30 Jul THE MILLENNIAL WAY OF PHILANTHROPY: WHAT ADVISORS NEED TO KNOW

Millennials – those born between 1980 and 2000 – are changing the philanthropic landscape. These young adults are oriented toward the future, with a strong sense of familial and social responsibility. They have shown a strong drive to bring about social change. They are generous and community-driven. In fact, the Millennial Impact Report reported that 84 percent of millennials made a charitable contribution in 2015, while 70 percent volunteered their time. They are also now the largest share of the population, eclipsing the baby boomers generation. And, over the coming decades, the millennial cohort will become the wealthiest generation as they stand to inherit $30 trillion.

The opportunity to mentor this cohort and guide them through philanthropy to make the impact they seek is boundless. Given the potential trillions that will transfer, the wealth management industry is actively researching this important demographic group. Here are a few notable traits that makes the millennial generation unique when it comes to charitable giving.

Millennials are driven by social causes
According to a U.S. Trust study, millennials are prioritizing social, environmental issues and the greater good when choosing an investing strategy. This keen interest in impact philanthropy and social responsibility has enabled considerable growth and innovation among alternative forms of charitable giving. Interestingly this outlook translates into their consumer behaviors, with 84 percent of millennials saying they consider a company’s involvement with social causes when making purchasing decisions.

Millennials give actively and frequently
Millennials also tend to give more repeatedly, albeit in small amounts, to more causes, giving an average of $580 during the past year. Moreover, they value transparency and monitor the impact of their giving more than past generations. They want to know where their dollars are going and how they are being used and, with the help of financial advisors, are vetting prospective investment opportunities according to social responsibility. Encouragingly, a growing body of research shows these traits point to millennials being more likely to give more to charities as they mature.

Millennials value flexibility
Because Donor Advised Funds (DAFs) are easy to set up and maintain, they have been proven to be a good path for getting started with personal philanthropy and continue to grow in popularity among millennials. Plus, the use of impact investment managers is an option with certain DAFs, which enables the ability to invest in companies that do societal good but also provide competitive investment returns. A DAF that is linked with a community foundation can also make considerable positive impact in the local community, another appealing point for millennials.

Millennials seek to put wealth into action
Like their older counterparts, millennials are motivated to help others through philanthropy and report feeling that there is more they could be doing. Yet, while the majority of respondents reported taking practical steps to protect and sustain wealth, only about half have clearly defined a purpose for their wealth or taken deliberate steps to make the most of it. (What an amazing opportunity for advisors to foster the achievement of family philanthropic goals across wealth generations!)

A final note to keep in mind as you mentor young adults with their philanthropy: millennials with inherited wealth tend to be more anxious around their stewardship role in sustaining family wealth. Many are the progeny of “larger-than-life” parent personalities and wealth creators, and they worry that they will not live up to their parents’ expectations. The ability to bridge the apparent communication gap between the millennials and their parents can lead to enhanced family relationships today and enable better odds of intergenerational wealth transfer success and sustainable family philanthropy. For this reason, a DAF, is an option to consider as it can be professionally managed by the current family wealth managers, which enables advisor continuity. A DAF also allows advisors to provide resources for grantmaking, educate family members on philanthropy and create philanthropic organization support that would otherwise be difficult to replication through a private foundation. The family office can initiate, organize and support these important conversations, integrating them around the other wealth management activities of the family.

Julie Neitzel is a partner and advisor with WE Family Offices in Miami and a trustee of The Miami Foundation.