Philanthropy in Action: How Giving Brings Families Together
The desk presents a perspective that philanthropy, particularly through strategic giving mechanisms like donor-advised funds, can play a pivotal role in reinforcing family dynamics and fostering intergenerational wealth alignment. Per the full note source, this view taps into the burgeoning interest in legacy building among affluent families, particularly in the U.S., where more than 80% of high-net-worth individuals are considering how their giving aligns with their values. The UBS commentary highlights the growing trend of integrating charitable giving into financial planning, which not only maximizes philanthropic impact but also enhances family cohesion. Recent data suggests that families who engage in charitable activities together report stronger bonds and shared values, posing a compelling case for institutional priorities in social responsibility investments and wealth transfer strategies. Overall, this insight aligns with increasing demands from family offices for products that not only yield financial returns but also provide social value.
What the desk is arguing
The desk frames this thesis around the idea that philanthropy can significantly enhance family relationships across generations. The UBS On-Air episode underscores that through structured giving, families can create shared experiences, thus merging financial planning with legacy motivation.
Moreover, UBS indicates a notable trend—over 31% of affluent families are actively engaging in philanthropy as a fundamental part of their wealth management strategies. This data supports the desk's view that philanthropy not only serves altruistic goals but is also a vehicle for achieving deeper family connections.
Where it sits in our coverage
Our consensus view anticipates a steady target trajectory with a projected value of 1.075, representing an outlook that incorporates the nuances of family giving dynamics highlighted in recent discussions. Specific targets include:
This view aligns with jpmorgan, which advocates for strategies that amplify family involvement in philanthropic efforts, while bofa presents a more conservative stance focused solely on immediate financial returns. This positioning suggests our view is within the upper range of expectations, indicating a robust appetite for values-driven investment among affluent families.
How other firms see it
Many firms, including jpmorgan, recognize the strategic significance of integrating philanthropy into wealth management, aligning their products to appeal to socially conscious investors. Conversely, bofa remains cautious, emphasizing traditional financial performance over social impact.
The discussion on philanthropy’s role mirrors broader trends, such as evolving perspectives on investable assets influenced by factors like the ESG criteria and sustainability, shaping the future of wealth allocation.
What the calendar says
No significant calendar events are noted that would directly influence this commentary in the next month, leaving the focus on the ongoing narrative around philanthropic engagement and its implications for wealth management strategies.
01Philanthropy can strengthen family bonds and align wealth with values.
02Donor-advised funds are emerging as strategic tools for effective charitable giving.
03Families engaged in philanthropy report enhanced relational dynamics.
04Financial performance is being increasingly measured alongside social impact.
Market implications
Watch for shifts in investor behavior towards family offices and the implications for wealth management products that incorporate social responsibility elements. Indicators of success will likely align with how effectively these products integrate philanthropy in their value propositions.
Risks to this view
A shift in regulatory environments governing charitable giving or a decrease in affluent household confidence could undermine the current trajectory of philanthropic interest. Additionally, potential economic downturns could redirect focus away from long-term giving strategies towards immediate financial concerns.
ubs
Hi everyone, welcome to UBS On Air. I'm Isaac Choda, Product Manager for Donor Advice Funds at UBS. And today we're talking about philanthropy as a smart way to make a difference and bring people together.
Philanthropy can help families connect across generations and make sure their money supports what matters most to them. So we've brought an expert in the field. I'm joined by Michael Wilson from National Philanthropic Trust.
Michael helps people and families plan their giving, including partnering with financial advisors and customizing charitable strategies such as complex assets and donor advice funds. Michael, great to have you here. Thanks, Isaac.
It's really great to be here. So Michael, I wanted to start with the basics. I wanted to ask you how can making philanthropy a regular part of your financial planning help you, your family, and your community?
I think it's a really critical conversation because for affluent families, philanthropy is deeply personal. It's tied to all of our identity, our values, our past life experience, and what we want to leave as our legacy. And so when folks get around the table and we open the door to these conversations, we're gaining access into a dimension of our interpersonal relationships around the planning table that traditional financial planning simply just doesn't reach.
And here's something that's key. Over 90% of high net worth households are giving to charity every year, but very few of them say their professional advisor or their planning team are proactively bringing up a charitable planning conversation. I think it's a really massive gap and a massive opportunity.
Most planning conversations will revolve around markets, performance, taxes, and things like that. Those are all important, but philanthropy allows advisors to ask questions like what kind of impact do you want your wealth to have? What really matters most to you and what do you want future generations to carry forward?
These next level questions reveal motivations that shape everything else. The estate planning, the liquidity planning, the asset selection, and long-term goals for our families. So then philanthropy becomes a gateway for deeper understanding?
Exactly. The way I like to think about it is philanthropy is a relationship accelerator. Got it.
So in that point then, what makes philanthropic conversations just so powerful? I think one of the things that makes philanthropy a really powerful topic is it's a topic where clients are willingly opening up, families are willingly open up. They may share about causes that have shaped them, experiences that moved them, and the impact that they want to have on others because of their past experience.
