Philanthropic Families Should Approach Giving as They Do Their Investment Portfolios: Intentionally and Strategically
Whether through private foundations, donor-advised funds, or direct charitable contributions, the intent of philanthropy is to generate positive social impact – just as we seek positive returns from our investment portfolios.
In this piece, we will explore a few strategies for families to consider in pursuit of the strongest returns — or impact — from their philanthropic endeavors.
The Benefits of Philanthropy Can Go Beyond the Impact
Philanthropy can be a joining exercise for families and one of the best ways to introduce younger generations to wealth. In setting your family’s course for a philanthropic strategy, there is an immense benefit to exploring and ultimately defining the mission, vision, and values that will serve as the guideposts for your efforts. Doing so can also clarify and fortify your family legacy, and instill in young people several elements of being thoughtful stewards of wealth in today’s world.
Avenues to Impact
Once your family has committed to setting a strategic vision for its philanthropy, the next steps are to determine where you seek to make an impact and how to achieve it effectively. Thoughtful giving is not a one-size-fits-all activity; depending on how turnkey or customized the strategy, there can be a significant time commitment required. Families can engage professional advisors to help manage all, or just a portion, of their philanthropic activity – from setting strategy to implementing and assessing impact, and all the details in between.
Outlined below are a few giving strategies and structures for families to consider as they think about their desired impact and capacity to devote time and energy to philanthropic activities.
- Issue-specific strategy
- For families that have identified one, two, or three issues of meaningful import, it may make sense to focus philanthropic efforts in these areas specifically.
- Significant time and effort are required to customize, implement, and manage an effective strategy.
- Outside advisors commonly support and facilitate these efforts.
- Place-based strategy
- Similar to issue-specific, if there is a community near and dear to a family’s heart, they may seek to formulate a strategy across issues but specific to that particular location.
- This strategy also demands a significant time commitment; however, local issues may be less complex and time-consuming, depending on the particular circumstances.
- Pooled philanthropic funds
- For families short on time but long on desire for impact, these vehicles can be an effective option to outsource giving, “soup to nuts.”
- Philanthropic dollars are directed to a selected intermediary organization responsible for establishing a strategy (or multiple strategies) and administering grants.
- Outsourcing strategic and administrative responsibilities allows for a minimal time commitment for donors.
- Donor collaboratives
- If there is a specific issue that will benefit from pooling resources of a few like-minded donors, donor collaboratives hosted by public charities can yield greater impact.
- Donors are still responsible for strategy and implementation but can hire professionals to manage and administer the effort.
- Depending on how the collaborative is structured and managed, time requirements can vary greatly.
- Community foundations
- Combining the concepts of place-based giving and pooled philanthropic funds, community foundations are public charities with the mission of generating impact within a defined local geographic area.
- After the initial decision of identifying the organization with which to partner, families have the freedom to spend as much or as little time as they desire.
Services That Support Giving
We have only scratched the surface of a few strategies for families to contemplate as they consider how to customize their philanthropic efforts. Effective philanthropy further demands thoughtful consideration to organizational structure, governance, cost, theories of change, measurement of impact, and the many associated details thereof.
Lake Street Advisors partners with families to make sense of the giving landscape and establish a roadmap for their philanthropic journey. We collaborate with leading sector experts in circumstances warranting a custom-tailored approach. We help families refine their objectives and purpose, develop a strategy, and coordinate execution. Our goal is to facilitate a positive experience for our clients, enabling lasting impact through a thoughtful philanthropic strategy.