A new study by the National Center for Family Philanthropy highlights the growing use of family offices to manage the philanthropic giving of wealthy Americans. As private entities created to manage the investments, estates, and even businesses of a single family, these offices are increasingly including philanthropy in their repertoire as well. The majority of firms surveyed in this study reported not only assisting their clients strategize and execute their giving but also having dedicated staff and resources to oversee it. Philanthropy is clearly playing a larger role within the greater financial portfolio of wealthy families.
Some of the findings include:
– Both families and family offices take philanthropy seriously. 84% of study participants have paid staff for the family foundation; 60% have active boards of directors that oversee the foundation’s giving; 34% reported that a foundation CEO serves as the primary decison-maker on giving.
– Family offices were highly involved in guiding and managing the family’s philanthropy, sometimes in cooperation with the family foundation. Involvement included help in finding a strategic focus, leverage the impact of its giving, and measuring the effectivess of its grants.
– A growing number of family offices support multiple foundations, with more than one in five supporting three or more foundations.
– All parties reported unique challenges associated with the working relationship between family offices and foundation staff. Different goals (one preserves capital and makes money while the other one gives money away) , different matrices for measuring success, cost and inefficiency, complicated IRS regulations, and issues created by separate management structures were cited by participants.
– The majority of family offices serve three or more generations, and families are often two or more generations removed from the founder(s).
– Families and advisors placed a high priority on developing the next generation of family leaders.
– Interest in impact investing is limited (19% of respondents ranked it as “very important”) but its popularity is growing among new foundations.
While use of a family office has been a growing trend among philanthropists, little research has examined the issue in depth before this benchmark report. It not only provides an introduction to the role of a family office but, through case studies and interviews with practitioners, presents best practices and recommendations for how families can best leverage this resource for their own philanthropy. It will undoubtedly become a useful guide for advisors, philanthropic families, and even non-profit professionals wishing to understand how to engage with donors.We hope to see a similar study on family philanthropy and family offices in Asia.
The report, titled “Working Together for Common Purpose,” is collaboration between the NCFP, the Family Office Exchange, and the Threshold Group. The full report and an executive summary can be found at the National Center for Family Philanthropy’s website.