Thought leadership  

24/05/2017

Rethinking “Next-Gen” Philanthropy

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More than USD 59 trillion of established wealth is estimated to pass into the hands of the next
generation by 2050. Overall, “Next-Gen” donors will end up controlling between USD 20 trillion and USD 30 trillion in charitable giving.

The question is, how will they transform philanthropy, and as their bankers, how can we add value? Research shows that 87% of millennials think business success should be measured by factors other than just financial performance. They are keen to marry profit with purpose.

Entrepreneurs in tech and other industries are creating new wealth on an amazing scale. Moreover, more than USD 59 trillion of established wealth is estimated to pass into the hands of the next generation by 2050. Overall, “Next-Gen” donors will end up controlling between USD 20 trillion and USD 30 trillion in charitable giving.

The question is, how will they transform philanthropy, and as their bankers, how can we add value? Research shows that 87% of millennials think business success should be measured by factors other than just financial performance. They are keen to marry profit with purpose. In their philanthropy, Next Gen’ers are a lot more flexible in how to go about achieving social impact. They often want to explore new engagement tools, and view giving and investing as different activities along one spectrum. They don’t just research non-profit organisations, but are also open to getting involved with individuals and for-profit companies that are tackling the issues they are passionate about.

There are two additional dimensions to have on the radar as well. Most of this new wealth is made in Asia-Pacific, where strategy consultancy BCG predicts USD 15 trillion in wealth will be added between 2015-2020. Another trend to watch is the millionaire household segment, estimated to own 52% of global private wealth by 2020; many of these millionaires will want to make a difference as well.


Next-Gen philanthropists want due diligence and impact. Although their age bracket is a common denominator, the “Gen X” (born 1964-1980) and the “Gen Y” (born 1981-2000) high net-worth individuals (HNWIs) are a diverse group, including tech entrepreneurs, heirs to family wealth and real estate luminaries. For sure, the world of technology has evolved a lot since Lombard Odier was mentioned in Jules Vernes’ “From the Earth to the Moon,” published in 1865. But some things don’t change. Just like previous generations, the Next Gen also wants to leave its mark. The exciting difference is how they engage. A recent study found the following patterns:

 

  • Next-Gen philanthropists want to conduct “due diligence” and do research before deciding who to support; being highly connected and Internet savvy, they are also not shy to recommend a cause or organisation to their peers.
  • They like to fund efforts that address root causes and look for systemic solutions.
  • They first decide the philanthropic goals and preferred solutions and then search for potential recipients where there is a fit; and
  • They seek information about an organisation’s proven effectiveness (or “impact”) before deciding whether to provide support.


We can help strike the right balance between tradition and change.
“Many Next-Gen donors see themselves as very different from their parents (or grandparents). They are excited about innovations and new ideas for change,” remarks Dylan Samuel from our London office. Yet what ultimately drives them are the philanthropic values they learned at home. Inheritors strive to be stewards of their families’ philanthropic legacies, and partially give to similar causes as their families.

Striking the right balance is not a given. Fortunately, in building on our own strengths acquired over more than two centuries, we are well positioned to help reconcile honouring the past with building the future. For example, Lombard Odier relationship manager Alexia Rambosson explains, “in the Lombard Odier Family Programme, we have found that sharing wisdom helps clients to build values and transfer them. Philanthropy is just the kind of positive glue that can give a family a common sense of purpose across generations. Such programmes are very powerful for the client relationship.”

Also relevant to us as technology leaders in our industry, Next-Gen philanthropists are particularly excited about the use of technology and innovative, high-ambition projects. Lombard Odier has competences and deep relationships that are valuable for a client engaging in forward-looking, tech-heavy projects, who is looking for inspiration as well as solutions.

Technology is taking philanthropic possibilities to a new level. So why not use the power of information technology for good?
Take the Venice Time Machine project (VTM). Co-financed by Fondation Lombard Odier, and launched by the EPFL (Swiss Federal Institute of Technology in Lausanne) and the University Ca’Foscari of Venice, VTM is an international scientific “BigData” programme. The State Archives of Venice contain 80 km of shelves filled with over a thousand years of administrative documents. Treasures include a hand-written document by Galileo, then Professor of Mathematics in the University of Padua, requesting financial support from the Venetian Senate to develop the telescope, where he describes its various uses (academics always need funds for research).

