Wealthy Families Using Family Offices to Manage Giving

Wealthy Families Using Family Offices to Manage Giving

Wealthy American families increasingly are considering family offices — private entities that manage investments, trusts, and other financial planning — to manage their philanthropic giving, a report from the National Center for Family Philanthropy finds.

In a survey of family offices affiliated with family foundations conducted by NCFP and Family Office Exchange, a global community of wealthy families and their advisors, about the benefits and challenges of such arrangements, the majority of respondents said they were involved in helping their foundation clients find and sharpen their strategic focus, leverage the impact of their giving, and measure the effectiveness of their grantmaking. FOX estimates that there are more than five thousand single family offices in the United States.

Funded by the Threshold Group, Working Together for Common Purpose highlights the benefits of these kinds of arrangements, including greater economies of scale, increased efficiency, expanded capacity for mission-related investments, and a closer alignment of family members' shared values. Challenges cited in the report include overcoming differences in business and philanthropic cultures, measuring success, competition for the attention and resources of family members, and IRS restrictions that add to complexity and uncertainty.

The report offers a number of recommendations, including more investment in professional development for family office staff, as well as more support for mission-related investing and capacity-building approaches that leverage the expertise of financial staff.

"We found that managing philanthropy through the family office can be a very effective approach for families, particularly if there are multiple branches to the family and if they are using a number of charitable vehicles," said NCFP president Virginia Esposito. "To get it right, families must pay careful attention to structure and governance, to understanding the goals and values of the family, and to effective communications. But it can be done, and we saw many examples of families who are leveraging the strengths of each piece for greater impact in the community and greater satisfaction for the family."

"New Study Reveals Benefits and Challenges of Philanthropy Through Family Offices." National Center for Family Philanthropy Press Release 10/29/2012.