WHY PHILANTHROPY IS NOW A WEALTH MANAGEMENT ‘MUST’

philanthropy_block_2

There is an old proverbial saying – give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime. In a similar way, yet with a slightly more financially-oriented twist, provide your HNW clients with the philanthropic guidance and tools to make sound financial decisions and they will make more effective, positive change to the causes they care about.

High-net-worth individuals of today want to be more strategic, focused and actively involved in their charitable activities – they are no longer looking to simply write a cheque. Scorpio Partnership’s research has identified that over 80% of wealthy individuals give time, money and/or expertise to good causes principally driven by a sense of responsibility, and personal and family values.

The trend of ‘philanthrocapitalism’ has led HNWs to harness the power of the market by utilising different vehicles in order to make philanthropic giving more efficient and effective.  This trend was noticeably reflected in Facebook founder Mark Zuckerberg and his wife Dr. Priscilla Chan’s creation of the Chan Zuckerberg Initiative, a philanthropic organization to which they pledged 99% of their Facebook shares. Rising numbers of such paragons of generosity have left wealth managers confronted with the clear demonstration that the charitable rich are not seeking good public relations from their altruistic behaviour, but rather see giving as an opportunity for meaningful work.

The private wealth of UK HNW individuals reached an astounding total of £1.5 trillion in 2015, yet estimates conclude that the total amount given philanthropically in the UK in the same year, stagnated at £1.3 billion – a meagre 0.1% of total private wealth. Why? Conclusively, it is not because the British are ungenerous. In fact, the Charities Aid Foundation (CAF)’s World Giving Index ranks the UK in sixth place globally for philanthropic activity and giving.

The UK’s wealthiest individuals then, give little in the context of their total wealth because of the lack of (or poor quality) philanthropy advice they receive – in fact, less than 20% of the UK’s professional advisory firms offer such a service (see Figure 1). Even though they like to give and want to give, only a minority are advised on how to give most effectively. We have found that those who are advised properly actually tend to give more and get more personal satisfaction out of their giving as a result.

Figure 1: UK advisory firms offering philanthropy advice

figure1

Philanthropy Impact’s research among HNW clients strongly suggests that the main reason the UK’s wealthy population has not yet fully learned how to give is because their advisors have not yet learned how to guide, out-sourcing to joined-up expertise teams if need be.

Offering philanthropic advice cannot be purely motivated by direct revenue. Clearly, engaging in philanthropy enhances a firm’s reputation and opportunities for positive PR, direct client referrals, and being positioned at the forefront of social, political and economic thinking. Yet, the main benefit of jumping on the philanthropy bandwagon is the opportunity to truly deepen relationships with clients over the long-term.

When the going gets tough, the tough get going…

In a progressively competitive market, it is often difficult to create differentiation. It is through a wider proposition positioning and a strong philanthropic marketing plan that firms’ reputations can be enhanced, allowing clients to feel confidently secure that their advisor will understand all levels of their needs – ranging from purely financial decisions to emotional, personal values through the development of philanthropic aspirations.

In fact, the institutions that have already realised the potential gateway to future opportunities provided through the implementation of philanthropic initiatives, have received huge amounts of positive client satisfaction ratings:

  1. Coutts

Coutts collaborates with specialist organisations and major donors, implementing one-to-one consultations to better understand clients’ motivations for their charitability, as well as their values, principles and goals. Coutts advisors carry out strategy workshops in which they help clients develop a common vision and a process for carrying forward all future giving. Advisors helps donors select charities, review grant applications, conduct site visits, and monitor the impact of their donations. The creation of the Coutts Forums for Philanthropy has allowed clients to discuss similar philanthropic interests.

  1. Standard Chartered Private Bank

Standard Chartered Private Bank’s comprehensive philanthropy programme Investing for a Better Future is providing clients with a three-pillared approach to philanthropic activity. (1) Seeing is believing – they facilitate co-investments amongst clients to fund projects; (2) Advisory Services – Standard Chartered provides bespoke strategic philanthropy advice from external experts; (3) Education and Involvement – the private bank educates clients with an aim of demystifying philanthropy, making it simple.

  1. Stonehage Family Office

Stonehage has implemented strategic vision planning sessions for their clients, where goals, objectives and project selection can be discussed. Stonehage also aids in the development of a Family Philanthropy Vision in which a Philanthropy Committee in the context of a Family Constitution is established. The aim here was to create a ‘safe zone’ in which all family members can participate with equal voices in a financial decision making for social good.

Several other wealth managers and private banks have set up other types of philanthropic initiatives such as UBS’ Optimus Foundation, which allows donors to directly support projects that improve the lives of children facing adversity.

No professional is better placed to develop a client’s philanthropic plan than his or her own wealth manager or private banker. Yes, integrating holistic philanthropic advice into wealth managers’ job specs is a complex business because of the interdisciplinary skills it requires. However, the benefits and emotional connection that charitable activity discussions will reap between clients and their advisors, will last the test of time.

Interested in learning more about the shifting sands of philanthropic giving? In Philanthropy Impact’s most recent Magazine release (Issue 12) Scorpio’s managing partner Catherine Tillotson explores the intricacies and complexities of HNW giving styles in the UK and the reasons for this. Download the full issue of Philanthropy Impact’s Issue 12 ‘The changing role of professional advisers’

 

Thought for the week:

‘The results of philanthropy are always beyond calculation.’ – Miriam Beard (Historian)

News from the world of wealth:

Deutsche says to expand into high net worth private banking in Asia – Reuters

Capital One offers a robo-adviser with a human touch – The Wall Street Journal

Advisors should expect to work hard to justify client fees – WealthManagement

LinkedIn founder Reid Hoffman’s net worth jumps $800 million on news of sale to Microsoft – Forbes

Millennials want their investing to make a difference – Nasdaq

Coming events in the world of wealth:

events

LAURA_CAVACIUTI_2016Author: Laura Cavaciuti, Analyst at Scorpio Partnership

Education: Laura holds a Bachelor’s degree in Sociology from the University of Bristol where she also founded the university’s Women in Leadership society.

Role with us: Laura is engaged in qualitative research projects, marketing and market insight projects.

And at the weekends: Laura can be found wandering around the city, trying to get to know London. Her objective: tracking down the best street markets, where she hunts for ingredients to pursue her determined belief that gourmet cooking is in her DNA (after all, she is Italian). However, this has not always proven to be the case.

Leave a Comment