VTM will digitalise Venice’s archives and give them a new, virtual existence on the web in the coming years. Where scientists had to travel to examine fragile documents on site, they will start to access history from the Cloud. An advance tomography technique will soon allow reading the content of ancient manuscripts without physically opening the pages.

This larger opportunity of harnessing the power of technology to achieve change is not lost on tomorrow’s incoming philanthropists.

“For us at Lombard Odier, the opportunity to support the Next Gen of philanthropists is incredibly exciting,” remarks managing partner Hugo Bänziger: “They will have an unprecedented amount of wealth at their disposal. Their identities as major givers are just now taking shape. And they want to make a definite difference.”

As re-thinkers, we can help to be catalytic. In our philanthropy offering we are also assessing how we can best build on our strengths to be an exciting go-to point for millennials – on the structuring and programmatic side of philanthropy as well as regarding the asset management. Whether we provide tailor-made solutions, a sheltered fund at Fondation Philanthropia, or a charitable asset management solution to their foundation – possibly with impact assets as a part of the allocation – let’s remember:

  • Next-Gen’ers are all about the here and now. They desire a much higher level of direct contact than their predecessors, who tended to be more hands-off in funding. They also want results faster.
  • They are tech savvy, rely on social media and the internet to learn about issues, causes and organisations. They like to conduct charitable activities online. Using analysis procedures from fields such as the hedge fund industry is not a taboo, but makes sense if it leads to deeper insight into what works.
  • The Next Gen network with peers for greater results; and
  • They want to be actively engaged and develop relationships with the organisations which they support, giving “more than money,” offering their own professional or personal talents.

As the cost of information keeps falling, client philanthropic experiences will keep getting better, at lower cost, and increasingly in real time. Covering family offices for Lombard Odier, Ahmed Husain sums it up: “Many larger family offices are looking into upgrading their philanthropy and investment activities; it’s about making them more exciting for Next Gen’ers who want to think of themselves as entrepreneurs in their own right. Winning client propositions include ability to think impact across a series of activities, and access exciting projects. Here also, technology is definitely changing the game.”

 

IMPORTANT INFORMATION – GENERAL MARKETING
This is a marketing communication issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This marketing communication is provided for information purposes only.
It does not constitute an offer or a recommendation to subscribe, to purchase, sell or hold any security or financial instrument. It contains the opinions of Lombard Odier, as at the date of issue. These opinions and the information herein contained do not take into account an individual’s specific circumstances, objectives, or needs. No representation is made that any investment or strategy is suitable or appropriate to individual circumstances or that any investment or strategy constitutes a personal recommendation to any investor. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Lombard Odier does not provide tax advice. Therefore you must verify the above and all other information provided in the marketing communication or otherwise review it with your external tax advisors.
European Union Members: This marketing communication has been approved for issue by Lombard Odier (Europe) S.A., a credit institution authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg and by each of its branches operating in the following territories: Belgium: Lombard Odier (Europe) S.A. Luxembourg · Belgium branch, a credit institution regulated in Belgium by the Banque nationale de Belgique (BNB) and the Financial Services and Markets Authority (FSMA); France: Lombard Odier (Europe) S.A. · Succursale en France, a credit institution and regulated in France by the Autorité de contrôle prudentiel et de résolution (ACPR) and by the Autorité des marchés financiers (AMF) in respect of its investment services activities; Italy: Lombard Odier (Europe) S.A.  • Italian Branch, credit institution governed in Italy by the Italian stock market regulator (Commissione Nazionale per la Società e la Borsa , or CONSOB) and the Bank of Italy; Netherlands: Lombard Odier (Europe) S.A. · Netherlands Branch, a credit institution regulated in the Netherlands by De Nederlandsche Bank (DNB) and by Autoriteit Financiële Markten (AFM); Spain: Lombard Odier (Europe) S.A. · Sucursal en España, a credit institution regulated in Spain by the Banco de España and the Comisión Nacional del Mercado de Valores (CNMV); and United Kingdom: Lombard Odier (Europe) S.A. · UK Branch, a credit institution regulated in the UK by the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority (“PRA”). Details of the extent of our authorisation and regulation by the PRA and regulation by the FCA are available from us on request. UK regulation for the protection of retail clients in the UK and the compensation available under the UK Financial Services Compensation Scheme does not apply in respect of any investment or services provided by an overseas person.
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