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Philanthropy Can Build Legacies Worth Sharing

By Murray Coleman July 6, 2015

Charity is a good estate-planning tool and a force for good in the community. But some advisors also tout philanthropy as a means to polish a family’s tarnished image or build goodwill for a family business whose role in society may not be seen as altogether positive.

“Philanthropy doesn’t need to be based solely on the goodness of a client’s heart — there’s nothing wrong with also using charitable work to help build a family’s legacy,” says Charles Lowenhaupt of Lowenhaupt Global Advisors in St. Louis, which manages $967.7 million.

This may sound like a hard-hearted approach to philanthropy. In fact, most advisors like to use discussions of charitable giving to help families discover common values. In this light, shared philanthropic missions can help children and grandchildren understand the value of preserving a legacy to do good over time by — in turn — preserving the family fortune.

To this end, Lowenhaupt argues that being too altruistic about philanthropy can blunt the tool. Looking at a family’s core values should just be a start to making more detailed recommendations for picking and making gifts. “As an objective advisor watching out over your clients’ best interests, it just makes sense to think strategically from all angles about how best to build a family’s legacy,” he says.

Charles Lowenhaupt

The classic example is a wealth builder whose reputation has suffered in the climb to great success. Just think what over 2,300 Carnegie libraries constructed around the world between 1880 and 1930 did for the good name of robber-baron Andrew Carnegie. More recently, says Lowenhaupt, Microsoft cofounder Bill Gates was embroiled in antitrust cases on two continents before he decided to ramp up his charitable efforts. “While the Bill & Melinda Gates Foundation has made huge contributions to reducing poverty and improving education, it’s also proved immensely successful in revitalizing his image as a humanitarian and putting his past blemishes in the business world behind him,” the advisor says of Gates.

Erik Strid, chief executive at Concentus Wealth Advisors in King of Prussia, Pa., says he’s aware of lesser known entrepreneurs who’ve “reinforced their family legacies over the years” thanks to artfully executed philanthropy efforts.

“There’s no question that when you become known in your community as a philanthropist, a client’s business reputation is enhanced,” says Strid, whose firm manages $500 million. “Of course, that shouldn’t be the only reason for making a gift, but clients need to realize the impact philanthropy can have on their images.”

Families Strid works with don’t normally need new reputations. But he thinks it’s worthwhile telling clients how philanthropy can affect the way friends and others in the community view them. For example, he recently worked with a couple who wanted to donate several million to help children with chronic illnesses. But they were worried the move might publicize the extent of their wealth, something they didn’t want to do.

Profiles Low and High

So Strid recommended creating a foundation to parcel out money over time. This way they could do good and enhance the family’s reputation without making it obvious how much they’d earmarked for the effort. “There are a lot of different ways to create goodwill in a community through charitable giving — sometimes a lower-key approach can wind up making an even bigger impact,” says Strid.

Susan Colpitts

But not always, according to Susan Colpitts of Signature Family Wealth Advisors in Norfolk, Va. In her view, advisors’ first priority on the philanthropic front, after finding out what clients’ giving goals are, should be to help them understand what role they want to play in such efforts. “Most of the time, it’s less about ego and more about leadership,” she says.

To this end, Colpitts likes to help clients consider how they feel about lending their names to different causes — even when publicity is the last thing they want. “In some cases,” says the advisor, whose firm manages $3.2 billion, “they’ll see that being more public about their participation can actually encourage others to step up and do the same.”