The Future Depends on How Advisors Engage Generation Impact

Advisors need to move faster and smarter to engage these next gen donors. If doing so altruistically isn't motivation enough, research shows that after a client's first parent passes away, only 45 percent of next gen wealth holders stay with their parents' advisors; that drops drastically, to only 2 percent, after the second parent passes.¹ This statistic should serve as a warning to advisors and their firms.

In the coming years, you will need to increasingly forge new relationships with your current clients' next gen family members in order to maintain and renew the lifeblood of your practice. And in doing so, you will have to reach out to next gen prospective clients differently than with previous generations because next gen donors are already rejecting established norms in the field, shaking up how they want others to approach and work with them.

The seven best practices described in this guide outline behaviors we hope will enable you to navigate this paradigm shift as you attract and engage Generation Impact and help these donors make the most of their upcoming opportunities.

Get Familiar with Today's Generational Personalities—Especially Those of the Next Gen

There are now five generations above the age of 21 in American society: Traditionalists, Baby Boomers, Gen X, Gen Y/Millennials, and Gen Z. It behooves you to train advisors of all ages in your firm to understand the generational personalities now in play. Chapter 1 and Chapter 10 of this book give a brief overview of these five generational personalities, and organizations such as 21/64—the nonprofit Sharna runs—and Gen Z Guru—run by David Stillman—offer training on generational differences and effective multigenerational engagement.

While our research focused on next gen donors in the United States, there is a similar cohort emerging in Europe, Asia, and elsewhere, and these donors both share some aspects of broad generational personalities and differ in culturally specific—but very important—ways that advisors should become familiar with. Also, while your next gen clients will reflect these generational personalities overall, each client will also come with their own specific cultural and familial characteristics that can affect their giving preferences. Not all next gen donors are the same. And, in fact, rising generations are more diverse—racially, religiously, and in many other ways—than previous ones.

Be Prepared to Make Necessary Changes to Your Approach

We understand that it's hard for firms still serving older generations to shift gears and simultaneously serve the needs of a very different demographic. While some advisors we know are ignoring this reality—literally assuming that as peers of their clients, they'll pass away when their clients do and won't have to develop relationships with their clients' kids—others are taking a more realistic long-term view. Some firms are creating teams in which older advisors are serving the matriarchs and patriarchs while younger advisors serve those client's children, grandchildren, nieces, and nephews. At a minimum, we believe some degree of next generation outreach is necessary, namely, because renewing one's clientele matters and because these next gen family members are getting involved in managing personal and philanthropic family funds at younger ages than ever before.

If you're looking into what the next generation of clients want, be prepared to adjust a few things about your approach. In addition to learning about who the next generation are, advisors need to begin adopting new vocabulary, an open-minded posture, and a willingness to experiment with new tools and practices to serve these clients. Advisory firms might begin to retrain personnel to operate in a multigenerational context—where instead of one generation of leadership passing the proverbial baton to the next and stepping back, multiple generations with equal agency work together to achieve shared goals. Firms might also need to develop new tools for marketing, technology products, and relationship management to meet the worldview of next gen clients.

Focus on the Relationship, Not the Transaction

Next gen donors prefer to see their efforts and engagements as transformational, not transactional. Building relationships with them means focusing on more than just the technical issues of their money. They want support in many tangential areas. Next gen may not be at the stage of wealth planning, legacy planning, or major gift planning, but they are in a stage of shaping who they will be for decades to come. They are forming their adult identities at the same time as they're making major investment and giving decisions. By inviting them to consider the bigger picture—the intersection between money and life decisions—they might see that you want to help them for the duration. If you succeed, they could stay with you long term. In our interviews, we heard that the next gen are looking for values-aligned advisors, and if they find them, they want to build loyal and lasting relationships with them for years to come.

Apply what you learn about who next gen are (see Best Practice #1) to nurturing these relationships. The next gen donors we studied said that taking a relational approach can mean helping them “think about what I'm grappling with at this stage of my life,” offering recommendations and connections that address a problem or unmet need—even if this means referring them to a resource outside your practice—and refraining from adding yet another meeting to their lives “just because you want to sell me something.”

