Wealth management needs an upgrade. We have been operating a mid-development system, call it Wealth Management 2.0. We need Wealth Mobilisation 3.0T. Wealth Management has focused on careful conservation and preservation of assets. Supported by analytical tools like P-Calc, and PowerPoint graphics, we can lay out the upside, the downside, the tax and investment risks, of any given choice, all in the name of “optimising” the outcome in dollar terms. It is true that people appreciate advice on lowering their tax burden and organising assets that can move gracefully to younger generations. Likewise, clients seek security in our expertise to assure comfort in their increasingly lengthy elder years.
However, amidst the talk of decision timing, risk management, probabilities, marginal tax rates, and generation skipping trusts, we have, too often, missed our most important opportunity. We must also focus on “mobilisation” of wealth, not simply on its “management”. Wealth Mobilisation 3.0T must focus us on “meaning”, that uncomfortable, but all powerful element of life. It should equip us to convey to our clients the fundamental benefits to society that personal generosity has produced. Mobilisation by private citizens of accumulated assets through their investments in people, in facilities, and in ideas has created much of the wealth in the developed nations of today. Nowhere is this more true than in the US where citizens give away 2% of GDP in philanthropic contributions each year. Wealth Mobilisation 3.0T should teach us to “follow the money”, to understand and appreciate the economic benefits that this “extra pool” of venture capital has generated for all citizens.
Mobilising wealth has been underway in America since before the founding of the nation. For instance, Lady Mowlson gave the first scholarship to educate other people’s sons in the US in 1643! She set a stunning example in the new Massachusetts Colony. Billions of dollars have followed the example of her gift to the sons of farmers and bakers so that they could attend Harvard. It is difficult to imagine a single life in the US today that is not touched by someone educated on a scholarship contributed by a private citizen. Not only did Lady Mowlson contribute to the upward mobility that has characterised US society since colonial times; she also inspired additional generosity based on gratitude. By 1651, local farmers, bakers, and blacksmiths were donating bushels of corn and wheat to Harvard College to say thank you for scholarship support. Gratitude has inspired so much of US philanthropy for 350 years!
Julius Rosenwald, a German Jewish immigrant to the US who became president of Sears Roebuck, Inc., decided that his conscience, his company, and his country would benefit from entering into partnerships with black communities in the America’s South less than thirty years after the end of the Civil War. He matched the contributions of blacks, community by community, and built 5357 grade schools throughout the South. He made a major impact on the economic development of that region, through his partnership approach to his philanthropy. Young blacks educated in Rosenwald schools were able to attend the historically black colleges funded by Rockefeller and others. Rosenwald’s progeny are still people of wealth in 2005. His generosity lives on in the Rosenwald schools that endure and in collective memories. These are two of thousands of examples, stories of well-to-do individuals inspired to seek “the greater good” with their accumulated wealth. Governments cannot hope to attend alone to the complex needs of their societies. All In the US, tens of thousands of wealthy people and their advisors have begun to see that Americans are not generous because they are rich; they are rich because they have been generous – from earliest times wealth-developing nations need their wealthy families to act on the values they hope to pass on to their own children and society itself. Healthy societies have grown faster in the presence of values like generosity motivated by gratitude.
Wealth Mobilisation 3.0T should prepare us to become the “faculty” of philanthropy. It should equip us with the tools and strategies needed to inspire our clients on behalf of the “greater good”. This new platform must give advisors access to stories that clients can connect to their own aspirations, their varying levels of wealth, and their diverse family backgrounds and experiences. Advisors should ideally find stories that “upgrade” clients’ aspirations, their moral imaginations, and their understanding of the power of a philanthropic gift. Other stories should energise the sometimes weak drive of children of wealth to make a difference in their communities.
Clients deserve the legacy of Wealth Mobilisation 3.0T. It is up to us to bring them the “gift” of history. They need stories of the economic benefits of generosity to connect to the social stability that philanthropy has created. Capitalism has an unquenchable appetite for new ideas. Unselfish investment of assets in support of high-risk ideas, with the potential to transform the lives of many citizens, has proved to be the engine of economic and social progress.
The stories speak for themselves: the conquest of polio, the creation of commercial aviation, the creation of social service infrastructure, the US teachers’ pension system – these are a few of the high-risk investments by philanthropists that have changed the lives of millions.
This broader setting for decision-making puts clients in a different context. It situates their lives in relation to people still remembered for their values and the impact of their lives on the larger community.
The stories show how they and their progeny helped shape their own lives by how they dealt with their wealth for their own and the greater good. Wealthy people deserve to see how people like them established the norms of modern society with their gifts, as well as with their capital producing work.
These stories illustrate how capitalism has benefited from the willingness of successful practitioners to give back to the society that has allowed them to prosper. This pattern engenders trust across the social and economic strata of a society. It keeps alive the dream of upward mobility for those still seeking the dream of economic success. But equally importantly, those fortunate individuals with “lots to lose” come to appreciate that trust among citizens is the single most important “insurance policy” they can invest in.
As Francis Fukuyama has shown in his masterful study, Trust, this sense of “mutuality” among citizens is the primary reason for the success of capitalism. It has produced the 30-year bond (who could imagine valuing risk over such an extended period without a sense of social stability?), the environment in which “patient” capital could take risks in a previously unimaginable project or idea. Chances are, our clients and their businesses are beneficiaries of these conditions, and we must help them understand this .
Generosity has bred the comity that the most successful democracies with capital market economies benefit from today. Our wealthy clients and their children need to understand how their own generosity will help secure the social comity and upward mobility that will make future generations secure at the level enjoyed by the wealthy of today, Our past history illustrates the role of these and similar idealisms in economic growth. We ignore this reality in favour of raw personal financial data at our individual and collective peril. We must show our clients how the economy, their investments and their businesses, and society as a whole have benefited from donations as part of wealth mobilisation.
We can assist them in deciding how they want their legacy to endure: how broadly, how deeply and in what sectors they wish to make a difference and choose to be remembered centuries from their meetings with us.