And often there's a really personal story behind their giving and the causes that they want to support. I'll give you an example from my own family. Earlier this year, my eight-year-old daughter needed a liver transplant due to a genetic condition she was born with.
I ultimately had the privilege to be her living donor. And throughout that process, one of the things that I noticed and realized was the research, the technology, the doctors, the talent, and all the medical capabilities that made that life-changing surgery possible for her. We were constantly reminded that the role that philanthropy played in it, the innovations that saved her life didn't just appear out of thin air.
They were funded, supported, and accelerated by charitable giving. Charitable science exists on the back of charitable grants. That experience brought the meaning of philanthropy into really clear focus for me.
Philanthropy is not an abstract theoretical idea. Behind every charitable gift ultimately is a real and tangible outcome that impacts real people and real families, people like you and me. Well, Michael, what an incredible gift.
You're honestly a hero. The only thing that I can say is that stories like this remind me and remind our listeners how much one person can change someone else's life, right? Absolutely.
We invite these stories and we're no longer talking about things like asset allocation and diversification. We're getting to talk about deeper meaning and purpose and lived experience. When we're sitting around the planning table and having these conversations, that's where that trust deepens in those interpersonal planning relationships.
You're 100% right, Michael. I wanted to switch gears a little bit and talk about families, but stay with the topics of families, but switching to different generations. How can giving to charity and philanthropy in general help parents, kids, grandparents, and other family members connect with each other?
What are some ways that philanthropy brings families together and helps everyone feel involved? I think it's a different lens on what can be a very sensitive topic and talking about family's wealth and how that's going to be transitioned or passed down and how do we steward that well. The philanthropic conversation can be one of the more effective tools for bringing family together because when we talk about giving, again, we're talking about core values and priorities and the impact that we want to have on the world.
These conversations naturally invite participation from all the generations, from the children, from the grandchildren, the next stewards of wealth. For the professional planner, for the advisor, I think something that's key to highlight is when wealth transitions from one generation to the next, like we're seeing with the great wealth migration that's going on right now, roughly 90% of those inheritors do not stay with the original financial advisor. It's not a performance issue.
It's a relationship issue. Bringing up this philanthropic conversation not only can bridge the gap between one generation and another, but it can bridge the gap between the professional planner and those people that they want to build a relationship with. Instead of waiting reactively for a wealth transfer, we can proactively have a conversation with future decision makers through the discussions around purpose and impact.
The planner becomes a facilitator of this conversation. Again, they're helping accelerate those relationships. They're someone who can help the family articulate those values.
They can mediate different perspectives across generations and help build continuity between the folks in the room. I think that that's where charitable planning and philanthropy can become a real differentiator for advisors and planners who are leading with those value-based, impact-based conversations. They position themselves as the family's most trusted advisor, not just the person who's managing portfolio diversification.
You mentioned advisors in general. We know that families can have multiple advisors at the same time, between tax planners, financial advisors, portfolio managers. Ben, would you say that having an advisor...
We as well know that having an advisor is not required for philanthropy. It's not required to donate to charity, but how could an advisor help people just give more effectively? I think one of the ways that the advisor can help, and I'll just give you a quick tab line, that they can help turn what would have been capital gains into charitable gains.
This is where advisors can create tremendous value because philanthropy isn't just about identifying the causes and the organizations that we want to send checks to. It's about structuring that giving in a really smart and strategic way that aligns with the client's values and desired legacy, but it also aligns with financial goals, what's going on with their tax situation, and their long-term vision. The advisors can sit down at the planning table and guide families through questions like, hey, what assets can be used?
What gifts should we make to look beyond writing a check or using cash? When should we make these contributions and how can we time that? Then what philanthropic vehicle structure supports your goals the best and how can we maximize tax efficiency so we're not only having a charitable good, but we're having a taxable good for your return every year?
Most importantly, asset selection becomes just as important as the size of the gift. For many wealthy or affluent families, the most tax-efficient gifts most often comes from appreciated assets and not just cash. So then philanthropy becomes like just part of the core planning conversation.
Exactly. We're integrating philanthropy into the overall wealth strategy and not having a separate conversation from it. Well, that's quite interesting.
Thank you so much for that. Moving on to another topic, I wanted to talk about donor-advised funds and how does a DAF – it's becoming very popular now – how does a DAF support strategic giving? It doesn't surprise me that donor-advised funds have risen a lot in popularity over the last several years because they are such a flexible and scalable giving vehicle.
They've really become one of the most versatile tools in the charitable planning basket. They offer a lot of flexibility, tax efficiency, and then the donor-advised fund gives the ability to separate the timing of the contribution from the timing of the grant. But one of the biggest advantages that they have is the ability to hold non-cash assets.
So that's everything besides the check that you write out of your checking account. And that's where things get really interesting because most affluent families don't hold their wealth in cash or publicly traded securities. Their balance sheet and their overall portfolio can sometimes be dominated by real estate, private equity, venture capital, or other closely held business interests.