Support next gen with something they need rather than expecting them to provide what you need. This next gen donor explains it well:

Regarding advisors, what works for me is offering to eliminate some friction in my life. So many people reach out to me and say, “I'd love to meet you. I'm a wealth manager—blah, blah, blah.” Compare that to a time when I had a team reach out to me around the acquisition of my company and they said, “I'm sure you have so many new things you have to do every day—managing some back-office issues, signing checks, sending wires, and so on—and we are happy to be helpful to lighten your load. And, to the extent that you are looking to have any of your portfolio managed by someone else, we are happy to talk to you about that, too.” Because they started from the problem that I was actually facing day to day, versus selling me on something, I was open to the conversation. Similarly, with estate planners, attorneys, and accountants, I really like being approached and told, “We have this tool to help analyze your estate plan and we would be happy to walk you through it and give you feedback.” I am more responsive to that.

Help Them Launch

Be sure to talk with next gen donors not just about your “hard” products and skills, but also about your “soft skills” as they tend to be very interested in the human side of wealth and philanthropy, beyond just setting up the vehicles for grantmaking and investing. Understand that they are in the process of becoming. Help them launch. Help them self-actualize. Help them be independent adults. And by all means, see them as individuals, not as “the children of so-and-so.” Advisors should also pay attention to where these next gen donors are in their philanthropic journeys, taking note of differences between those who are just dipping their toes in the water versus those who are already quite experienced despite their youth. Avoid making assumptions.

Avail Yourself of Values-Defining Tools and Alignment Support

Clarifying values builds confidence and clear communication; it helps your clients better articulate their needs and wishes—and increases your ability to anticipate these. If you find that your next gen clients are giving with others—whether through multigenerational teams at family foundations (which we delve into deeply in Chapter 10) or with siblings, cousins, peers, or even just with a spouse/partner—consider using professional tools that can help multiple donors clarify the values that most motivate their giving. In this way, funding collaborators can come to some agreement on guiding principles and work well together. Without helping clients to articulate and prioritize their collective underlying values, donors and those who advise them are often left navigating conflict between, say, an elder generation that wants to fund scholarships in their local community versus next gen donors who want to fund microcredit loans globally.

In our research, 89 percent of next gen donors said their parents influence their giving, and 63 percent said this of their grandparents. And when we asked about this influence, most said it was about learning values from their elders. Underlying values can be the bridge between past and present, the connective tissue aligning generations. As a nonfamily member, you are uniquely positioned to be the neutral catalyst for a solution to a stymied dynamic and help them gain a big win.

Advisors who feel their organization is focused on “hard skill” tasks such as investing the assets of a foundation, sending checks to grant recipients, and filing their tax-exempt documents—who don't feel open to catalyzing a “soft skills” conversation with donor clients around values and philanthropic identity—can bring in organizations that will complement their strengths. Why would you do this? Because next gen donors are proactive about clarifying these issues and want their advisors to help with this. You might also consider the role you can play in encouraging older donor clients to help their next gen launch by making these patriarchs and matriarchs aware of some of the conferences, peer groups, resources, and consultants available to assist their next gen.

We realize taking time out of busy schedules to articulate values can seem indulgent to some high-powered donors and their advisors. But as years of experience have borne out, advisors who don't “go slow to go fast” risk undermining the very outcomes next gen donors want to achieve, which impacts the client-advisor relationship. When advisors haven't taken the time to do this upfront work, we find next gen donors end up serving on boards whose missions don't align with their values and so they exit prematurely, or they feel frustrated by the lack of outcomes in their grantmaking or discover their investments conflict with their values. This next gen donor encapsulates one of the most important cautions we heard: “We are the inheritors of that $40 trillion. If we don't understand what our own values are, we're going to sit on that money and do nothing with it.”

Help Clients Share Family Narratives and Legacy with Their Next Gen

Next gen donors are eager to be invited into a family narrative and told the stories of their predecessors and the decisions that led to who they and the family are today. Next gen inheritors, on the whole, respect the legacies they are stepping into. While most donors want to talk about their giving with their children and grandchildren, they might not have found the right moment to do so. And you might run into elders who are reticent to face their own mortality or simply don't know where to begin. As advisors, you can help convene these conversations, knowing they are desired by each generation, even if they don't exactly know how to go about them.

Recognize that it's difficult for anyone to start with a blank sheet of paper and write down a vision for their legacy from scratch or give a speech about how they want to be remembered. You can comfortably prep to host these discussions leveraging the many tools on the market, from biographers and videographers to oral historians and philanthropy advisors who specialize in helping clients convey family narratives and transmit values and legacies down the generations. There are also advisors you can bring in, such as Susan Turnbull, Eric Weiner, and Elana Zaiman, who help write “ethical wills” and “legacy letters” that go beyond financial matters.

