Monaco Life recently caught up with Richard Ditizio, President and COO of the Milken Institute, who was in town to discuss with Monaco Life publisher Eric Brundage and members of His Serene Highness Prince Albert’s administration how we can all work together to position Monaco as a centre of excellence for families interested to understand how best to channel their philanthropic resources.
For those readers not familiar with the Milken Institute, it is a non-profit, non-partisan think tank focused on promoting collaborative solutions to some of the toughest problems facing the planet and its inhabitants.
Prior to joining the Milken Institute, Mr. Ditizio was the CEO of Citi Private Bank and has spent much of his career counselling clients on issues such as business succession, philanthropy and the challenges of raising children amid great affluence. Mr. Ditizio was kind enough to share his thoughts on these issues with Monaco Life.
Monaco Life: What led you to focus your efforts on the issues affluent parents face in raising their children?
Ditizio: I’ve spent my career helping UHNW families manage and protect their wealth, but more often than not the financial component of that work was the easier part. What they really needed help with was navigating through the confusion that often accompanies great wealth.
There is no handbook for parents that explains how to instil a principled existence into your heirs, and the psychodynamics of wealth are extremely challenging. I have for years worked with families where inherited wealth has led to terrible decision making, substance abuse, even suicide. And it is such a shame because there are strategies that can be pursued that can help with some of these issues some of the time.
Monaco Life: In your experience, what are some of the ways parents can interact with their children to mitigate these risks?
Ditizio: Firstly, parents need to develop a language to get comfortable talking to their children about having a lot of money. I firmly believe that philanthropy can be a curative mechanism to many of these issues. Given the extraordinary – and often quite public – financial success of some families, it can be extremely difficult for children to craft an independent identity away from the family fortune.
That creates an odd dynamic with these children, whose inheritance will often dwarf any wealth they accumulate on their own. I am convinced that one’s identity is very much impacted by what they feel they’ve contributed.
Monaco Life: What resources does the Milken Institute provide to help structure these conversations?
Ditizio: The Milken Institute has created the Center for Strategic Philanthropy (CSP), where we discuss with many ultra affluent families the potential issues their children may face. Having a positive societal intention through philanthropy can often spur meaning, creativity and independence in adult children, and I believe it is very helpful for all members of the family to understand the external impact giving.
The Advisory Service provided by CSP helps families sharpen their philanthropic focus by asking three questions: What is the ambitious change you passionately want to see in this world? Do my philanthropy, energy and insights align with my cause? Do I have a community of peers and experts to learn from?
Monaco Life: What are some of the specific ways you counsel these families?
Ditizio: It’s about activating your wallet, whether that wallet contains a thousand or a billion dollars. Philanthropy should be thought of as a portfolio- to be most effective, there should be short term as well as long term goals, and a diversifies set of interests. The whole philanthropic world relies on collaboration – it isn’t that your dollar has to solve a particular problem, it’s that you hope your dollar leads to the dollar that does.
And collaboration within the family is of equal importance. I very much like the idea of “stewardship” when discussing inheritance as it imparts responsibility on the recipient. I might suggest to the children that “you did not create the fortune you are now inheriting, so the testament to your parents and grandparents rests in how productively you use this gift”.
I always ask the parents, “Are you preparing your children to navigate the world without you”?
The answer is almost always, “Yes!”
I then ask, “Tell me three specific things you are doing.”
That’s when the room goes silent. While these issues are certainly challenging, I continue to believe that engaging your children in philanthropy can provide a treasure trove of lessons as you begin discussing wealth, as it illustrates the transition from “what money can buy” to “what money can do”.
And that discussion can begin much earlier than most parents realize. I advise parents to give a small amount of money – say $300 – to each child starting on their 10th birthday with the requirement that they give it away to an organization that works on something they care about. Nothing makes children appreciate their advantage more than staring disadvantage in the face.
In working with Michael Milken all these years, I’ve heard him ask people, “What do you stand for”?
It’s really a rhetorical question in the context it’s asked, but I often see a wave of panic sweep over the faces of the people. This is not a trick question, especially since the only one who can know what you stand for, is you. So among the things you need to decide is what you stand for. Then tell your children. It could start a conversation you both will be happy you’ve had.
Monaco Life: Rich, thank you so much- those are fascinating insights and we very much look forward to working with you and the entire team at the Milken Institute to promote the mission of strategic philanthropy to our community.