One of our core pillars of editorial content here at Crain Currency is philanthropy. Families of great wealth are those who make a difference in our world and society. While this time of year is often marked by discussing year-end giving trends, instead we’re looking to the future. Susan Barnes asked philanthropic experts what they believe will be the trends for 2024 and what families should keep in mind when supporting different causes and charities.
We also bring to you news of a wealth management firm’s rebrand — Boston Family Advisors has been reborn as BFA Family Offices. The firm, which focuses on entrepreneurs and high-net-worth investors who have built generational wealth, is working on expansion plans that include growing but not through acquisitions.
As always, we appreciate any comments, ideas and insights that would make this newsletter more useful. I look forward to growing this family office community with your help. Please email me at [email protected].
HANDPICKED: What philanthropy is poised to look like in 2024
By SUSAN B. BARNES
For many family offices, philanthropy is key. “The act of contributing financial and social resources to benefit others is a wonderful way for families to learn and work together positively,” says Johanna Anderson, chief impact officer at Broward Grove. But it can be overwhelming to plan how to give and how to ensure a lasting legacy of impactful charity, given the many options and philanthropic vehicles.
For insights into philanthropic trends for 2024 and what family offices should keep in mind when selecting beneficiaries, we checked with a handful of industry insiders to share their thoughts.
BETTY PETTINE
Pettine is the director of philanthropic consulting at the Callan Family Office, an independent firm focused on delivering precise and objective counsel to families, foundations and institutions.
What philanthropic trends do you predict for family offices in 2024?
Without a doubt, technology and the digital revolution will transform fundraising for nonprofits, as well as the donor experience. Social media, crowdsourcing and targeted campaigns by nonprofits (think AI) who have the capacity to invest in these technologies will have the advantage of enhancing the donor experience from a stewardship perspective. Additionally, family offices that enhance the member experience with virtual foundation board meetings and apps that enable online voting on grantmaking which reach multiple generations in any time zone will move to the front of the line for family office technology solutions.
Women and younger generations are becoming increasingly influential in this space. Contributing to this trend, women are gaining more financial independence and accumulating wealth, whether through entrepreneurship, inheritance or financial career success. Additionally, the generation now joining the philanthropic conversation likely has different perspectives and philanthropic priorities than their predecessors, such as social justice, the environment and a community-oriented approach to giving (one of many examples are “giving circles”). Additionally, these demographics are looking for community representation in all aspects of their giving. As a result, factors such as nonprofit board makeup and social impact, as defined by the charity’s constituency, are mission-critical in their decision-making.
What factors should family offices keep in mind when considering organizations and charities to donate to through their philanthropy?
With more than 1.6 million charities in the U.S. alone and increasing interest in supporting global philanthropy, there’s no shortage of needs domestically and around the world. That being said, having a well-defined mission statement, based on individual and multigenerational family values, can help to narrow the scope of opportunities to support. Additionally, at a minimum, family offices should focus on:
- Setting a budget for their own mission, with allowances for supporting areas outside of their mission statement. For example, emergency and disaster relief, as well as requested funding to support those in their network, are inevitable events that can and will happen as a matter of course.
- Determining who, what and where you want to support can offer excellent “guardrails” to keep you focused on your philanthropic goals and objectives. Additionally, family offices should consider what other resources are available to them for making the greatest impact — e.g. volunteer and nonprofit board service, offering access to your network, etc.
- Identifying resources to assist with selecting organizations that are aligned with your mission, such as the local community foundation or web-based databases (i.e. Charity Search), can narrow the field of giving opportunities.
- Working with your team of advisers in understanding the financials of each charity is a way to measure your philanthropy’s effectiveness. For example, asking “How is the charity measuring impact?” and “How engaged is the nonprofit’s governing bodies?” are just two of the many ways that Callan Family Office supports our clients’ giving efforts.
TONY MACKLIN
Macklin is an independent philanthropic adviser, helping donors, families, grantmakers and their advisers answer questions about purpose, governance, resources, planning and learning.
What philanthropic trends do you predict for family offices in 2024?
The intense political polarization in the U.S. and many other countries has already spilled into family philanthropy conversations and how donors look at many nonprofits. Family offices will need to hone their facilitation, governance and family-dynamics skills to help families refocus on shared purpose in their philanthropy.
