Strategic philanthropists were the focus of the article, Doing Good the Hardnosed Way, in this week's Financial Times.
What are the traits of strategic philanthropists? They:
(1) are passionate about their causes;
(2) want to ensure their philanthropic dollars have the greatest return and impact- usually judging their return on their investment by measurable performance results;
(3) are practical and hands-on;
(4) have a hardnosed investment mentality; and
(5) act as a business consultant to the nonprofit groups they invest in.
Many have spent time amassing their wealth using business principles and so they want to give away their wealth using the same principles. They do this by developing an investment strategy and taking an analytical approach to their time horizon, risk tolerance, goals and outcomes. Sounds so investment-like doesn't it?
Hemant Singh, founder of New York City-based Private Wealth Management says that the passive form of giving and investing is gone. "People want the highest yield possible. These are people who have the resources, the confidence and most importantly, the conviction."
According to experts, here's the process for giving away wealth:
(1) find out where your client's interests are;
(2) look at your client's assets and determine the most efficient, tax advantageous mechanisms for achieving their vision;
(3) work with the nonprofit organization to set up a plan for the donation, complete with monitoring and evaluation elements; and finally
(4) assess the donation. Donors want benchmarks to evaluate their own individual success.
It seems to me that this process has been around for awhile in the gift planning world. But since clients are expecting their advisors to include philanthropy as part of their investment strategy, it is always good to see more educational articles like this. Perhaps we can get more advisors to talk to clients about philanthropy and create a bigger pool of philanthropic dollars.
Bank of America and the Center on Philanthropy at Indiana University released a report earlier this year that basically said that wealthy donors want to 'meet critical needs' and 'giving back to society' was more important than leaving a legacy. This is fairly consistent with some of the Asian American philanthropy research out there.
The report also found that entrepreneurs are more generous when it comes to giving back than those who inherited their wealth. In comparing household donations by sources of net worth, entrepreneurs contribute an average of $232,206 annually while those who inherited their wealth gave an average of $109,745.
This is good news for the Asian American community since we have a large number of entrepreneurs. In fact, the number of Asian-owned businesses is growing at twice the national average.
