Self-regulation may be way forward for philanthropy advisory market

Self-regulation may be way forward for philanthropy advisory market

News

Regulation of the currently unregulated philanthropy advisory market was the issue under discussion at the recent Alliance Breakfast Meeting attended by around 50 representatives of the many organisations and individuals offering advice.

Only a few felt external regulation was the way forward for this nascent market, the development of which many feel suffers from a lack of professionalism, standards and transparency.

However, self-regulation seemed a more acceptable option and there was much discussion around establishing a code that could address standards, both ethical and professional.

The panel of experts were Maya Prabhu,  head of philanthropy at Coutts, Michael Alberg-Seberich of Berlin-based Active Philanthropy and Olga Aleexeva, former head of Charities Aid Foundation (CAF) Global Trustees who has recently set up Philanthropy Bridge Foundation, and was chaired by Alliance Magazine editor Caroline Hartnell. They discussed issues of transparency, neutrality, qualifications for practitioners and the development of the market, with many suggestions from the floor.

On the issue of regulation it was accepted there are already lots of standards in the legal and tax areas and Prabhu cited the framework created by the Family Firm Institute (FFI), a similar industry concerned with family business advising, that might be used as a model.

FFI offers conferences, qualifications, publications and best practices, though no one present had heard of anyone being expelled by FFI for failing to meet the standards. Remi Ayiela of Cavendish Law, said while FFI might have credibility with other professionals, their clients mostly know nothing about it and made the industry regulating body needs to create awareness outside its own industry.

One point made was that regulations are useless without the power to enforce them and it was suggested there was a need for a commission or ombudsman that could take on this role.

Alexeeva and Alberg-Seberich highlighted the ‘fine line’ between fundraising and donor advice - some large NGOs, for example, have foundation advisers whose role is basically to attract foundation grants for the NGO’s projects. Prabhu, who believes there is a need for professional standards, acknowledged this as an issue and explained that Coutts is very clear to keep management of funds and philanthropy advice separate and its Donor Advised Fund is run by the Charities Aid Foundation in order to deal with any possible issue of conflict of interest.

Alberg-Seberich felt transparency was crucial: “Donors should always understand an advisor’s motivations,” he said.

Emma Turner of Barclays Wealth stressed the need for advisers with banks to be ‘totally neutral’; they are there to facilitate and guide their client to do what is right for them, she said. “You can throw away the reputation of the bank with one silly remark or suggestion,” she said, with Alexeeva adding that poor advice can lose people to philanthropy all together.

Jason Jarvis of Coutts drew a parallel with the mainstream investment world, making an important distinction between information and advice. “If someone looking to buy securities asks, ‘How is oil doing?’ he’s asking for information. But ‘what should I do?’ is a request for advice” and he suggested philanthropy advisers, too, need to make a distinction between educating and informing clients as opposed to giving them advice about what they should do. When they’re giving advice, he suggested, they need some form of standards/internal regulation so they can demonstrate a degree of ‘threshold competence’. It was suggested that charities should use the term ‘donor education’ not ‘donor advice’.

Advisors should advise donors about questions they should ask potential beneficiaries, said independent advisor Theresa Lloyd. “Then they must ‘fly free’.

All three panelists agreed that being passionate and knowledgeable about one cause isn’t enough of a qualification to become a philanthropy adviser.Advisors need knowledge of givers, knowledge of beneficiaries and access to both, said Alexeeva “though access to rich people should not be seen as a substitute for knowledge, it’s much deeper than that, “she added.

Donor advice is wider than specific charities or causes, said Prabhu. You also need to have some understanding and knowledge of donors’ aspirations, philanthropy strategies and measuring impact.

If people are motivated by passion for a particular cause, said Warren Lancaster of Geneva Global, they would do better to work with a charity. The motivation he sees for advisers is avoiding ‘wastage’ – of donor money that could be better used.

In looking forward David Ainslie of law firm Stone King said there was a need to create an association of philanthropy advisors of like-minded people: The steering group on philanthropy advice, convened by New Philanthropy Capital and chaired by philanthropist Dame Stephanie Shirley is such an organisation addressing many of the issues under discussion. The Society of Trust and Estate Practitioners’ new Philanthropy Advisors Group is another. And codes also exist including a ten-point code of practice, developed by the Canadian Association for Philanthropic Giving and adopted by The European Association for Philanthropy and Giving as well as The US-based National Network of Consultants to Grantmakers.