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Wealth And Worth - Making A Difference

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The 2017 U.S. Trust Insights on Wealth & Worth® survey affirms that the vast majority of the wealthy cite giving back to society as a priority. Today, high-net-worth individuals are motivated to contribute to society in a variety of ways, including giving, volunteering, social entrepreneurism and impact investing.

Social Change

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Contributing to the greater good is a goal for most high-net-worth individuals and families.

Such is reflected in the variety of ways high-net-worth individuals make an impact (see Figure 1). Most give back by donating money or time to nonprofit organizations. Many also serve on nonprofit boards. Increasing numbers are also making a difference through less traditional ways, such as owning companies that create opportunities for others, or by investing in, or creating, companies with social or environmental missions.

The desire to effect social change often stems from family attitudes and beliefs. Seven in 10 say engaging in philanthropic activities as a family leads to stronger relationships. Eight in 10 agree that effecting change as a family helps instill philanthropic values in the next generation.

Motivations

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While most wealthy individuals and families are committed to making a difference, how and why they contribute often differs across generational lines.

Baby Boomers (83%) are far more likely to make charitable donations than younger generations (61% of Gen X and 36% of Millennials). While a majority of all wealthy individuals volunteer their time, Millennials are less likely to do so than Boomers (58% versus 71%)

Millennials, meanwhile, are the most likely to engage in social entrepreneurship (29% compared to 15% of Gen X and 3% of Boomers) and to view owning a business as a way to create opportunities for others (32% compared to 23% of Gen X and 10% of Boomers).

Why they give back can also vary by generation (see Figure 2): more than half of the Silent Generation (52%) and Boomers (59%) view charitable activities as a way to express their personal values. Gen X and Millennials feel the same way, although to a lesser extent, at 40% and 39%, respectively. Gen X are the most likely to consider the tax benefits of philanthropy (22%), while Millennials are five times more likely than average to be motivated by the access and status that come with giving back to society

Impact Investing

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Across the board, interest and ownership in impact investments are steadily increasing. While just 18% of high-net-worth individuals have had conversations about impact investing with their advisors, that percentage is up from 11% a year ago, and overall ownership of these investments has risen from 10% to 13% in the past two years.

Importantly, eight in 10 investors who currently own impact investments believe it’s possible to achieve market-rate returns—compared to 44% who do not currently invest for impact.

Millennials are the generation most likely to own impact investments (28%), compared to Gen X and Boomers (17% and 10%, respectively). More women own impact investments than men (18% versus 10%); however, men’s interest in impact investments has doubled over the past two years, from 16% to 31%.

For those who are not impact investing, overall interest has increased from 22% to 32% from 2015 to 2017. All generations have exhibited a significant increase in interest in impact investments since 2015. The biggest increase has been among Gen X—from 23% two years ago to 37% today.

When it comes to making investment decisions, more than half of high-net-worth individuals think the social, political or environmental impact of their investments is important (see Figure 3). Younger generations are more likely to think impact is important when making investment decisions, with 46% of Millennials finding it extremely important.

Factoring Your Values

Effecting social change can provide a means for wealthy individuals to express their values, enrich their lives and pursue their personal visions.

In preparation for a conversation with an advisor on how to approach philanthropy and/or impact investing, consider the following questions:

  • Which social issues are most important to me?
  • What values do I want to be sure are aligned with my wealth strategy?
  • What methods of giving back fit best with my lifestyle and give me the most fulfillment?
  • Can my investments play a role in the way I choose to effect change?
  • How can I both express my values and achieve returns in my portfolio?

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