Assist older donors in clarifying their wishes and help next gen family members understand if they are expected to steward the family's legacy as is or if they have permission to innovate on a theme. Don't leave it so you're the bearer of this information after the elders have passed away and next gen can no longer ask for clarification. These discussions are also a tremendous opportunity for you to get to know your existing clients' successors and let the next gen know you can be a valuable resource.

For Next Gen, Legacy Is an Engine that Informs Today's Decisions

As you help clients share their family story and legacy wishes, promote encouraging the next generation to find their own path within it. Realize that they, too, are adults who want to start thinking—even at an early age—about creating their own legacy. Next gen donors see legacy as “an engine,” not an anchor—to use the words of a donor we interviewed. Next gen overall are predisposed to not want to make bequests or give to endowments—they want to give now and see the impact of their giving now—but they do want your help thinking about the impact they can make; specifically, how can they stand on the shoulders of those who have come before them and affect change through their own time, talent, treasure, and ties? Legacy becomes a lens through which they view their choices. As advisors, you can encourage them to see that their legacy provides them with opportunities, not just obligations. Duty, obligation, and guilt might get them to take a meeting with you, but will only motivate them for so long. They'll stay engaged if you can help them develop impact toward a legacy of their own. Help them see how their own goals, passions, and ideas fit into the family story—and where you can help them take that story to the next level.

Offer Your Next Gen Clients Strategy, Innovation, and Donor Education Opportunities

Present next gen donors with models and advise them on how they can better engage in the way they want. Help them understand how they can “go all in” and develop deep relationships with grantees. For example, this experienced next gen donor describes the type of educating conversation advisors can facilitate with their clients:

It is up to the advisors to say, “Okay, you showed a really great interest. You recently had twin girls and you're showing interest in girls' education in Central America. Here are a few organizations that do this. Which ones appeal?” [Then next gen come back with], “Oh, we want to build a school, and of course, we want our name on it.” “Okay, well, that's really interesting. But how about this? Could you work with another family where together you could both build a school and have the infrastructure to support it?” And they would be like, “Oh! Of course.” And then they think they thought of it. That is the agency that advisors have.

Today, next gen are pushing for greater awareness of strategy as well as impact and innovation in giving, so expose your clients to the field's many new funding mechanisms and tools, such as those blurring traditional lines between the nonprofit and for-profit sectors. The role you can play here is pronounced and lasting, as this next gen donor calls out: “The tide of traditional philanthropy is pretty strong, and it will carry you a certain way. But there are a lot of ways in which I want to swim against the tide. It is tricky, and for me, it takes continuing to have relationships with [advisors] who can keep pointing at that for me and keep saying, ‘Yes, keep going in that direction. How can I support you? How can I challenge you?’ Because otherwise, it's really easy to get swept up in the traditional stream.”

Connect your next gen clients to places for donor education, especially those designed for younger emerging donors. For example, the Dorothy A. Johnson Center for Philanthropy offers The Grantmaking School, and its online portal, LearnPhilanthropy, provides learning and training resources. You can also look for the PJSF X 21/64 Board Leadership Course or TPW's Impact Accelerator program focused on strategic philanthropy. Find opportunities for training on things next gen are particularly interested in, like analyzing evidence of impact, devising innovative new strategies, and learning to respect the power donors wield and how to maintain healthy donor-grantee relationships.

Support Next Gen Donors with Validation and Agency

Encourage families to get rid of “the kid's table”; nudge elder family members to consider adding their next gen to the board of the family foundation and to make them full voting members in a reasonable time period. Offer to be a mentor or sounding board for the next gen who are coming into a family foundation and who might not want to go to their parents every time they have a question. Make sure they know that there are no stupid questions. Anticipate teaching them things you might see as basic, but that they might not have had an opportunity to learn, like understanding what a portfolio of grantees is or how to read grant proposals and nonprofit budgets or even how to understand a foundation investment policy.

Provide ideas and tools to help the next generation experiment within the context of family giving. Help parents and grandparents carve out an environment in which next gen donors can make grants and acquire hands-on learning about what it means to be a “good and responsive grantmaker.” Point out risks in advance, then “give the next gen agency [and] allow them to fail”—without the stern judgment that might stifle their enthusiasm. If they don't learn at this stage of their development, the stakes can be even higher as they get older and earn, inherit, and/or steward additional funds. These are important roles for advisors because sometimes you are the only one in the situation able to play them.

