Over the next 30 years, an estimated $30 trillion of wealth will exchange hands from the baby boomers to Generation Xers and Millennials. The next generation of investors are poised to play a pivotal role in tackling some of the most pressing issues of our time. We already see Millennial donors bringing a heightened sense of urgency to considering the social and environmental impact of their investments. As new stewards of family wealth, this often involves pushing traditional boundaries both in negotiating family dynamics and relationships with advisors.
Moderated by Diana Trump, Trustee and Treasurer of the Penney Family Fund and Confluence Board Member, the panel of Next Gen investors spoke candidly about the challenges of managing inherited wealth and where they see opportunities for advisors to improve client relationships at Confluence’s 2nd Annual Advisors Forum in San Francisco, CA. Panelists included Katie Hoffman, NEXUS Working Group Co-Chair for Energy Innovation and Environment; Hanieh Sadat, Managing Partner at GenesysOne Capital; and Alexander Golding, President of the Lawrence Golding Foundation.
Innovative Models
Diana opened the panel with the question, “What are some innovative, status-quo-pushing models you are seeing in impact investing right now?” Hanieh shared that her primary focus in impact is on housing, energy, and agriculture, and in particular the opportunities of fintech to create change in those industries. She founded an innovation lab at Arizona State University to work on blockchain technology to address these issue areas. As an alternative to raising a traditional venture fund, Sadat sees this kind of investment as an opportunity to make a larger impact by addressing an area of technology which will critically change our society in the next two decades.
Katie identified using familiar financial models to scale new, exciting solutions as another opportunity for innovation. By using a proven financial model from the fossil-fuel industry, she has been able to deploy the capital they need to scale innovative climate solutions quickly.
Direct Investments
Next, Diana asked panelists to share what they are doing on the direct investment front. Alexander spoke openly about a number of direct investments he has made but emphasized that these are personal investments. When advisors and family politics do not support moving towards impact investments, young donors often turn to making direct investments with their personal wealth.
Katie pointed out that networks like NEXUS allow millennials to connect on projects they are particularly passionate about and co-invest directly. She stated the value of these opportunities “mitigates risk by pooling capital, but also builds our own deal flow,” allowing young donors to prioritize the impact they want to see and put their time and money in projects they invest in, sharing resources, networks, and expertise.
Communication
When Diana asked about the panelists’’ experience with cross-generational communication and communication with advisors, they highlighted a few key suggestions for optimizing communication related to investing.
- Meet everyone where they are at: All generations should consider the current position and experience of their families when coming together to have a more productive conversation.
- Work together on your Investment Policy Statement (IPS): By bringing in your advisor or external support, families can have a mediated discussion to create an IPS everyone can feel ownership over and are more likely to adhere to. “Generations are often actually saying the same thing, they are just not saying it the same way,” Katie shared.
- Be transparent and establish trust: Prioritize building genuine relationships with families to create transparency and trust between advisors and clients.
Defining Impact
Diana then asked panelists to share how they define impact and how it relates to issues they are particularly passionate about. Katie emphasized that time and scale are the most critical aspects of impact investing right now to really move the needle on climate solutions, her most pressing area of concern. Additionally, Katie identified health as a primary area of interest and where she perceives a lack of focus among advisors, particularly around opportunities that might not be considered traditional health investments.
“Impact for me is about giving back to the community,” Hanieh shared. “[Millennials] no longer trust the media, they no longer trust the government, so what’s left? The community.” In line with her passion for technology and innovative solutions, she provided the example of using digital assets to democratize access among communities. With AI leading the way for massive changes around how we communicate, Hanieh identified these kinds of projects as particularly exciting opportunities for impactful investment.
Threat of Climate Change
Diana dug further into the threat of climate change by asking panelists about how it affected the way they think about investing and stewarding assets. All three panelists expressed a sense of urgency. With only 12 years to make drastic changes and slow climate change, the question of supporting investments which create incremental versus immediate change is top of mind for millennial investors. Scalability is paramount and is a key consideration for any investment. Katie emphasized that for her “now is better than new.” While venture remains an exciting field, and one that needs to receive continued support, it is critical to immediately fund current projects to scale.
Hanieh pointed out that investment strategies, including divestment and shareholder advocacy, are not enough on their own to make necessary changes to the practices of fossil fuel companies in such a short amount of time. She expressed that policy is imperative to moving these companies in immediate and monumental ways.
Advice for Advisors
The session concluded with an audience question about advice the panelists would give to advisors about working with next gen clients. The panelists underscored a few key suggestions:
- Listen to your clients: Whoever your client is, even if they are inheritors who do not have access to foundation money yet, listen to what they have to say and treat them with respect. You can prevent losing clients from the next generation by building relationships early on.
- Walk the talk: If you do not have dedicated ESG staff, or you are not doing the impact you say, young donors have the resources to know when they are being led on. Treat clients as educated and informed individuals and show you can do what you say.
- Utilize your internal assets: “If you have millennials on staff, bring them into conversation and leverage the asset you have right in front of you,” Katie shared. Bringing a diversity of voices into the conversation can help bridge communication gaps and build trust among advisors and clients
