The way high-net-worth Millennials are sharing their wealth is changing the dynamics of philanthropy in the U.S.

There are over 80 million Millennials living in the U.S. and as they move to inherit wealth from their parents and grandparents, they will likely become one of the wealthiest generations in U.S. history.

The way in which high-net-worth (HNW) Millennials are sharing their wealth is also changing the dynamics of philanthropy.

In July 2014, professional golfer Chris Kennedy recorded a video of himself pouring ice water over his head as part of the now-viral Ice Bucket Challenge. Over social media, the 26-year-old called out three others – including his cousin whose husband suffered from amyotrophic lateral sclerosis (ALS) – to do the same within 24 hours or donate to charity.

The video went viral and by August, the ALS Association had received more than US$15 million and added 307,598 new donors.

“It was like wildfire, it just caught on and everybody was doing it," recalls Bill Ringham, vice president and director of private wealth strategies at RBC Wealth Management-U.S. in Minneapolis. Donations raised through the fundraising-as-meme spread across social media, ultimately leading to a scientific breakthrough for the incurable disease. It also proved a pivotal moment, a tip in the scales of social awareness and philanthropy. Millennials had ushered in a new way of giving.

“You look back on before the ability of the web and transferring videos via your phone, that wouldn't have had that same kind of impact," says Ringham.

This new charity

Commissioned by RBC Wealth Management, The Economist Intelligence Unit (EIU) undertook a study of 1,051 high-net-worth individuals (HNWIs), including 365 respondents in the U.S., from March to May, 2018. The survey explores how the meanings of legacy and wealth are being redefined across regions, genders and generations.

According to The new face of wealth and legacy research, 79 percent of Millennials globally say they believe societal causes have become more important than wealth accumulation in defining their legacy.

Where other generations typically turn to large, well-known charities, Ringham says Millennials are more targeted and focused on using social media to support grassroots organizations. For HNW Millennials who haven't accumulated the kind of wealth necessary to launch a foundation, vessels like donor advised funds – where assets sit in a fund in a tax efficient way and can be given to charities flexibly in smaller sums – have seen a spike in interest.

"Through the years I continue to see more of an emphasis on 'let's not write a large cheque at Christmastime, let's write a more palatable amount on a monthly basis that fits within the causes of individuals,' " says Ringham.

Giving USA's 2017 report found donations from individuals totalled an estimated $281.86 billion, a 3.9 percent growth from the previous year, outpacing foundation and corporate giving.

“I think Millennials are interesting … they're a very large population and they're still very young, so they can afford to be a little bit more idealistic (and) how they believe they can influence the future," says Angie O'Leary, head of wealth planning at RBC Wealth Management-U.S. in Minneapolis. “I think they're much more willing to sacrifice in the short term in order to have an impact whether that's how they spend, invest, or accumulate their money."

Ringham agrees, pointing to a recent client family who went through a liquidation event where the Millennial in the family inherited a significant amount of money from her parents, who were still alive.

“(The parent) didn't really have social restrictions in place on what their investment platform would look like, but fast forward to their daughter who had very strong convictions on responsible investing and what types of investments to avoid based upon her moral compass," says Ringham. “It was interesting to watch the two go about it (with) very different investment philosophies."

"Good" investors

Ringham points out the Millennial generation is “very much in-tune" with finding ways to invest responsibly. Impact or socially responsible investing is a form of building a portfolio of companies that support environmental, social, and governance (ESG) causes or business models.

“Millennials are really good at researching things like causes, as well as things they don't really want to promote or purport," says Ringham. And they're using tools like social media to define their beliefs and share them with others. “You might not have to ask them what their thoughts are on tobacco, they'll probably tell you as you're going through the investment discussion."

According to the Global Sustainable Investment Alliance's latest data, global responsible investment (RI) assets reached $22.89 trillion in 2016, a 25 percent increase from two years prior. The U.S. accounts for 38 percent of that global figure.

O'Leary says she suspects Millennials are going to start influencing where the markets are going. “How they spend is important to them – companies that are green or companies that represent society in a more roundabout way, organizations that support women … the socially-responsible world is a little bit different than what we grew up with."

The EIU survey also found 22 percent of younger respondents in the U.S. rate financial services by advisors, lawyers or accountant as an important influence in their wealth planning, higher than the other three generations.

Whether it's through investing for social impact or putting the mechanics in place to ensure Millennial HNWIs can make sure they're having a positive impact with their wealth and legacy, O'Leary says the data is clear – wealth managers are going to need to be more nimble. “How we, as the stewards of financial responsibility and accountability, help inform what they see on a day-to-day basis is going to be important to their future."

*The minimum investable wealth of respondents was US$1 million. The margin of error on the U.S. sample is 5.1 percent with a 95 percent confidence level.

RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.