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The Giving season and Philanthropy

19/12/2019

Philanthropy is the desire to promote the welfare of others, expressed by the donation of money to good causes.

Rebecca Constable, Kleinwort Hambros Head of philanthropy, spoke to Tom Burroughs, Group Editor of Wealthbriefing and shared her views on the importance that philanthropy holds when speaking to clients. 

In the jurisdictions that you operate in, what sort of trends do you see in terms of what causes people want to support and why? What causes/objectives seem to be gaining ground, staying the same, or losing some momentum?

The trends observed are not so much about the causes philanthropists seek to support, but more about ways of giving. Philanthropists, in particular the self-made entrepreneurs, are keen to give time and expertise as well as financial support and they are particularly attracted to opportunities where their funding offers match funding thereby doubling, or tripling the funds raised. This approach is gaining ground and the outcome can result in significant sums raised.
 

Are you noticing differences in philanthropic goals/objectives depending on which countries people come from, their life experiences, whether they are self-made, inheritors, etc?

Yes and No. There is definitely a more ‘business-like ‘approach to fundraising and giving, as the business world and the not-for-profit sector (or third sector as it used to be called) converge. Companies are very keen to demonstrate in their culture and conduct an appetite for fundraising and volunteering as a means of attracting and retaining talent, and charities are increasingly working with business on their fundraising strategy.

This has resulted in very impressive impact reports being produced by charities and philanthropists who have entrepreneurial skills and who are greatly assisting in developing strategies for charities around impact, scale and sustainability. However, this does not represent all philanthropists and there are still significant sums raised from more traditional fundraising, and this is often based on life experiences and a desire to support a particular passion or medical cause close to their heart.
 

When you talk to clients, in your experience is it the client or advisor who brings up philanthropy first? Is this changing? If it is the client, what do they often say? If it is the advisor, what does the advisor say?

It really depends. One of the privileges and fascination of advising private clients is that they are all individuals and there is no set formula for conversations on giving. Many of the regular givers have already decided which charities to support, and it is always interesting to discuss with them why and how they decided to support these causes. Others give in a modest way and plan to build up a strategy for giving as they make plans for succession and wealth transfer and these are the clients where advisors can assist in raising the subject regularly alongside broader financial planning.

Advisors from Kleinwort Hambros can assist in the discussion on how clients structure their giving, for example setting up a foundation or charitable trust, or giving via donor advised funds. For more specific questions about which causes to support, we often seek the assistance of experts at Global Philanthropic, an exclusive partnership we have with these specialists in philanthropic advisory work. They can help to provide guidance for our clients on the causes they can support to assist their short, medium and long-term aims and how they facilitate their giving, for example would they like it to be anonymous, or do they give their name to a particular project etc.
 

In your view what are the main added-value offerings that you can give to a client in helping their philanthropy goals? How has your organisation developed these in recent years (types of expertise, reporting, due diligence checks on charities, access, connections with the beneficiaries of the philanthropy, engagement of children, others)? Have you recruited more people to handle this work, invested in resources, etc?

Kleinwort Hambros has a long-established UK and CI trust company and offers charity administration and trusteeship services. We add value when advising individuals or families on whether they should set up a charitable trust or foundation, and in the administration and trusteeship of that charity. However, given the responsibility and cost of running a foundation, our trust team is also well placed to advise on whether clients should direct their focus on giving, rather than the responsibilities of being on the board of a charity and therefore giving via Donor Advised Funds.

We also recognise that the expertise of other specialists is extremely important when deciding on the direction families or individuals wish to go on their philanthropic journey. This is why we have partnered with Global Philanthropic who can work with clients to set up an effective long-term philanthropic strategy.
 

To what extent is philanthropy now sitting inside a broader field of “environmental, social and governance (ESG)-focused activity, rather than as a standalone advisory line?

I think this is a good question. In the same way that the business world and the charitable world are converging, the same is true with philanthropy and ESG. However, it is also about the trade-off between profit, impact and altruism! ESG is becoming mainstream as a way of assessing non-financial criteria on the performance of a company. Those companies which screen positively in this area are potentially the top performing companies financially as well in the future. As the focus of the cause leans more towards impact and ultimately altruism then this is where it is more traditionally classified as philanthropic.

The reward is not financial, but there are benefits both psychologically and mentally.

How do you think firms should position the philanthropy offering? Should it be a core offering, or an add-on? Should firms charge separately for philanthropy advice and support, or include it in an overall fee?

Philanthropy is driven by the culture and desire of our clients, assisted by the culture of the bank. Therefore, if this demand becomes greater it will become more of a core offering. We are keen to broaden the expertise of our bankers’ so that they understand the options available, and the expertise on offer should clients wish to make significant donations.
 

In what ways can private banks, wealth managers and other advisors to HNW individuals use philanthropy expertise and support as a business differentiator?

Retention of client assets as part of succession planning – assets can be managed in a foundation or a Donor Advised Fund. Intergenerational involvement in terms of the future of family wealth philanthropic aims and aligning the culture of clients with the culture of the bank.
 

We have seen that philanthropy sometimes does not shield a client from reputational problems and that giving money to “good causes” can sometimes backfire. How should philanthropy sit alongside the work of protecting clients’ reputations?

I believe that the two should be totally unrelated.
 

Some jurisdictions – such as France and Germany – tend to make certain causes more a concern of the State than private philanthropy. However, there is still philanthropic and private giving in parts of Europe and elsewhere. Which markets which might have been a bit overlooked deserve more attention?

Research from Global Philanthropic indicates that there is enormous growth in Chinese philanthropists, and they are keen to support Western education and the performing arts, as well as medical science.
 

There’s quite a “toolbox” today for giving: Donor Advised Funds in the UK and US, private foundations, trusts of various kinds, etc. Depending on whether one is in a Common Law or Civil Law centre, certain structures work better than others. Do you see any trends in structures becoming more, less popular, and why?

Donor Advised Funds offer enormous potential for philanthropists to focus on giving rather than running of a charity etc. I see this as a growth area.
 

We have to talk about tax. Tax breaks can motivate some giving – where do you see tax changes posing a threat or creating opportunities in certain countries?

In my view, the current position can be confusing and can often be overlooked by donors. There is no doubt that in certain circumstances the tax breaks do motivate giving, and certain jurisdictions such as the Channel Islands where there is no inheritance tax do not get the benefit of some of these tax breaks. If the tax changes become even more complicated they will be overlooked and underutilised. Therefore, there needs to be some simplification, both in terms of income tax and inheritance tax reliefs. Kleinwort Hambros are not tax advisors and we would always recommend that clients seek tax advice.