What to do when you're approached for money

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Though families with wealth are often very aware of the privilege of their situation, they are also keenly aware of one of the drawbacks: constant requests for handouts.

Three experts discuss how wealthy individuals and families can feel that requests for part of their wealth can come from anywhere, including those close to them and deserving philanthropic organizations, but also inappropriate or fake startups and publications, acquaintances who feel they’re owed something, or even complete strangers.

They offer advice on how to manage those constant requests, and also maintain authentic relationships with those outside their circle of wealth.

Jen Lawrence, managing director, Toronto-based Process Design Consultants Inc.

Lawrence helps organizations and individuals develop critical thinking, change management, and people development skills. She has 30 years of experience in corporate training, investment banking, coaching, and management consulting and is a certified career and business coach, trauma of money facilitator, and a member of International Coaching Federation.

Tell us about your practice and your role.

“I help organizations make better decisions, particularly in times of crisis or change. I use a trauma-informed lens, since it’s helpful to understand the role of stress on the nervous system and brain when setting strategy or making decisions.

Family-focused enterprises can carry a lot of emotional baggage and even the most logic-driven discussions can trigger emotional responses reaching back to childhood so it’s important to address some of these issues up front.

In your experience advising ultra-high-net-worth individuals (UHNWIs), how do others approach them for money?

“Most non HNW people believe that money would solve most of their problems. It’s common for family members and friends to view HNWI and their wealth as a potential backstop in times of trouble: ‘If things get worse and we can’t pay the mortgage, we can always approach Uncle Jack,’ or, ‘If there is a shortfall in the money we need to start our restaurant, we can probably ask Aunt Jane.’ If you or your clients have not had open conversations around money with family and friends, it’s quite likely that they [family and friends] may view you as a potential solution to their financial problems, particularly in times of crisis.

Sometimes, even if there is no crisis, friends and family can simply feel entitled to your wealth. They may feel that you had an unfair advantage that allowed you to succeed and feel that you owe them some money as a way to rebalance things. New friends may see the relationship as transactional and think that it’s a condition of your friendship that you pick up the tab. Money can create resentment and those with less may feel that it’s just for you to pay for everything since you can more easily afford it. If you are not comfortable with this, it’s important to reset the expectations of the relationship.”

How do organizations such as startups and publications approach UHNWIs for donations?

“People and organizations who need or want money often make lists of potential donors or investors. It’s easy to find out who the UHNWIs are in a community with a quick Google search and if you are a UHNWI, you can assume you are a target donor or investor for startups, charities and other folks in need of your wealth and your connections.

Organizations won’t always ask you outright for money and try to create a connection first. They may give you an award, ask you to serve on a board, invite you to an event, or ask to write an article about you to create some rapport before making a financial ask. Before you or your clients agree to any engagement with an organization or publication, it’s important to do some due diligence to make sure the organization is legitimate and aligns with your values.

It’s important to clarify if there are any financial expectations of the HNWI such as donating a certain amount of money as part of serving on a board or receiving an award.

If you or your client are being featured in an article, will it open you or them up to solicitations by others? Individuals and organizations – legitimate or not – who want money are savvy at understanding where your points of vulnerability might be. If you disclose your family’s struggle with substance use in an article, be prepared to be asked for money by organizations fighting addiction. If you lost a beloved pet, you may find sympathetic organizations setting the stage for a donation request.

Most UHNWI are very private and have point people to handle any inquiries or offers but that does not stop individuals from trying to gain access in other ways.”

How does all this affect UHNWIs’ relationships?

“It can be hard not to become cynical when so many people want to get to know you to access your wealth. HNWIs can struggle in relationships with family and friends.

If you use your wealth to wield power over others or take a transactional approach when dealing with others (‘I’m the busiest and most important person in the family so the holiday plans should be on my terms’), you can expect others to treat you the same way (‘Fine, we will do dinner on the Friday, but you should pay for everything’).

The more you act like an equal member of a family or friend group and show flexibility and willingness to compromise, the less likely the others are to feel resentful that you are using your wealth to gain some sort of advantage. The more of a gap people see between the real you and your money, the less likely they are to view you as a walking bank account.

As a HNWI, you need to have very clear boundaries so that your friends and family know where you stand. Make decisions in advance of getting together, such as ‘all requests for donations go through our advisor,’ or, ‘I never make decisions around money on the spot so please email details about your business to my assistant.’