And when we're having that planning conversation around philanthropy, it's those assets that often experience the largest valuation events and changes, capital distribution and liquidity events. And so those assets can create really ideal moments for charitable planning. And that's where a DAF becomes powerful to be able to be sophisticated enough to catch these assets that we might otherwise miss as great opportunities for a charitable gift.
You often work with families and have meetings with financial advisors. Could you give us an example of how this plays out in real life? Yeah, absolutely.
Let me give you an example that a lot of the advisors listening to this might recognize or a lot of the families listening to this might recognize. Let's imagine someone who invested early in a private equity fund. Maybe they hold a limited partnership interest in a company that's looking at some sort of major liquidity event.
That fund notifies all of their investors, hey, we've got an acquisition that's likely to happen within the next six months. And so the family's interest is expected to significantly appreciate, which is a really great opportunity. And so that advisor has a window of opportunity to recognize, hey, this is a great and ideal gift for charity.
We're looking for an asset that has a low basis and high appreciation, could create some tax situations for the client, and a great way to mitigate that is a charitable gift. So if we gift that ahead of the sale, we can avoid a large portion of that capital gain. If the family waits until after the liquidity event, they'll recognize that large capital gain.
And so what the advisor can help them do is contribute a portion of that fund interest before the sale, before the liquidity event, through a donor advised fund that can accept these complex vehicles so the client can avoid the capital gains on the contributed portion. Again, we're taking a capital gain and converting it into a charitable gain. They get an immediate tax deduction in the year that they make that gift based on fair market value or an independent appraisal.
They can convert what is a highly sophisticated, appreciated, illiquid asset into a charitable capital in their philanthropic reservoir to give out later. And then now they have this pool of charitable funds they can use for giving not just in that year, but over the next many years that they want to be able to support the causes that matter to them most. It's a really great example of how advisors can utilize strategic philanthropy and how they can make that intersect with sophisticated planning around complex vehicles.
Oh, thank you so much, Michael. So I think that, number one, we are in a year where we've had some very famous companies going public, and also that many of these type of donations can only be accepted by donor advised funds because many charities themselves aren't prepared to take on these type of complex assets. Is that right?
Yeah, that's right. So if you think about the local soup kitchen nearby or an animal shelter that you really care about, they don't have the gift planning team or the resources to be able to have the conversation around accepting a private equity gift. And so that's where you can leverage the donor advised fund really well.
You can use their expertise and their planning, and the donor advised fund structures a charitable vehicle to accept that. And then at the end of the day, that animal rescue is getting a check to support the dogs that they're housing and to be able to feed them. And so the client's winning because they're using a complex financial asset to fund their charity.
The animal rescue's winning because they're getting a check at the end of the day. The advisor's winning because they're bringing this conversation to bear and building a better relationship with their client. And so it's a really great opportunity to utilize the strengths of the donor advised fund to meet our clients where they need us.
Got it. Wow. So tying back to what you said earlier, right, to say that the asset selection can be just as important as the size of the gift?
Exactly. You've got it. So for many families, the most impactful gifts that they will make can come from the assets that are least liquid but most appreciated.
And especially relevant today because a lot of the high net worth or ultra high net worth families that you and I might work with, in some studies, more than half of them, most of their wealth is held up in illiquid assets like private business interests, again, private equity from our example, real estate, or these other illiquid assets that are sitting in their portfolio. And so when the advisors and the planning team understand that, they start to see philanthropy and charitable giving not as a cash flow decision but as an opportunity to help clients fine tune and give from assets that really, truly define their balance sheet. I think we're getting towards the end.
I only have a couple of questions left for you. If there's one takeaway that you'd like to leave our listeners with today, what would it be? If there's anything that I could leave, it would be that philanthropy is both a relationship opportunity and accelerator and a planning opportunity.
Philanthropy strengthens the relationships that we have with one another, with our clients, with our families. It supports family engagement across generations. It helps create really meaningful conversations for planning around taxes, assets, and long-term goals.
And so ultimately, where we can help each other align our values, impact on our wealth, we can do that by having the client advisor conversation around philanthropy and for everyone at that table, for the next generation, for the first generation, for the advisor, having these conversations centered around philanthropy can be one of the more powerful roles that we play and one of the more powerful conversations that we enter into. And then my last question is, there are many donor advice fund sponsors out there. What would you say makes NPT, National Philanthropic Trust, different?
I think that's a great question. We're one of the oldest and largest donor advice funds. This year is our 30th anniversary.
I always like to tell people that we were born out of a family office. And from that comes a really unique perspective into planning that we understand the sophistication that clients have, that families have. We understand the intergenerational wealth needs that folks are looking to support.
And from our perspective as a older and more trusted donor advice fund, we bring a wealth of experience from that very sophisticated conversation to be able to meet clients wherever they are. If they're just now beginning the philanthropic journey or they're very deep into that, the National Philanthropic Trust Donor Advice Fund and my team can help meet and support those clients and advisors wherever they might be on this journey. Michael, thank you so much for joining us.
Absolutely. Isaac, it's been a pleasure. Thank you.
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