Philanthropic Strategies For Entrepreneurs And Business Owners

 

In a nation that leads the world in private philanthropy,1 entrepreneurs as a group rank consistently among the most generous segments of the population. Charitable giving by entrepreneurs reached a peak in 2007, when the 2008 Bank of America Study of High Net Worth Philanthropy found that business owners had donated an average of nearly $270,000 to charity — more than double the average of what other wealthy households were giving at the time.2 And though the financial crisis and recession decreased what they could allocate to charity, entrepreneurs still donated more in 2011 than did any other group with the exception of those who had inherited their wealth.3 And the focus of entrepreneurs' generosity is spread widely among causes ranging from the environment and education to arts and culture.

Motivations to give are always personal and defy easy generalization. Still, Ramsay Slugg, Managing Director, Wealth Strategist, National Wealth Planning Strategies Group, U.S. Trust, sees a natural connection between entrepreneurs and philanthropy. "Entrepreneurs are, at their core, in the business of solving problems," Slugg says. "They find a problem, they come up with a solution and they build a business around that. That's the same thing charities do. There's a problem and a group of people come together to try to find a solution."

At the same time, it's hardly surprising that entrepreneurs are highly individualistic when it comes to philanthropy. Entrepreneurship depends on creative thinking, and "there's no one-size-fits-all strategy," Slugg says. "Different people are going to do things in different ways." That same attitude leads business owners to embrace diverse giving approaches and vehicles.

Active Involvement

Financial solutions are only part of the philanthropic story. Giving applies to time as well as to money, and entrepreneurs and other wealthy donors tend to be as generous with the former as with the latter. In fact, in 2015 half (50 percent) of wealthy individuals volunteered their time and talents to charitable organizations they care about4 - twice the rate of the general population (25 percent)5, according to the 2016 U.S. Trust® Study of High Net Worth Philanthropy.

"Business owners tend to throw themselves into their philanthropic ventures as enthusiastically as they do into building their businesses," says David Ratcliffe, Managing Director, National Philanthropic Expert – Thought Leadership and Research, Philanthropic Solutions, U.S. Trust. “They bring to the table all of their talents and entrepreneurial experience." And because entrepreneurs understand the concept of risk and reward better than most people do, and because they're old hands at making the best use of limited resources, they are often driven by a desire to make sure the charities they support handle money wisely and make forwardthinking decisions — in other words, that they behave like successful businesses. Thus, even when entrepreneurs may not seek a highly visible role with a charity, they'll often accept a seat on the board because of the opportunity it gives them to help shape and monitor the group's operations.

Community Spirit

The primary philanthropic motivation for many entrepreneurs is a deep sense of connection between themselves, their companies and employees, and the communities in which they live and work. "They tend to be very supportive of volunteerism," Ratcliffe says. "They get on board with a walk for cancer or diabetes and open that opportunity to their entire workforce. They may even match donations made by employees."

Such gestures "send a message to employees that the owner has a philanthropic spirit and wants to pass that along," Ratcliffe adds. "And encouraging employees to be engaged in that way can lead to a better functioning team at work." Indeed, enlightened entrepreneurs often seek philanthropic goals that, in the best sense, benefit all concerned. Ratcliffe cites the example of a group of business owners in a city known more for recreation than for culture, who banded together to support a first-class public library and an arts center. "In order to attract a specific type of talent to their firms, to convince them to move their families, they needed a vibrant cultural community," he says. "Part of their motivation was philanthropic and part business. They recognized that those improvements would be good for the city and good for them."

Donor-advised fund and private foundation management are provided by U.S. Trust.

1 The World Giving Index 2011. https://www.cafonline.org/pdf/world_giving_index_2011_191211.pdf

2 The 2008 Bank of America Study of High Net Worth Philanthropy.

3 The 2012 Bank of America High Net Worth Study.

4 The 2016 U.S. Trust® Study of High Net Worth Philanthropy.

5 2013 U.S. Volunteering and Civic Engagement Study.

Institutional Investments & Philanthropic Solutions (Philanthropic Solutions) is part of U.S. Trust, Bank of America Private Wealth Management (U.S. Trust). U.S. Trust operates through Bank of America, N.A. and other subsidiaries of Bank of America Corporation (BofA Corp.) Bank of America, N.A., Member FDIC. Trust and fiduciary services and other banking products are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A.

Bank of America, N.A. makes available investment products sponsored, managed, distributed or provided by companies that are affiliates of BofA Corp.

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