If you know how to handle requests for money, you can quickly address them and then move on to other things. You really do teach people how to treat you.”

How can UHNWIs sensitive to constant requests for money maintain relationships with less-wealthy family and friends?

“It’s very important to set some ground rules. Some people have a policy of not giving money to friends or family, period.

Some people decide what they will give in advance, such as, ‘We will give each niece and nephew $100,000 towards their postsecondary plans.’

To preserve family harmony, it’s a good idea not to put conditions on giving, such as giving money to any kids who attend law school or who keep an A average. When you use money to shape behaviour, it can be seen as controlling or manipulative and becomes about the family power dynamic rather than about the money itself. It’s your money and it’s fine to give or not give as you please but if you are seen as using money to wield power or exert control, it will tend to cause more problems.

Within the world of philanthropy, most donors are reluctant to fund operating costs since nobody wants to be accused of turning out the lights on a charity or institution if they decide not to give one year. This is a good strategy to keep in mind as an UHNWI.

Giving a generous wedding or graduation gift is a far safer way to help family or friends than making someone’s monthly mortgage payments or offering to pay for school. You don’t want people to rely on you to fund their lifestyle unless you are willing to do it for an extended period of time. A lot of giving falls under the category of ‘no good deed goes unpunished’ so it’s important to structure your giving in a way that serves everyone well.

When it comes to giving – or not giving – to friends and family, you will never please all of the people. Some will find your lack of giving to be stingy. Others will find your generosity manipulative or showy.

You need to feel comfortable in your wealth and your levels of giving and let the chips fall where they may. More importantly, if you don’t want money to be the foundation of your relationship with people, then don’t make money the foundation of your relationship with people. If the basis of your friendships are you flying your entourage around, then those friendships will disappear when the money stops flowing. If you want to take on the leadership role in your family because of your wealth, then expect there to be some resentments. Be yourself and be authentic and the money will be less of an issue.

Finally, wealth is often the elephant in the room. Be honest with friends and family about your feelings around the disparities in wealth and see what they have to say. Most people do not want to feel beholden and don’t feel as entitled to your wealth as you might think, and an honest conversation can clear the air.”

Mark Barnicutt, president, CEO and co-founder of Oakville, Ont.-based HighView Financial Group,

Tell us about your practice and your role.

“With over thirty years of experience as a both a Bay Street executive and entrepreneur, my professional expertise is the stewardship of family wealth as a mentor to affluent families, their professional advisors and their family office businesses. Over this time, I’ve both managed affluent client wealth as well as leading wealth management businesses in Canada and the United States.

I’m currently the president and co-founder of HighView Financial Group, a wealth management firm servicing the needs of affluent families and their foundations. I additionally provide select consulting services to affluent families in the education of their family office options, the preparation of heirs for inheritances and the formation, growth and governance of their family office businesses.”

In your experience advising ultra-high-net-worth individuals (UHNWIs), how do others approach them for money?

“In my experience, I’ve seen UHNW families approached for monetary donations in a wide variety of ways (such as casual versus formal; emotional versus logical), which I find does depend upon the intent of the monetary donation, but generally speaking, tends to place the UHNW family – in the absence of strong boundaries – in an uncomfortable situation given the personal family or friendship relationship.

Over the years, I’ve observed three types of requests:

If it’s an ‘investment request,’ most people will approach UHNW families with a business or investment concept by asking for investment funds without having taken the time to create an actual business or financial plan that outlines the purpose of the business, its plans for growth, return on the capital invested, and why the funds are being requested as capital for the business.

If it’s a ‘philanthropic request,’ most people tend to approach UHNW families with an emotional appeal for a charitable cause or organization that they’re passionate about, without having taken the time to understand how the charity operates, its historical success in accomplishing its charitable goals and its track record in effectively stewarding the wealth donated to it.

If it’s an ‘emergency request,’ it can be an urgent ‘investment’ or ‘philanthropic’ request, but often it’s a personal financial request tied to matters such as asset purchases (i.e. house, car), debt problems, postsecondary education funding or health issues (i.e. seeking assistance outside of Canada or the public health system). If an UHWN family does provide the requested funds, these can be either outright gifts or loans with repayment terms. Given the emergency nature of the funds request, combined with the personal family or friendship relationship, these requests can be highly emotionally charged ones, which can potentially lead to relationship strains – whether or not the UHNW family provided the requested funds.

