REPEAT: FEATURE: Many Generation Y Donors Are "Taking The Reins" In Philanthropy

Eliane Chavagnon

23 December 2013

A rising number of young individuals are “taking the reins” on their families’ philanthropic efforts, says Rebecca Eastmond, head of philanthropic services for EMEA at JP Morgan Private Bank.

The trend is associated with what has been described by a recent study as the “new age of philanthropy” and potentially points to an opportunity for wealth advisors and firms.

Eastmond recently spoke to this publication about the continued level of philanthropic dedication among wealthy individuals, discussing all the while her increased involvement with people as young as twenty over the past year or so. She said her firm is seeing a number of next generation individuals from wealthy families looking for ways to make a difference in the world.

Her observations resonate with findings from a global paper by Charities Aid Foundation called The Future Stars Of Philanthropy: How the next generation can shape a bright future. It found that young people “thrive on engagement,” value their networks and are more willing to make noise about what they’re doing philanthropically.

The study, which involved 5,975 wealthy individuals, also suggested that young donors take a more strategic and hands-on approach, meaning the industry can expect greater innovation, experimentation and long-term relationships with causes and charities. Interestingly, it also discovered that wealthy individuals from generation Y are giving, on average, some $3,000 more than those over the age of 45.

“Individuals in the younger generation are already putting their money exactly where their mouths are,” it says.

In conjunction with this is an estimated $41 trillion currently being handed over from generation to generation, representing the “largest post-industrialized intergenerational transfer of wealth ever seen,” Claire Costello, philanthropic practice executive for US Trust, told this publication late last year.

Prospects

CAF’s survey also points to a difference in attitudes among younger and older donors when it comes to philanthropic decision-making, with philanthropists under the age of 30 more open to “bouncing ideas off their family and friends,” it found.

Illustrating this, the firm highlighted that just 13 per cent of 1,428 surveyed online in the under 30 age bracket said they turned to private bankers, while only 11 per cent turned to specialist charity advisors. By contrast, 42 per cent said they turn to family, 39 per cent to peers and 38 per cent use giving circles. Older donors are most likely to rely on accountants (35 per cent).

Somewhat unsurprisingly then, overall family involvement is still as important as ever. For example, another study conducted by US-based Johnson Center for Philanthropy and the non-profit consulting practice 21/64 found that 53 per cent of young donors said they plan to be involved with their family’s philanthropy.

Findings from this survey, Next Gen Donors: Shaping the Future of Philanthropy, suggest “several ripe opportunities” for wealth, legal and philanthropic advisors when it comes to this next generation of donors, said Meg Lassar, an analyst at Strategic Philanthropy.

“One specific point of entry for advisors looking to initiate a relationship with this generation is around the giving vehicle and giving strategies,” Lassar added (view full article here).

Different ways of giving, interacting

Eastmond mentioned that young people tend to care about different things and are more socially aware about certain issues. They might take an alternative approach and be more interested in impact investing, for example.

On this, she acknowledged that the market in impact investing is “developing” and is something that JP Morgan has been “very involved in trying to support.” However, as it’s not “super-developed” there isn’t an abundance of easy investment opportunities at a size and with a track record that make it easy for people to build impacting investing into their standard asset management approach. However, “it will happen over time,” she said.

Meanwhile, there are now more ways than ever to engage with philanthropy and crowdfunding is one of them, Eastmond added.

The term “crowdfunding” refers to the combined effort of individuals who pool their money to support efforts initiated by other people or organizations (source: crowdsourcing.org).

The rise of crowdfunding in philanthropy suggests that a wider range of people are joining forces and sharing ideas. A UK firm called Mosaic, which specializes in socially responsible investment, recently wrote that this funding method enables individuals to pursue an “interest, hobby or dream” without the stress of creating a successful business from the funds. The firm said this has given rise to the “new age” of philanthropic crowdfunding, which in turn has attracted “a wider and more involved audience of contributors,” it said.

Eastmond said crowdfunding has proved popular among young people who want to follow their philanthropic goals in a way that enables them to communicate and network with people who they can resonate with.

Philanthropy in a state of flux

“This decade sees philanthropy at a pivotal point,” Jo Ensor, director of philanthropy at Charities Aid Foundation, said in the organization's report.

“The evolving global landscape, the rapid creation of new wealth over the last 25 years and a greater awareness of how philanthropy can create social change has led to exciting innovation and new thinking that is changing approaches to giving and social responsibility across the world,” she continued.

With the “next generation” of philanthropists already perusing active leadership roles within their families, the concept that people in philanthropy are, in the words of Eastmond, “all on the same side” is as relevant as ever. “The more that philanthropists can learn from each other and the more tools they have, the better,” she said.

Of course, gen Y givers “are not necessarily going to completely reinvent the wheel when it comes to giving,” CAF said. They are, however, going to develop the best tools to guarantee that their giving makes a difference, the organization predicts.

CAF highlighted in its report how over the past 25 years some of the most astonishing global changes have occurred. During this time, “fortunes have been made and a new age of philanthropy has been born,” it said.