How can I make a charitable impact and preserve my wealth?

As women increasingly step in as stewards of personal and familial wealth, they're driving a change in the way we talk about legacy and, perhaps more importantly, how we give back.

“People are thinking about their legacy more broadly than just the financial number,” says Angie O'Leary, head of wealth planning at RBC Wealth Management-U.S. “Especially women and Millennials – (they're thinking about) protecting their legacy and the impact of that legacy on the next generation, on their communities and their relationships.”

Commissioned by RBC Wealth Management, The Economist Intelligence Unit (EIU) undertook a study of 1,051 high-net-worth individuals (HNWIs), including 365 respondents in the U.S., from March to May, 2018. The new face of wealth and legacy survey explores how the meanings of legacy and wealth are being redefined across regions, genders and generations.

According to The new face of wealth and legacy research, women control two-thirds of the wealth in the U.S. and Millennial women are accumulating wealth faster than their Boomer counterparts.

Of those surveyed, The EIU found 22 percent of Baby Boomer women have US$5 million or more in investable assets, while 32 percent of female Millennials have accumulated a similar amount.

“Women outlive their male counterparts for the most part, so we're going to have this huge wealth transfer where much of the assets are going to go to the women probably before they go to the next generation,” says O'Leary.

As inheritors, generators, and preservers of wealth in the U.S., women are guiding how HNW families protect their wealth while still having a positive impact on the world.

Of the women surveyed in the U.S., 81 percent say it's important their wealth plans are aligned with the legacy the wish to leave.

Creating a survivor plan

Traditionally, says O'Leary, household finances have fallen on one spouse's shoulders, which typically was the male. “You go through life, it's busy, you divide and conquer, someone takes the finances, someone takes the household and – high five – see you when we're 55,” she says. “But all of a sudden we're seeing more couples at the table.”

The EIU research in the U.S. shows men are the primary decision makers in financial planning (68 percent compared to 51 percent of women) and when it comes to household purchases, women take the lead (51 percent, compared to 42 percent of men).

Protecting the family legacy is often top of mind, especially as wealth increases.

O'Leary explains financial road bumps – from market turmoil and taxes to an unexpected long-term care event, or taking care of aging parents and supporting kids longer than planned for - are all real client concerns that are important to anticipate. Perhaps more critical for older generations is discussing what the surviving partner's life will look like financially.

Liz Jacovino, wealth strategist at RBC Wealth Management-U.S. in Minneapolis, says the long-term-care conversation is particularly pertinent with women in later stages of their life. Unsurprisingly, The EIU survey echoes her sentiment with 34 percent of older women in the U.S. citing health as a major obstacle in achieving life goals, as opposed to 16 percent of younger respondents.

“They're very fearful that they won't be able to sustain themselves and pay for their care, that risk aversion is very apparent,” says Jacovino. Becoming a burden to their families is next on the list. “For the younger Baby Boomer generation, the focus is very much about family,” she adds.

Before they can even begin to think about charitable giving, they want to make sure concerns about supporting their family are allayed.

“It's the unknowns – what if I have a huge healthcare event or if I wind up having to pay the costs of long-term care for an extraordinary period of time, it's those variables that I think paralyze people oftentimes,” says Jacovino. “(Through) crafting a plan with actual assumptions and numbers that illustrate projections, you can help clients work through some of those fears.”

The intentional giver

According to The EIU study, 48 percent of female respondents globally believe the ability to create change through giving is of increasing importance. That's compared to 45 percent of men.

Women in the U.S. are also more likely to put more stock in societal causes than growing wealth, when it comes to defining one's legacy (53 percent versus 49 percent of men).

“If we can spend time helping them understand they do have enough, that they can afford to give that's something they really enjoy, it brings them joy,” says O'Leary. “I think it's innate in their DNA.”

She calls it intentional giving, an approach to charity that sometimes differs between high-net-worth men and women.

“Women, in general, would rather give while they're alive (whereas) men think about the legacy as what's leftover, that'll get passed on to the kids,” says O'Leary. Intentional giving allows you to focus your giving and have more of an impact.

Making an impact

The EIU research found 17 percent of those surveyed globally want to “improve the efficacy” of their giving. But they want to be able to do so strategically and in a way that fits their values. In fact, 77 percent of respondents in the U.S. say it's important their wealth plans align with the legacy they want to leave.

Again, having a financial plan in place that lets you know how much you're able to give is key. The question then becomes: which assets should I look at gifting?

“Do I have some appreciated securities? Do I have some other assets, some artwork or something that would make sense to look to give to charity?” says Jacovino. “Gifting is very personal and our job as financial advisors is to help accomplish that gifting in an efficient and tax-favored manner.”

While direct gifting, endowments, and foundations tend to be the more traditional routes, Jacovino says she's seeing clients turn to the flexibility of donor-advised funds.

“The benefit is you are creating that charitable structure (but) the fund itself is advised by the donor,” says Jacovino, adding you can make recommendations about which charities to point your resources at. “You can make a gift and switch (to a) particular charity or several in a year and then the next year, (you) could make no gifts or completely shift gears – as long as those organizations are qualified charities.”

But Jacovino says there's no question the dynamics of wealth and legacy are changing. The future of wealth is female, stereotypes are being broken, and a new approach to giving is taking hold.

“(The) concern is not getting a charitable deduction or gifting in a way that generates a financial benefit to them,” says Jacovino. “What they're looking to do is make a difference.”

The minimum investable wealth of respondents was US$1 million. The margin of error on the U.S. sample is 5.1 percent with a 95 percent confidence level.