The proliferation of family offices tests the boundaries between external risk management and the unique challenges faced by families navigating significant changes in financial status. Adding philanthropy to the list of services softens those boundaries and often strengthens communication and integrity across family office activities. 

Challenges

Most advisors working with family offices have seen the drama behind the curtain. Lack of communication and transparency, infighting and jealousy, conspicuous consumption, and addiction are some of the monstrous outcomes that grow out of the change in purpose that can happen after a liquidity event. The book, Fragile Power, Why Having Everything is Never Enough; Lessons from Treating the Wealthy and Famous, by Dr. Paul Hokemeyer, explores these issues and opportunities in depth. 

Purpose Driven Engagement

Problem solving in communities and supporting medical, arts, and educational institutions are all well and good, but the value of family led, purpose-driven engagement can be enormous. Internal opportunities that arise from a philanthropic focus include:

• Contextualizing values across generations
• Deep learning and collaboration within the family
• Connecting with peer groups with similar interests
• Financial education within a discrete fund or set of funds
• Leadership skill building

The Hat Trick

Sadly, the magic isn’t instantaneous. It’s intentional, arduous, and rarely done without objective, experienced facilitation. Attention to purpose-driven engagement can change the way people interact. 

The parents (G1) in one family I work with were adamant about building legacy through a perpetual foundation, but were disinclined to talk to (G2) about it because of fear the kids wanted to support funding something not in line with their own values. What G1 wanted was to do something transformative in their community. The options in this case are to continue not to talk to G2 and let them deal with it themselves when the time comes (likely with horrible outcomes) or create an opportunity for facilitated collaboration around shared values culminating in a meeting and engagement agreement that everyone signs. Once that agreement is done the next step is to define everyone’s role, in the same way you might for a corporate board. 

A glimpse of the structure behind the scenes takes the mystery away from working together and allows everyone a seat at the table to talk about a defined way of giving. 

Takeaways

• Identify philanthropic advisors and services that align with your client’s needs
• Encourage wealth generators to think about their current and future goals 
• Ensure PF by-laws capture roles and responsibilities clearly
• Focus on consensus building around an agenda that supports the whole family

It takes courage to look behind the curtain, but taking the mystery out of engaged philanthropy uncovers where the magic really lies. 

Resource: Fragile Power by Dr. Paul Hokemeyer