On a more positive note, inheritors of the great transfer of wealth and new generations of entrepreneurs are more creative in their thinking about philanthropy and social impact. They’re more likely to use all their resources — time, talent, treasure, ties (relationships) and testimony — to make a difference in specific issues rather than specific organizations. And they want to use tools such as political advocacy, impact investing, direct giving and lending to individuals, activating social networks and starting their own social enterprises.
Those family members are forcing family office staff and philanthropic advisers like me to look beyond tax-deductible giving to public charities. Conversations about all the ways they want to make a difference are truly inspiring. And they help younger generations find their own voices in the family and even succeed as creators and co-founders.
What factors should family offices keep in mind when considering organizations and charities to donate to through their philanthropy?
The nonprofit sector continued to face tough financial times in 2022 and 2023. Temporary funding from the pandemic wound down, while inflation and competition for quality talent took a toll on budgets. In addition, the percentage of U.S. households that give to public charities has been declining in the 2000s, and overall giving declined by 10% from 2021 to 2022. Smaller nonprofits have felt the financial pain the most. [Macklin notes that around two-thirds of public charities have budgets under $500,000).
Wealthier donors stepped up during 2020 and 2021 — they gave more and gave with fewer restrictions. They also gave to nonprofits new to them, especially smaller nonprofits and those founded by and primarily serving people of color, people with disabilities and our other neighbors who are often marginalized. Family offices could have a big impact in 2024 by simply continuing the practices they started in 2020 and 2021.
I wouldn’t recommend focusing on simplistic measures such as financial ratios. Business models and stages of growth can vary as widely in the nonprofit sector as the for-profit sector. So the needs for cash for current operations and investments in future effectiveness will change over time. Instead, I suggest starting with the five Charting Impact questions to check in with nonprofits. Nonprofits can also answer the questions in their free Guidestar profiles. When they complete those profiles, donors receive a more well-rounded look at impact measures, governance practices, qualifications of leadership and financial health.
I’d also recommend family office staff tap resources about effective giving on Giving Compass, a nonprofit news and advice aggregation source started by wealthy donors for their peers.
JOHANNA ANDERSON
Anderson is the chief impact officer at Broward Grove, which provides strategic leadership, governance, planning and advisory services to families who are committed to being effective stewards of capital across generations.
What philanthropic trends do you predict for family offices in 2024?
Many nonprofits have used governmental ARPA [American Rescue Plan Act] funding to maintain or expand programming in the post-COVID world. Given the requirement that those funds be spent by the end of 2024, we’re having a lot of conversations with nonprofit organizations about how to sustain enhanced services when the federal funding runs out. Private philanthropy will not be able to fill the void. I expect family foundations will grapple more with the role of private philanthropy in sustaining critical social services. Encouragingly, I’m seeing more foundations recognize the value of convening diverse stakeholders — government, nonprofits, community members, fellow philanthropists — to collaborate toward community goals.
Family offices are paying increased attention to true family wealth being defined in terms of human capital: Family members living fulfilling, healthy lives. Philanthropy — the act of contributing financial and social resources to benefit others — is a wonderful way for families to learn and work together positively. Intergenerational and cross-branch relationships — grandparents with grandchildren, aunts and uncles with nieces and nephews — can be one of the most meaningful ways to develop the rising generation of wealthy families. There are excellent resources for families engaging in this work and wanting to learn from others, including the National Center for Family Philanthropy and 21/64.
What factors should family offices keep in mind when considering organizations and charities to donate to through their philanthropy?
The most meaningful philanthropy comes when passion intersects with impact. With so much need in the world, families can sometimes feel overwhelmed by how to select causes and organizations to support. Instead of sprinkling dollars reactively, we prefer seeking out strong nonprofit leaders in an area that interests the family and learning as much as possible from those closest to the work. The investment of time in relationship-building will grow curiosity, passion and, ultimately, better understanding on how to realize impact.
PAUL LUSSOW
Lussow is the co-founder and CEO of Giving Place Inc., which helps donors and their advisors get the greatest satisfaction and achieve the maximum impact from their charitable efforts.
What philanthropic trends do you predict for family offices in 2024?
