Philanthropy and charitable giving for family offices

THE IMPORTANCE OF PHILANTHROPY IN FAMILY OFFICES

Wealth, especially when accumulated over generations, is often viewed as a responsibility that extends beyond the family. The wealthy have traditionally used their resources to contribute positively to society, ensuring their wealth benefits communities and causes that reflect their values.

As wealth complexities increase with asset size, family offices play a crucial role in maintaining, growing, and passing on wealth from generation to generation.  Family offices must know how to incorporate charitable giving into their overall strategy as it is tied deeply to the legacy and values of many wealthy families.

Here are some of the reasons family offices pursue philanthropy and charitable giving:

VALUE-BASED WEALTH MANAGEMENT

Philanthropy allows families to align their wealth with their values, so family offices often take a value-based approach to wealth management.

By incorporating charitable giving into their financial strategies, family offices can ensure wealth is used for the greater good rather than exclusively personal gain. With this approach, families can develop long-term financial plans reflecting their commitments to social causes while creating a meaningful impact in education, healthcare, and environmental sustainability.

After determining the goals and values of their clients, family offices work to dedicate resources toward those target areas and issues. Eradicating world poverty is too general, so a more targeted approach is necessary, allowing the family office to create a more measurable impact. [2]

LEGACY BUILDING

Philanthropy enables family offices to establish and preserve a lasting legacy, maximizing the value of their wealth. Through charitable endeavors, families can create foundations or endowments supporting causes they care about for several generations.

They can contribute to society while cementing the family’s name in philanthropic circles. Even future generations can inherit a meaningful mission, ensuring that the family’s impact extends well beyond its business and personal financial success. [2]

FAMILY COHESION

Providing future generations with a mission can help unite the entire family toward a common goal. Engaging in philanthropy is ideal for establishing family cohesion and creating an opportunity for collaborative decision-making on charitable causes.

Family members can strengthen their bonds while instilling a sense of purpose and responsibility in younger generations. Family offices help facilitate this by using philanthropic activities as a platform for multigenerational engagement.

TAX BENEFITS

Philanthropy is a social endeavor that can be emotionally fulfilling. It also offers significant tax benefits that can be advantageous for family offices.

Donations to qualified charities are often tax-deductible, reducing the family’s overall tax liability. Strategic charitable planning, such as through donor-advised funds or charitable trusts, can optimize the family office’s financial structure, enabling wealth to be efficiently transferred across generations while minimizing tax burdens.

Family offices incorporate philanthropy and charitable giving into their strategy because they benefit society while contributing to intelligent financial planning.

THE RISE OF IMPACT INVESTING

While philanthropy involves giving some of your money away, family offices are turning to impact investing to align their financial goals with their philanthropic values.

Impact investing involves investing in businesses, projects, or funds that generate a financial return and a measurable positive impact on society or the environment. This form of investing bridges the gap between philanthropy and traditional investment, allowing family offices to support causes while preserving and growing wealth. [3]

Impact investing historically appeals to younger generations, who are often more socially conscious and want their investments to reflect their values. However, any wealthy family could use it to work toward their financial and ethical goals.

For example, a family office might invest in a renewable energy company to generate a return and contribute to combating climate change. This way, they can positively impact the world instead of laser-focusing on chasing profits. [3]

HOW FAMILY OFFICES INTEGRATE PHILANTHROPY INTO THEIR STRATEGY

Family offices are increasingly blending wealth management with social responsibility. This integration often stems from the desire of high-net-worth families to create a lasting legacy that aligns with their values.

By embedding philanthropy into the family office structure, these entities provide for future generations and actively address global challenges such as education, healthcare, environmental conservation, and poverty reduction.

A key strategy involves the creation of mission-driven foundations or donor-advised funds, which allow family members to collectively decide on charitable causes and make impactful grants over time. [2]

Many family offices might engage in venture philanthropy, investing in startups or organizations that address social challenges, creating a direct link between charitable giving and business innovation. As family offices take on more structured and strategic philanthropic initiatives, they can establish precise governance models, develop measurable goals, and leverage their networks to amplify the impact of their giving. [2]

This trend reflects a shift from one-off charitable donations to a more thoughtful, systemic approach to philanthropy driven by a long-term vision.

CHALLENGES OF PHILANTROPHY IN FAMILY OFFICES

While philanthropy and charitable giving provide long-term advantages for wealthy individuals and families, they also come with specific challenges. These challenges are commonly rooted in balancing family values with complex financial strategies.

One major challenge is aligning the philanthropic vision among multiple generations and family members with varying values, priorities, and risk appetites. [4]

For instance, experienced generations may prefer conservative, long-term giving to traditional causes like education or health. In contrast, millennials and subsequent generations in the family may prioritize social justice or climate action. The latter may prefer direct impact and innovative funding models.

This misalignment can lead to internal friction and difficulties in setting a unified philanthropic agenda.

Another challenge for family offices is the increasing demand for accountability and measurable impact in philanthropy. Social impact is not easily quantified, making it difficult to assess the impact of their philanthropic efforts. [4]

Philanthropy and charitable giving are more than just acts of generosity—they are essential to a family office’s strategy. By aligning philanthropic efforts with family values and getting multiple generations involved, family offices can plan for their wealth to impact society positively while maintaining financial stability.