The key to navigating these requests, is to have a strong set of boundaries, which should ideally include a prudent governance process around the advancement of funds.”

How do organizations, especially illegitimate ones, approach UHNWIs for donations?

“Illegitimate Organizations that approach UHNW families is becoming an increasing challenge in our modern world, especially with advances in technology that has created a globally, interconnected world.

Such organizations can approach UHNW families in a wide variety of ways (for example, through e-mail or internet versus in-person, casual versus formal, emotional versus logical).

The key for the UHNW family is to ensure that they take the time to conduct a thorough due diligence to determine if the organization is legitimate or illegitimate, prior to committing to the advancement of any funds. As this can sometimes be challenging, I believe that it’s important for UHNW families to involve their other professional advisors (such as accountants, lawyers, investment professionals, etc.) in such assessments. Some frauds and scams can be easy to detect but often the big ones can be extremely well-planned, and therefore require a diversely experienced and professional team to assess. In other words, that ‘sober second opinion’ can often be invaluable for UHNW families.”

How does all this affect UHNWIs’ relationships?

“My experience over the years has shown me that there is no perfect solution to this dilemma for UHNW families, as it’s often an internal tug of war between the heart and the head. UHNW families cannot, and should not, bankroll all of their family and friends’ financial needs – there just need to be boundaries.

For instance, boundaries that can mitigate issues can be established through a simple and effective governance process over the advancement of funds. It doesn’t mean that everyone, in the end, will be happy, but at least family and friends can hopefully understand that there was a fairness and transparency in the consideration of the request for funds.

An example of a governance process that can work well for UHNW families, is to notionally divide the family wealth according to financial purpose. I’ve always viewed three broad financial goals for UHNW families: Lifestyle, Family Legacy, and Philanthropy.

While Lifestyle is the daily funding needs for the UHNW family, just like any other family, the Family Legacy needs are how much capital or income UHNW families wish to pass onto the subsequent generations.

Philanthropic needs are how much capital an UHNW family desires to donate to charitable causes. Additionally, for philanthropic needs, I strongly believe that UHNW families should pre-define the charitable causes that they’re prepared to support, as this typically brings a focus to an UHNW family’s philanthropic efforts but also provides a framework for which philanthropic requests are declined. You can’t help everyone.

Then ensure that the capital is invested in accordance with each need. As a result, every year, there is a certain dollar amount available for each of these three needs, and once the dollars are spent, they’re spent.

Within this broad framework, UHNW families can then decide – in coordination with their professional advisors – how much they’re prepared to allocate, if at all, towards requests from family and friends, whether they be gifts or investments.

I’ve seen some UHNW families who have a hard ‘No’ on these types of requests and other families who are very generous with such requests

But when emergency requests arise, given the often emotionally charged nature of these requests, an UHNW family’s response to such fund requests is highly personalized and very dependent upon each situation.

As a result, the heart will often trump the head in these decisions – which is understandable – but it’s critical that UHNW families do not make financial choices that have the potential to negatively impact the wealth sustainability of the UHNW family, or negatively impact the lives of fund recipients. This can include providing ongoing funding to family or friends that negates their need to work or have a purpose to their lives. As one affluent family client said to me many years ago, ‘We’re a very philanthropic family but charity begins at home for myself and my wife.’”

Julie Blais Comeau, chief etiquette officer at Gatineau, Queb.-based Etiquette Julie

Tell us about your practice and your role.

“As an etiquette expert for over a decade, in workshops, in my books, as well as when I collaborate with the media, I teach words and actions to help people shine at work and in the community. According to their circumstances, I help my clients avoid embarrassment and faux-pas. I am certified in client service, etiquette, protocol and cultural intelligence.”

What mistake do organizations make in approaching UHNWIs for donations?

“The error that startups or publications that are not legitimate make is not to validate the missions and values of the UHNWIs and family enterprises. They don’t do their homework to show the value of the alignment between the missions of their organizations and that of the individuals and their organizations. They forget to show the ROI of contributing to their project.”

How can UHNWIs handle requests for money?

“Have in place a personal policy for giving. Establish the mission of your gifts. For example, you can have an annual budget of X amount of dollars for children’s wishes, education, the elderly, etc. You can also offer expertise, jobs or references.

Hence, when the request comes, you will be able to make it not about saying ‘no’ to the person, but about saying ‘no’ to the purpose of the request.”

Responses have been lightly edited for clarity and length.

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