Give Back, Pay Forward

by David Drake

Growing need for professional philanthropic assistance

Many family offices now offer professional assistance to their clients on the best course for their
philanthropic endeavors, in addition to their wealth management services.

Philanthropic assistance to wealthy families is fast becoming a top service provided by family offices
today. The explosion in the number of ultra-wealthy individuals in the world, with many arising from
emerging economies, is greatly altering the family office landscape. Traditionally set up to provide
wealth management services for affluent individuals and families, family offices have changed their
business strategies to provide other professional services to meet the growing demands of the
wealthy. Many family offices now offer professional assistance to their clients on the best course for
their philanthropic endeavors, in addition to their wealth management services.

Rise of philanthropic foundations and family offices

The motivation to give has prompted wealthy individuals and families to set aside a percentage of
their net worth for philanthropic causes.

Wealthy families have always been known to give to philanthropic causes in their communities and
around the world, for a variety reasons. While some have a family history of generosity, others are
driven by the desire for societal change and helping those less fortunate. The motivation to give has
prompted wealthy individuals and families to set aside a percentage of their net worth for
philanthropic causes.
Philanthropic investment used to be carried out by institutional investors and wealth managers on
behalf of wealthy families; however, the trend is changing as many families have decided to take a
hands-on approach by establishing their own foundations. Families are deeply and emotionally
attached to their philanthropic endeavors, so trust is paramount. Professionally- managed
philanthropic foundations provide structure and governance for their activities and often work hand-inhand with family offices to ensure effective use of their funds.

Motivations for philanthropic endeavors

As most families expand their charitable activities beyond their home base, there is a greater focus on
creating projects with lasting impact.

The desire to leave behind a legacy is one of the strongest motivations for philanthropic activities of
wealthy families. As most families expand their charitable activities beyond their home base, there is a
greater focus on creating projects with lasting impact. Family offices can help clients discover
philanthropic projects, monitor, and implement them in the most professional way.

How family offices are helping make the most of philanthropic

initiatives

Assisting in the monitoring and execution of philanthropic projects.

Most wealthy individuals and families, especially those new to philanthropy, face the challenge of
recruiting the right personnel for their foundations. Family offices bring a wealth of experience and
specialized networks to play in helping families source highly qualified and experienced staff for their
foundations, but are not directly involved in the funding or implementation process of projects. This
way, families can retain full control over the funding and execution of their projects without external
interference, as well as guard against fraud and ensure quality delivery and proper execution.
Another strategy adopted by some family offices is assisting in the monitoring and execution of
philanthropic projects. Most family foundations do not possess the expertise required to handle the
increasing complexities of charitable projects; hence, the need for professional advice. Clients who
use family offices as advisors can be assured their projects are implemented in accordance with the
familys unique needs and objectives.
The oversight provided by a professional family office also ensures greater transparency as projects
are executed according to plan and on time.

Rise of Social Impact Investments

Social impact has become an emerging field in the philanthropy arena

Traditionally, philanthropic activities were carried out on behalf of the ultra-wealthy by foundations and
family offices to ensure effective asset allocation. Most families simply wanted to ensure their social
and financial goals did not conflict. In recent years, however, the trend is changing, and the line
between philanthropy and financial effectiveness has been erased.
Today, social impact has become an emerging field in the philanthropy arena. Families want to meet
the needs of humanity while also pursuing their own financial goals. The Global Impact Investing
Network (GIIN) defines impact investments as investments made into companies, organizations, and
funds with the intention to generate social and environmental impact alongside a financial return.
According to the Monitor Institute Impact Investing report released in 2009, the impact investment
market will grow to $500 billion by 2020 (or 1% of $50 trillion in total assets). However, according to
the 2012 World Economic Forum presentation on the mainstreaming impact investing initiative, less
than US $40 billion of capital has been committed to impact investments out of tens of trillions in
global capital.
Moreover, the reports of the Council on Foundations and Family Wealth Alliance shows that wealth held
by families presents a fertile ground for the growth of impact investment. Family foundations hold an
estimated $245 billion in assets, while single and multi-family offices hold $1.6 trillion in assets.

Through impact investment, families have been able to tackle social and environmental problems
including improving agricultural systems, countering negative impacts of climate change, providing
affordable housing and improving health care. Although profit is not the major motivation, most
impact investments are still expected to yield returns that at least cover the initial investment.

How family values come into play in impact investment

Familys core values will determine nature and character of the investment.

Impact investment is driven by the desire to address social and environmental problems. As a result,
a familys core values will determine nature and character of the investment. They might choose to
improve agricultural practices, provide housing or access to quality education for the less-privileged,
depending on the governing philosophy of the particular family. Some families have a tradition of
supporting particular causes and will almost always channel their investments to bring about a positive
impact in that area.
Impact investment occurs across diverse asset classes, including angel investment, venture capital,
and private equity. Impact venture capital investment has become a favorite asset class among
wealthy families. It helps them focus their investment on particular areas of interest, projects, and
regions of the world along with greater returns and lower risks.

David Drake is the Chairman of LDJ Capital, a multi-family office; Victoria Partners, a
300 family office network; LDJ Real Estate Group and Drake Hospitality Group;
and The Soho Loft Media Group with divisions Victoria Global Communications,Times
Impact Publications, and The Soho Loft Conferences. Reach him directly
at David@LDJCapital.com.