A UNIQUE REAL ESTATE INVESTMENT EXCLUSIVE TO ACCREDITED INVESTORS: MULTIFAMILY PRIVATE PLACEMENT

As the landscape of wealth management continues to evolve, the role of philanthropy in family offices will only become more critical. Families who successfully integrate philanthropy into their wealth management strategy will build a lasting legacy and contribute to a better world for future generations.

The wealth of HNWIs allows them to pursue philanthropic endeavors and unique investment opportunities inaccessible to regular investors. For example, most real estate private placement deals, sometimes called syndication deals, are exclusive to accredited investors.

The U.S. Securities and Exchange Commission (SEC) allows accredited investors to participate in unregistered securities and other exclusive investments because they have the net worth and annual income to act as a safety net if an investment does not work out. Accredited investors hold the reputation of having the financial sophistication and experience to assess these investments properly.

Real estate private placement can be an excellent addition to an accredited investor’s portfolio because it allows them to enjoy all the benefits of owning real estate without the usual headaches of being a landlord.

Real estate investors know that properties can be expensive, especially if you are going for more significant properties such as multifamily real estate. These properties have multiple units and can generate more robust cash flow due to the number of residents, but they are also difficult for a lone investor to acquire. Buying an entire condominium or apartment community alone can be considered risky, especially if you have yet to experience running a large real estate property.

Real estate private placement solves this problem by pooling the financial resources of multiple investors. Any property can be a part of a private placement real estate deal. Still, multifamily private placement is prevalent among accredited investors because it allows them to enjoy consistent cash flow without buying the entire property alone. [5]

Multifamily private placement eliminates the high barrier to entry by allowing multiple investors to provide a share of the capital needed to purchase the property. This is less risky because investors need only worry about their share of the capital instead of the entire multifamily property.

An owner/operator or sponsor who serves as the general partner (GP) creates a private placement deal. As the GP, they take on most of the responsibilities in the private placement, from developing the business plan to executing it. They will handle everything, including locating the investment property, conducting due diligence, and securing the loan. They will also look for accredited investors to participate in the deal. [5]

Once the deal is in place, the sponsor will also handle property management. This means investors do not have to worry about being a landlord. The sponsor will handle the day-to-day operations of the investment property, including rent collection, resident relations, repairs, maintenance, etc.

With multifamily private placement, more prominent real estate properties become more accessible to investors. Accredited investors or limited partners (LPs) earn a share of the property’s monthly cash flow in exchange for their investment. This may be distributed on a monthly or quarterly basis. Investors should review the profit split and other deal details through the private placement memorandum (PPM). [5]

Every deal is different, so due diligence is still necessary. Depending on the deal structure, investors may earn a share of the equity upon resale of the property.

As limited partners, investors have no further responsibilities or liabilities beyond their initial investment. They may also pay specific fees to initiate the private placement deal. The sponsor will keep investors updated on the status of the investment property (or properties if in a fund) throughout the deal.

Because the sponsor makes all the decisions for the investment property, this is a proper passive investment in real estate. It can be a great way to add real estate to your investment portfolio without running an entire multifamily property. Accredited investors can sit back, relax, and enjoy their investment. [5]

WORK WITH BAM CAPITAL FOR PREMIER MULTIFAMILY PRIVATE PLACEMENT OPPORTUNITIES

Due to the passive nature of this investment—and the fact that it is exposed to illiquidity like other real estate investments—it is necessary to work with a trusted owner/operator.

If you wish to work with an owner/operator with a track record of excellence and producing results, work with BAM Capital.

BAM Capital is an Indianapolis-based owner/operator that has established itself as a leader in its industry. It is the private equity arm of The BAM Companies, an institutional real estate owner/operator.

BAM Capital focuses on high-quality Class A multifamily real estate, prioritizing properties with in-place cash flow and proven upside potential. [6]

BAM Capital’s award-winning investment strategy creates forced appreciation while mitigating investor risk. Today, BAM Capital has over $1.2 billion in AUM and ~6,500 apartment units. [6]

As a vertically integrated company, BAM Capital can guide investors through every step of the private placement process, from acquiring the property to managing it.

No investment is without risk. Before making financial decisions, consult your investment advisor and speak to a member of the BAM Capital investment team.

If you are an accredited investor who wants to enjoy passive income and all the other benefits of multifamily private placement, schedule a call with BAM Capital and invest today.

Sources:

[1]: https://www.investopedia.com/terms/f/family-offices.asp

[2]: https://andsimple.co/guides/family-office-philanthropy/

[3]: https://www.forbes.com/councils/forbesbusinesscouncil/2024/05/06/the-rise-of-impact-investing-how-millennials-are-shaping-finance/

[4]: https://www.forbes.com/sites/krisputnamwalkerly/2024/04/28/guiding-generosity-overcoming-family-office-challenges-in-uhnw-philanthropy/

[5]: https://multifamilyrefinance.com/apartment-investing-blog/multifamily-syndication#important

[6]: https://capital.thebamcompanies.com/