New Study Reveals Benefits and Challenges of Philanthropy Through Family Offices

October 2012

National Center for Family Philanthropy teams with Threshold Group, Family Office Exchange to produce first-of-its-kind study on family offices and family foundations

DATE: October 29, 2012

CONTACTS:

Kathy Whelpley, 202-350-9379/Kathy@ncfp.org 

Chris Phillips, 253-857-1602 / cphillips@thresholdgroup.com

SEATTLE, WA / WASHINGTON D.C -

Wealthy families are increasingly considering a family office to manage their philanthropic giving, according to a new study released today by the National Center for Family Philanthropy (National Center). The study is the first national research effort exploring the intricate relationship between family offices and family philanthropy, highlighting emerging best practices and providing benchmark data on the roles of each entity.

“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 Virginia Esposito, President of the National Center. “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.”

Family offices are private entities that manage the investments, trusts and planning needs for a wealthy family while also providing a variety of other services, among them philanthropic advice or the housing of a family foundation. Family Office Exchange (FOX), a global community of wealthy families and their advisors, estimates that there are over 5,000 single family offices in the United States, with a large percentage supporting philanthropic activity. The National Center and FOX sent surveys to approximately 400 family offices with foundations (return rate of 10%) and conducted 15 personal interviews. The study was sponsored by Threshold Group, a family-owned financial planning and wealth management firm dedicated to serving private families and family foundations.

“For more than a decade, we have been working with families who want to integrate their financial, philanthropic and personal interests in ways that carry out their values and help them meet their families’ goals, “ said Ed Lazar, President of Threshold Group. “We saw this study as an opportunity to provide insight into the practices of this growing field and as a way to help us all learn how to more effectively meet the needs of families.”

The report highlights both benefits and challenges offered by the family office structure. Key benefits include integration of functions and services, economies of scale, efficiency for family members, expanded capacity for mission-related investments, and alignment of the family’s shared values as they relate to governance, financial and investment management, and family leadership development.

“There is tremendous benefit to the family for the family office and the family foundation to work together to support the family’s legacy and future goals. Both can enhance the family values and help develop the human capital in the family,” said Sara Hamilton, founder/CEO of Family Office Exchange.

In addition, the study reveals that while both family office leaders and foundation staff place a high value on next generation education, neither side is spending much time in this area. In its recommendations, the National Center calls for the philanthropic field as well as family offices to invest additional focus and resources in educating and training the next generation for leadership.

Challenges associated with the family office structure include the different cultures of business and philanthropy, varying measures of success and different terminology that can cause tension, miscommunication and misunderstandings. Respondents also cited competition for the attention and resources of family members, and IRS restrictions on interactions that create complexity and uncertainty. The report includes a special appendix on “Key Legal Issues to Consider When a Family Office Provides Services to a Family Foundation,” a first-of-its-kind look at this complex issue.

One surprising finding was the extent to which family office staff was involved in the family’s philanthropic activity, with the majority of respondents noting that the family office is involved in helping the foundation find a strategic focus, leverage the impact of its giving and measure the effectiveness of its grants. Given this finding, the National Center offers a recommendation for increased professional development and training for family office staff on philanthropy issues and practices.

To download an Executive Summary or full copy of the report, visit www.ncfp.org. A webinar on the research findings and discussion with family office and foundation representatives will be held Thursday, November 8 from 12:00 noon to 1:30 pm EST. Register for the webinar at www.ncfp.org or by calling the National Center at 202.293.3424.

About the National Center for Family Philanthropy

The National Center for Family Philanthropy (www.ncfp.org) is a nonprofit organization dedicated exclusively to families who give and those that work with them. With extensive expertise in governance, grantmaking, planning and evaluation, NCFP is positioned to help emerging philanthropists and mature foundations and funds improve their work and expand their effectiveness. The NCFP, headquartered in Washington, DC, was founded 14 years ago in response to the need for a national resource center dedicated to serving the needs of specific donors and their families.
 
About Threshold Group

Threshold Group (www.thresholdgroup.com) leads a select yet diverse group of families and family foundations through the opportunities and challenges of family wealth. Our services—financial planning, investment advisory and family office—provide the solid foundation necessary for a family to grow, thrive, and give back, not just for a lifetime, but for generations. Founded as a family office in 1999, Threshold today guides private family investments of $2.7 billion and serves more than 50 families and family foundations across the United States.

About Family Office Exchange

FOX (www.familyoffice.com) is a global community of wealthy families and their advisors, pursuing best practices for optimal family legacy and wealth management. FOX is an objective, independent resource to help high net worth families, family office executives, and their advisors more effectively under- stand their responsibilities and enhance their opportunities as managers of family wealth and well being.