The world's wealthiest have always been subject to certain societal expectations surrounding their responsibilities regarding "giving back." Over the past decade, however, this call has intensified. With it has emerged a new generation of ultra-wealthy giving that looks nothing like it did before.
While ultra-high net worth individuals of generations past generally only considered philanthropy beyond capital donations as retirement approached, the new generation is far more engaged and involved in philanthropic endeavors at far earlier ages than their predecessors. They're also motivated by the value propositions behind sustainable and impact investment strategies, often driving such initiatives with their own or family businesses.
Here is a look at how the world's young and ultra-wealthy changing the face of giving and using it as a powerful tool in creating a world in which they want to live.
Redefining traditional perceptions of philanthropy and investment
While previous generations regarded philanthropy as "the giving of money to non-profit organizations," the next generation of wealthy individuals has redefined the term, considering it to be "the action of transforming others' social well-being through generosity."
The new face of wealth and legacy research shows that 79 percent of global Millennials believe that societal causes have become more important than wealth accumulation in defining their legacy. As such, these individuals are far more engaged, educated, and knowledgeable about the causes they champion. The giving often extends far beyond capital to time and energy committed to helping. Whether it be sharing information with their influential networks, serving on non-profit organizations boards, conducting site visits to charitable organizations or showing up to lend a hand on various projects, the next-generation is far more "hands-on" than ever before.
While older generations gave to well-known charities, younger ones and particularly Millennials, are far more targeted givers, with Millennials focusing on social media to identify and support grassroots organizations.
Beyond philanthropy, there has also been a notable shift towards sustainable and impact investing, primarily driven by the younger generation's desire to be socially responsible investors. Again, targeted investment vehicles that can effect change in specific sectors are highly sought-after.
What has driven such dramatic shifts in approach?
The answer is multi-factorial. The source of wealth, values instilled in upbringings, generational mindsets and personal aspirations are all at play.
For younger and newer self-made millionaires and billionaires, the dynamics of their rise to wealth play a significant role. They didn't spend a lifetime building their wealth, and so the expectation to embrace worthy causes and change the world are often far more intense. For those of inherited wealth, a lifelong social responsibility culture, family passion for philanthropy, or even a sense of unease or outright guilt fueled by societal judgment over their wealth may drive giving. Among both cohorts, the recognition that comes with championing certain causes is undeniable.
And, of course, there's the UHNW millennial generation. For those in this category, giving that extends beyond capital, making a difference, and utilizing resources to create the world they want to live in is deeply ingrained in the collective generational mindset.
With more vehicles to facilitate philanthropy from foundations to LLCs and donor-advised funds (DAFs) and financially viable sustainable and impact investment opportunities available to the next generation wealth owners, making a difference that makes business sense is far easier to achieve than ever before.
A contagious mindset
Driven by the next generation's approach to philanthropy and investment, those who serve UHNW and HNW individuals are shifting their value propositions and service offerings to these individuals and the families they influence. Finding common ground in addressing the things that matter to them is becoming a key strategic focus.
Shifts in approaches, communication and messaging are all evident and being tailored to achieve this. Major investment banks like Goldman Sachs and Morgan Stanley have recently updated their homepages to communicate their commitment to promoting racial equity, equality and diversity. Recognizing the rising economic clout of women has other organizations actively addressing gender equality, while many others have chosen a planet-focus, offering greater scopes of green energy investment opportunities. This green focus has recently made its way into the communication of almost every major private bank website — Credit-Suisse, UBS, Citi, Pictet, BNP Paribas — highlighting sustainable investing, green energy, carbon neutrality. Wether this is focus is authentic, remains to be seen, but the signalling that impact matters is a start.
The next generation's beliefs that their wealth can be used to effect change and create a world in which they want to live are slowly being recognized and actioned.
As future generations continue to become younger and more affluent, they will continue to push traditional definitions of giving back and the boundaries of those that serve them in achieving their goals. How private banks, wealth managers, family offices and even non-profits and sustainable and impact organizations position themselves will ultimately be one of the key differentiating factors in their survival and continued success.