- Generational transitions continuing to accelerate: Rising gen looking to build on their family’s legacy in a more modern way — technology, data, new cause areas and greater transparency.
- Wealth and other advisers looking to provide more active assistance to their clients, including greater due diligence, engagement with nonprofits on behalf of families, and more proactive grant planning and overall management
- “Trust-based philanthropy” principles in practice: More “unrestricted” giving for charities to deploy using their best judgment and fewer requests for custom/individualized reporting from grantees.
- Continuing desire for better/smarter ways of assessing impact and nonprofit quality.
What factors should family offices keep in mind when considering organizations and charities to donate to through their philanthropy?
It is very common for family offices to support their local communities. They have a strong desire to give back in the places where they flourished. If not watched closely, we see families being overwhelmed by inbound requests from friends and the community versus supporting causes and organizations for which they have strong personal motivations. A good rule of thumb from the Center for Effective Philanthropy is limiting less than 20% of giving (or a reasonable fixed dollar amount) for inbound, “off-mission” requests to ensure the majority of activity aligns with a family’s stated goals.
JULIA CHU
Chu is the head of philanthropy and family governance advisory at NB Private Wealth, dedicated to serving individuals, families and their charitable organizations by providing them comprehensive wealth and investment management services that enable their unique financial journeys and purpose.
What philanthropic trends do you predict for family offices in 2024?
- Rising-gen engagement: Founders who have established a charitable vehicle like a donor-advised fund account or a private foundation often seek to have their children become involved over time. This need becomes more critical as founders age and the challenge of succession planning becomes more immediate for the charitable entity, especially as the pandemic has contracted many founders’ mental timeline of passing the baton sooner rather than later. Often, the family office is charged with integrating rising-generation family members into an existing foundation’s governance, but an effective journey begins with the founder’s expression of aspirations for the future and learning of the children’s philanthropic interests. We may support family offices in guiding this ongoing dialogue between generations.
- Aligning financial investing with philanthropic values: 2023 marked a year of unprecedented extreme weather events and a corresponding focus on climate change and its aggravating factors. As younger family members express their interests in sustainable investing, family offices become charged with integrating environmental, social and governance considerations into the family’s balance sheet. At the very least, not to have one form of activity to counteract the other (for example, those who care about the environment may not want to invest in a company that pollutes downstream). Also, market-driven activity can often accelerate the rate of change sought in the world. We think it will be more common to see both philanthropic and personal investment capital at work in a similar direction.
- Complementing philanthropy with political activity: With 2024 as a major election year in particular, we believe that more family office founders will continue to seek to effect change directly through legislative and political activity as polarization and major policy decisions occur through elected officials. As a result, entities other than traditional nonprofits may become part of the standard menu of nonprofit funding by family offices. For instance, a section 501(c)(4) organization may engage in lobbying as its primary activity without jeopardizing its tax-exempt status.
What factors should family offices keep in mind when considering organizations and charities to donate to through their philanthropy?
Due diligence of nonprofit organizations involves factors similar to those of equity investing and may include the following:
- Program track record: Nonprofit organizations may share their activity and results through an annual report or updates on their websites.
- Leadership stability and reputation: Recent press coverage can highlight any awards, recognition or scandals that may affirm or question leadership capacity and integrity.
- Financial health: Several online platforms assess nonprofit financial health and may serve as a starting point for your efforts. GiveWell and Charity Navigator are two examples.
- Data and evidence: Updates and developments within your sector of interest (e.g., through platforms including Issue Lab and Giving Compass) can provide critical intel in assessing charities.
- Investments by peers: Leveraging the research of large funders in your area of interest can accelerate your due diligence. Foundations have specialized professional staff who thoroughly vet nonprofit organizations and often list their grantees online.
HANNAH SHAW GROVE
Grove is the chief marketing officer at Foundation Source, the country’s largest provider of support services and foundation software for private foundations and charitable advisers.
What philanthropic trends do you predict for family offices in 2024?
