Why every family office needs a philanthropic consultant

One of the joys of having significant wealth is the satisfaction that comes with being able to one day give some or all of it away—either through sustained philanthropy over a lifetime, or in the form of an estate gift. But while many wealthier families in Canada trust a family office to manage their financial, legal and other strategic business affairs, discussions over charitable giving often take a back seat. This, despite the fact that charitable giving is just as important as ever to the high net-worth community—and that includes the next generation of millennials who are eager to make a positive impact.

According to a 2018 TD Bank Group survey, 77 per cent of high net-worth millennial benefactors said they feel that it’s important to leave a legacy. Fully 63 per cent went a step further, saying that leaving a positive legacy is their duty.

Here’s the challenge: A 2015 Wealth Professional study noted a significant gap in how advisors believe they’re delivering philanthropic guidance and how it’s typically received by clients. The survey found that 91 per cent of advisors reported having discussions about philanthropic giving with their clients. However, only 13 per cent of clients felt those conversations were meaningful and offered the right insights to guide their charitable decision-making.

That discrepancy could actually be the result of a positive evolution. Traditionally, a family office was focused strictly on protecting and growing the wealth of the families on its roster (or a single family, in the case of firms that cater to the ultra-wealthy). But in recent years, a growing number of high net-worth Canadians have embraced strategic philanthropy. Wealthy benefactors have made a concerted shift from mere cheque-writing to being highly engaged with the charitable organizations they support. The Foundation account (or donor advised fund) structure offered by Canada Gives is a perfect example of the kind of administrative platform and strategic assistance they’re leveraging to maximize the impact of that generosity.

Some family offices have been slow to keep up with this shift. Creating and protecting wealth has long been their business. Giving it away to worthy causes, at least until recently, has not.

And that’s why they should consider bringing a professional philanthropic consultant onto their teams as a way to complement their core financial planning and wealth management services. That could be a full- or part-time consultant, or an experienced third-party partner such as Canada Gives. Philanthropic consultants are typically most effective when they work in tandem with the other professional advisors in the family office, coordinating their efforts to help clients achieve their financial, lifestyle and giving goals, while executing the donor’s wishes through careful guidance and planning.

Why philanthropy matters

One of the most important aspects of philanthropy is the one that’s often least discussed: the opportunity for families to bond, communicate their personal values, fund life-changing programs in their communities and share the gift of giving with subsequent generations. Many use events such as the holidays as a fixed date to meet with loved ones and either set or refine their gifting plan for the coming year. It’s an excuse to spend time together—and the life lessons that stem from it are truly invaluable.

A professional philanthropic consultant can help bring order and structure as families continue on that journey. They can highlight new giving opportunities, vet charities and otherwise help shape a giving strategy that a family can follow for years—perhaps even decades when the philanthropic tradition is passed through generations.

A philanthropic consultant can also act as a buffer between a family and the (many) charities that will inevitably solicit their support. It’s well known that once a philanthropist gives to a cause, that organization will often continue approaching them for support. The consultant can work with charities to highlight gifting opportunities, field grant requests and also provide a degree of anonymity to the family if they prefer it.

What makes a good philanthropic advisor?

A consultant should have both financial and philanthropic experience and expertise. They need to be able to communicate with the other advisors in the family office and align their strategic advice with that of their colleagues. They should also have the skills to liaise both with their high net-worth clients and a network of contacts across the non-profit sector (which they should build and maintain).

Finding a consultant with the Master Financial Advisor—Philanthropy (or MFA-P) designation is also important. The accreditation ensures that a philanthropic consultant has the specialized technical, leadership and negotiating skills to help families work through relationship dynamics, while celebrating their differing perspectives. Because as we know, many families share a great deal of love and affection for one another, but have a difficult time achieving consensus—and the same is true when it comes to making philanthropic decisions.

The only potential pitfall when hiring a philanthropic consultant is bringing an individual on board who has expertise only in specific sectors (e.g., in philanthropy but not finance, or vice versa). Effective consultants must be able to understand a family’s personal and financial motivations for giving. The goal is to approach the task of helping a family achieve their philanthropic goals in the most fulsome, comprehensive way possible. The philanthropic conversation should take the client’s giving plan and goals into account—along with other financial considerations such as tax planning. To come at the task from only the perspective of the non-profit sector would limit the scope and impact of the work that can be done on a client’s behalf.

Having a philanthropic consultant with diverse expertise can dramatically enhance a family office’s client service experience—and facilitate the generosity that’s long been a defining value of so many wealth families across Canada.

The Canada Gives team