Philanthropy could be the key to successful generational succession by engaging clients with the business, according to an industry leader.
As businesses change hands from generation to generation, a high proportion of wealth is often lost in the transition.
"Often what you read about . is largely on how to generate wealth and how to protect wealth," Opportunity International Australia chief executive Robert Dunn told InvestorDaily.
"But you could spend all of your life generating wealth only to roll the dice on the chances that in moving to the next generation this is going to be blown."
Philanthropy, according to Dunn, is a tool to engage company successors around a driving interest in the business.
By creating a financial goal outside the immediate business, clients often find extra motivation to ensure their business is a success.
Advisers should, however, approach philanthropy in the way they would a business transaction and do their research before advising clients on a charity.
"Ask the tough questions: Whether the charity is leveraged, whether they are sustainable," Dunn said. "These sorts of things are the bread and butter of business people. They want to see these things happen, that's what they're used to in their own business.
"The advisers don't need to have all the answers; they just need to ask the questions."
As the financial services industry moves towards a holistic advice model, advisers who avoid discussing philanthropy when giving financial advice could be missing a big opportunity.
"Ultimately, people want a full service," Dunn said. "If someone is just giving you what you're asking for, that's half the battle, but you want to know what you're not being asked - you want to know what else is happening out there."
"I talk to people who. on a full-time basis talk to financial advisers and investment managers and fund managers but when I talk about engaged philanthropy, they might not even know what it means."
