on philanthropy planning. Those below this inflection point achieve lower levels of impact and satisfaction, since they lack an effective strategy. Less wealthier clients can benefit the most from tactful philanthropic advice, and Millennials potentially have much to lose by following ill-advised philanthropic strategies. Effective philanthropic giving is just as important as other wealth management services, in terms of protecting a client's assets and helping them to grow.
The Trend: Global “Give As You Go”
Millennials tend to prefer more of a “give as you go” philanthropic strategy as opposed to making one big charitable payout at the end of their lives. Instead of waiting to give back, some consider lifetime-long charitable giving as being something of a moral obligation that comes along with growing success at their work.
This "give as you go" trend doesn’t mean that Millennials are inherently more altruistic than older generations. However they are more hyper-aware of the issues around them, and often favor more direct involvement. In part this is because topics that in the past would have only been covered by the news now reach far and wide through social media campaigns that appear on a Millennial’s Facebook, Twitter or Instagram feeds. This can cause some Millennials to value the potential impact of their donation over a simple dollar amount.
From Check Writers To Purposeful Givers
According to a Think Advisor report, “Gen X and Millennials were more likely to give to causes that fight diseases, and put a lower priority on religious organizations. Millennials were more likely than any other generation to give to causes that support education or kids’ programs.”
Aligning one's personal values with a philanthropy strategy can translate into more direct involvement with grassroots movements. This also makes the growing space of social investing an attractive opportunity, in which clients will strictly invest in companies with strong corporate social responsibility initiatives.
So developing a balanced portfolio for Millennials will include creative, interactive ways to contribute to the social good. Wealth advisors should talk to their Millennial clients about impact investing, proxy voting and shareholder advocacy. If the client seeks to have direct involvement and/or is particularly enthusiastic about a certain cause, he or she could be interested in the benefits of starting a nonprofit or becoming a board member.
In the "Wall Street Journal," Ken Nopar, a Chicago-based consultant, recommended donor-advised funds for Millennials who have unsteady income revenue streams. Donor-advised funds offer immediate tax benefits, facilitate consistent giving and allow clients to make grant recommendations to the charities and nonprofits of their choice. There are also many donor networks and community foundations that a client can join in order to build a philanthropic network.
So in general, advisors should take more responsibility in providing due diligence work for prospective charitable investment opportunities, since Millennials want to see strong and measurable social returns on every dollar spent.
The Bottom Line
As more Millennials are interested in philanthropy while they're still young, financial advisors should put philanthropy planning and strategy at the top of their to-do lists. Throughout the wealth management sector, philanthropy planning is becoming a primary wealth protection and allocation strategy for Millennial clients, where it was considered a secondary initiative for older generations. Understanding younger clients who seek personal, global and impactful giving will help advisors to create effective strategies for them. Since Millennials typically align individual values with their philanthropy planning, advisors should try to disover a client's personal passions in order to help them meet their philanthropic goals.