Connect Next Gen Donors with Their Peers and Peer Donor Networks

Next gen donors often trust the information and authentic experiences they hear from peers more than they trust information from other sources. They want to meet and learn from others like them, so help them do this. Help them research what their peers are doing and get exposed to new ideas and authentic advice from active donors their age. Introduce willing next gen clients to each other not only to network, but to learn from one another. Suggest they attend donor conferences, workshops, and retreats or join a next gen donor network. Consider bringing in a speaker to address next gen donor clients at your firm. Give your clients “peer activities so they know how they fit, what they can contribute, and know that they are not alone.” As advisors, you are in a great position to connect clients who are open to peer-to-peer learning.

Of course, your role in forging these connections is not solely altruistic; this type of work breeds win-wins. As one next gen donor summed up, “[Advisors] do want a glossy brochure and nice website. But the more powerful thing is when my cousin says, ‘Hey, I'm using this professional advisor and they did this for us, and it was good to use them because of this.'” For them, it's quality learning; for you, it's a potent source of new client leads. Another echoes: “We are looking for markers that other people have judged you to be credible. We rely on our friends' perceptions to establish people's reputation more than institutional markers of reputation…. Credibility is based on the fact that [you] are producing, not that [traditional] peer-reviewed journals are saying, yes, what you have produced is worth publishing.”

Generation Impact seeks peer connections for both strategic and personal reasons. On the one hand, peer learning among donors introduces them to a wider range of philanthropic strategies in a language and perspective they understand. On the other hand, these connections are powerful platforms for identity formation and values articulation. Next gen donors crave this network of “people like them.” One next gen donor mentioned the self-confidence she gained by attending a donor conference of peers, “This sounds funny, but you learn so much from your peers, realizing that you're not alone, that it is okay to be involved when you're young.” Many others mentioned feeling “inspired” and “empowered.” So, point out to your clients not only the strategic benefits of participating in peer-to-peer idea mills, but the potential personal benefits as well.

Provide Opportunities for This Generation to Give Together

Next gen donors also have an affinity for giving together—even more so than previous generations. They believe that by pooling their resources—both financial and human capital—they can create greater impact. Present your clients with opportunities to give together, such as peer giving circles and other forms of collaborative grantmaking. Giving circles were often mentioned by our interviewees as “a great way for young next gen to dip their toes in the funding side.”

Align Portfolios with Values

Talk to your young clients about what they care about and how they can align their money with their values in smart ways. Present strategies and data-driven options for lining up investment portfolios with issues important to them. Share simple stories that illustrate how impact investing works and the results that can be achieved. We suggest you re-read next gen donor Justin Rockefeller's features in Chapters 4 and 8, which specifically address aligning values with assets and impact investing.

As Justin lays out, this alignment can mean looking into investments that meet immediate needs related to a specific donor value (e.g., valuing education leads to investing in local education nonprofits) as well as investments that address root causes, development, infrastructure, and long-term advocacy (e.g., valuing education leads to investing in education technologies). It can mean investing in companies that address good practices (i.e., pay fair wages, employ women and people of color). It can also mean screening out industries that are harmful to our way of life (e.g., tobacco, blood diamond mining, industrial pollutants). In short, there are many innovative ways to respond to your clients' values. Wealth managers and other advisors who put intentional effort into being accommodating and inventive here will flourish—while others may be left behind. As this next gen donor urges: “The more [advisors] engage in terms of, ‘If this is actually interesting to you, we can do with your [investment] portfolio what is important to you,’ the more likely they are to keep their business and win the business of their friends. If they want to retain business, and if they want to win new business, they have no choice but to do this—to talk to their young clients about what they care about and how they can align their money with their values.”

Help Clients Hear How Others Are Innovating around Impact Investing

The field of impact investing is still maturing; change is frequent and new ideas are being tested every day. Show clients how next gen donors in other circles are innovating and getting results. Recommend attending one of the many philanthropy conferences that are now adding sessions on impact investing to their programming or suggest your clients join a social investor network. Encourage them to share research and effective strategies and to discuss their challenges.

Your efforts will have wider benefits in the long term, too. As next gen donors draw increasing attention to impact investing, the greater usage will result in trailblazing new tools and transparency, which will then become commoditized—the trickle-down effect being a value-add for even your smaller investors.