Bring Meaning to My Money
Resource type: News
Capital Magazine | [ View Original Source (opens in new window) ]
By Mitch Anthony
As successful baby boomers liquidate businesses or transition to “doing something more meaningful with their lives,” there is growing interest in capitalizing, in a philanthropic sense.
This sentiment is growing and there are not enough wealth managers in the marketplace that can provide the conversation these people want to have. They are ready to transcend material collections, showpieces, and gain simply for the sake of gain. These individuals want to elevate their game to an altruistic level where they see the investment of their lives and wealth pay inspiring dividends.
The Economist predicted that another golden age of philanthropy is staged to begin in the U.S. and around the world. It stated, “There are signs that a new kind of donor is emerging, with a new approach to giving. That new approach includes being more personally involved with their giving and placing a much higher premium on accountability.”
According to Bruce Meyerson of the Associated Press in an article in The Daily Star, “While they may not have $26 billion to sock away into a foundation like Bill Gates, many of his fellow baby boomers won’t settle for just writing cheques to their favourite charities.”
With a first wave of boomers nearing retirement, and many starting to receive inheritances from their parents, a growing number are establishing family foundations with endowments as small as $50,000 – $100,000. According to Guidestar — a leader in providing comprehensive data on more than 1.5 million nonprofit organizations in the United States — nonprofits are growing at an amazing and unprecedented rate. The wealth created in the 1990s has funded a virtual explosion of family foundations, charitable trusts, supporting organizations, and giving in general. In August 2002, there were 1.1 million nonprofits in the Guidestar database. By August of 2004, the number was up to 1.9 million — an increase of 73 percent in just two years!
Boomers are opening accounts with community-based foundations and setting up “virtual” foundations with donor-advised funds, that allow the individual to decide when, where and how much to contribute. This idea fits the baby boom generation’s approach to life, family, and personal fulfillment. (Read more about foundations and donor-advised funds.)
This generation is more hands-on with their giving than their parents were, opting for personal involvement, local charities and often designing their own approaches for social involvement. According to the Indiana University Center on Philanthropy, people between the ages of 50 to 65 years old are giving the most, with some levelling out at age 65. According to Melissa Berman of the Rockefeller Philanthropy Advisors, a non-profit organization that provides planning and operational assistance to family foundations and charitable endeavours, “many of the older boomers have reached a place in their lives where they have passed the immediate pressures of career building and raising kids to step back and say, ‘What do I want to do with my time and resources?’ ”
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According to FinancialCounsel.com there is a vast majority of middle-income individuals who make annual gifts based on generosity rather than tax motives. Case in point: nonprofits in the United States feared an ebb in donations with the advent of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), which reduced top income tax rates. However, donations actually increased after that tax cut by over $1 billion, which demonstrates that this giving ethos is deeply rooted in the boomer generation.
Becoming an eye witness to your own goodness
A watershed moment in the world of philanthropy came from Charles Feeney, co-founder of Duty Free Shoppers Group, Ltd., who sold his share of the business for $3.5 billion and proceeded to give away all but about $5 million of his personal fortune. His foundation Atlantic Philanthropies recently announced that it was going to quadruple its distribution of grants from $100 million to $400 million per year in order to exhaust the entire endowment in 12 to 15 years! Why such charitable aggression? Feeney capsulized his approach with the now popular phrase he has been credited with coining: he is a believer in “giving while living.”
Philanthropy once implied that the donor was dead; but now, it has been expanded to include living donors — and highly involved donors as well, with a bent for highly personalized giving. Individualized expression is the description that captures the boomer ethos. Should it surprise anyone that this group, having created their own individualized career tracks and having borne the responsibility of their own retirement, that an unprecedented age of highly personalized giving would be in the waiting?
This generation of investors has decided that they don’t need to be Bill Gates or Warren Buffett to make a difference in the world with their money. And like Bill and Warren, they have decided that they don’t have to be dead either. They want to be present to see the fruits of their charitable inclinations. The wealth manager who understands this and encourages the Venture Philanthropy conversation will see a whole new brand of charitable opportunity opening up.