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used in private equity investing : Foundation donors in this case make investments in private companies or venture capital funds — the difference being that these investments go beyond mere financial returns to provide social and economic benefits .
These investments don ’ t qualify as program-related investments because obtaining a financial return typically is at least as important to the foundation as obtaining a social return . Missionrelated investments are instead used to address social , environmental and economic challenges that cannot be easily tackled by grants alone .
Mission-related investments may be made by foundations in a variety of ways . The three main approaches are : ( 1 ) by buying stock in a well-established company that ’ s aligned with their mission ; ( 2 ) by investing in a social investment fund ; and ( 3 ) by angel investing in startup companies that have a social mission .
Keep in mind that mission-related investments , unlike PRIs , are subject to jeopardizing investment rules and that a private foundation can be subject to excise taxes for making imprudent investments . For this reason , involvement in mission-related investments should be based on a well-considered investment policy that includes a thoughtful asset allocation strategy using different classes of risk .
For donors looking closely at their current investment portfolio and finding a lack of alignment with their philanthropic objectives , there are many options to put both pools of assets to work for positive social outcomes . From relatively low-risk cash management options with community development financial institutions to high-risk angel investing in social enterprises , both casual and experienced givers can become impact investors . The key to success is to take an incremental approach , starting with a small portion of assets at first and expanding as the clients gain experience and confidence .
JEFFREY D . HASKELL , J . D ., LL . M . is chief legal officer for Foundation Source , a provider of specialized support services and technology for private foundations .
Parting Shot continued from page 60
advice and education ( named by 65 % of the respondents ), many inheritors also rely on input from family or friends ( cited by 60 %) or from online research or trading sources ( cited by 53 %). Just 19 % said they use robo-advice . And 54 % of inheritors ( next to only 35 % of wealth builders ) are working with more than one advisor .
Yet most inheritors won ’ t fully outsource their wealth management to an advisor : Nearly seven in 10 working with
an advisor prefer to personally oversee some aspects of their financial plan .
Through our research , we found that this investor cohort wants holistic , wellrounded relationships with advisors who are true partners and help them focus on what matters most . Such investors also seem likely to favor advisors who position themselves as advice orchestrators , overseeing the client ’ s overall wealth and planning and coordinating the efforts of other specialists .
The Six Non-Negotiables
Taking advantage of the wealth inheritor opportunity does call for some intention and action . Our research suggests several key steps advisors should take :
1 . Start early : Advisors should lay a foundation of trust with future inheritors by providing education and initiating discussion — as early as possible — on topics appropriate to their age and life stage .
2 . Focus on strategy : Advisors should
Through our research , we found that this investor cohort wants holistic , well-rounded relationships with advisors who are true partners and help them focus on what matters most .
consider how to offer clients and their families a comprehensive , inclusive experience through a wealth transfer strategy , instead of merely presenting them with a wealth plan ( strategic advice can help an advisor better connect with more family members ).
3 . Facilitate involvement : Advisors should consider offering a flexible fee structure and a client-engagement model that allows for varying degrees of investor involvement .
4 . Link assets to goals : Advisors should discuss incorporating varied investment asset classes and vehicles into the portfolio , while also connecting the clients ’ goals with their investment interests and explaining how that translates into portfolio construction .
5 . Have the right team : Advisors should maintain a multigenerational , diverse service team .
6 . Foster high performance : Advisors should align their service model and team strengths to support the needs of current clients and the future generations of wealth owners .
By understanding what wealth inheritors want and deploying a multigenerational approach , advisors can fully participate in an unprecedented shift in wealth ownership . Indeed , multiple opportunities should exist — even years before the wealth is passed on — for advisors to serve the interests of inheritors in ways that make for satisfying , enduring relationships .
JOY CRENSHAW , CIMA , is head of advisor development at Nuveen , the global asset manager of TIAA .
58 | FINANCIAL ADVISOR MAGAZINE | JUNE 2023 WWW . FA-MAG . COM