- Foundations are in it for the long haul. Year after year, we see private foundations thoughtfully plan and carry out grantmaking activities no matter what headwinds they’re facing. That was especially true over the last 12 months, as challenging macroeconomic conditions put generosity to the test. But foundation giving remained steady, according to a Giving USA report. The report also showed individual giving, the largest source of charitable gifts, was down by more than 6% in 2022, making the need for private philanthropy even more imperative. Our own recent analysis of nearly 1,000 private foundations revealed that they gave more than they did the prior year. In 2022, we saw the number of grants increase to 31,373 (up 7%), representing $865 million in charitable aid and a 15% increase in dollars granted. They also granted an average of 6.6% of assets in 2022, surpassing the required 5% distribution minimum. While we don’t have the full picture yet for 2023, we’re buoyed by the momentum we’ve witnessed amongst our clients so far and believe it bodes well for 2024 charitable giving.
- Foundations are balancing long-term strategies with quick responses to urgent needs. We surveyed a group of 200 clients at the beginning of the year and found that 58% plan to continue implementing their long-term strategy. This “stay the course” mindset is indicative of the discipline and commitment to mission that foundations hone to make a positive impact even during tough times. However, this long-term mindset doesn’t take away from their ability to act in unforeseen circumstances. Our survey found that 30% of donors are interested in leveraging more of the unique features of their foundations, such as granting directly to individuals, to drive change. Granting directly to individuals can be especially useful during crises to provide immediate relief during an emergency. We saw foundations tap into these tools to support humanitarian aid for people affected by the wars in Ukraine and Israel-Gaza, as well as natural disasters like the earthquakes in Turkey and floods in California. With continued social, political and environmental unrest predicted, we expect foundations will continue to balance long-term missions with near-term needs.
- Women are leading the charge for change. Research of our client base shows that female foundation leaders are on the rise. Over the last four years, the number of foundations with women in leadership roles increased by 32%, the number of women grantors increased by 26%, and the amount given annually by women grantors increased by 76%. At the end of 2022, approximately 40% of leadership roles at private foundations were held by women. Additionally, nearly 20,000 female grantors gave over $600 million in 2022, a 25% increase in dollars granted year over year. We believe this trend will continue in 2024 and beyond, as philanthropy is one of the most common interests among ultrawealthy females, and women are expected to control much of the $30 trillion in investable assets that baby boomers will possess by 2030.
- The great wealth transfer is ushering in a new era of giving. A New York Times analysis projects that $84 trillion will be passed down from older Americans to millennials and Gen X heirs through 2045. Of that, $16 trillion will be transferred within the next decade. This is expected to be the greatest wealth transfer in history. We’re optimistic that the next generation’s commitment to social change and desire to live a life of purpose will have a positive ripple effect through the philanthropic sector. We’re already seeing that take shape among ambitious entrepreneurs-turned-philanthropists like Reddit co-founder Alexis Ohanian, who launched the 776 Foundation to tackle climate change; and professional skateboarder and TV personality Rob Dyrdek, who aims to inspire and empower underestimated entrepreneurs through the Do-Or-Dier Foundation.
Wealth management firm rebrands and restructures
By MARCUS BARAM
The wealth management firm Boston Family Advisors is rebranding as BFA Family Offices with a commitment to growing organically rather than through acquisition.
The firm, which works with investors and entrepreneurs who have built generational wealth, manages private investment vehicles for clients who seek exposure to proprietary deal flow.
BFA plans to launch an in-house subsidiary to offer new funds and established BFA Trust Services to offer legacy and estate stewardship to clients.
“As investors and entrepreneurs who have built their wealth, our clients have a distinct way of thinking about risk, opportunity and legacy,” said Josh Leffler, a BFA partner and COO. "They’re constantly asking themselves ‘What’s next?’ We ask ourselves the same question, and our response is that we will continually enhance our offerings and remain attuned to the needs of preeminent investors."
LOOSE CHANGE
- World’s hottest vacation spot just got more expensive: Those dreams of a budget-friendly holiday to Japan are fast evaporating. An abrupt change has occurred to the trend that saw a weaker yen hand foreign tourists a chunky boost to their spending power.
- New BMO survey sheds light on gender gap among business owners: Women entrepreneurs have made progress in recent years but still lag behind their male peers when it comes to financial planning, transition planning and financial literacy.
- Michael Dell takes steps to donate stock worth $1.7 billion: The conversion was done in anticipation of a “future charitable donation of some or all of the shares,” according to the filing.
- Help us with a story: We’re working on a story about power and purpose from family foundations. If you have any comments on the topic, reach out to [email protected].