PART ONE OF A FOUR-PART SERIES
A reflection on a panel discussion about the important and evolving role of professional advisors and the increasing focus on philanthropy. The reflections captured here are all the more relevant given the COVID-19 outbreak and its far reaching implications.
The panel, comprising Sianne, James, Darren Kelland of Hawksford, Anthony Donatelli of UBS and Anna Josse of Prism The Gift Fund were joined by scientists from Cancer Research UK to discuss the important and evolving role of the advisor and the increasing focus on philanthropy in financial planning for HNWIs.
WHY IS PHILANTHROPY BECOMING SO IMPORTANT FOR PROFESSIONAL ADVISORS?
At its core, philanthropy is of great personal importance for many HNW clients, and as a result, advising on philanthropy is a way to deepen relationships by focusing on the things that clients care about most. Anthony Donatelli agreed, although acknowledged that there might be an initial reluctance on the part of some advisors to engage with philanthropy because of a perception that if clients were to give their money away this would impact negatively on their firm’s inflow of assets. However, he emphasised that the overriding issue for any advisor is what is best for the client and that, if an advisor is serving a client well by advising on the things that matter to them, this will lead to a stronger longterm relationship with the client.
WHY IS THIS EVEN MORE IMPORTANT NOW?
Sianne Haldane has been working on a Coronavirus response fund and a digital tool to create more transparency around funding and where there are gaps. She stated: “The coronavirus outbreak has impacted on every aspect of our lives and is affecting everyone. There has been a huge outpouring of support and we have seen impressive philanthropic re ponses being announced, which is really heartening. An advisor’s role is to guide their clients and help them navigate how and when to respond, as well as to make them aware of the opportunities out there in which either they or their businesses can respond.” “In a situation where we feel we have no control and there are so many unknowns, many will feel empowered to be proactive.”
TAKING BACK CONTROL
Darren Kelland added that, whether a client’s motivation for becoming involved in philanthropy is enhancing their status, giving something back, or a combination of the two, it is increasingly the case that clients want to have more control and to see more direct impact from their giving. He observed that some clients tell him this is the most important thing in their life and that they want something that they can control. They want to see the real impact of the donations in the areas that are important to them. Anthony Donatelli agreed, explaining that 70 per cent of the global value of wealth held by billionaires ($8 trillion) has been generated through entrepreneurial activities and that, in that context, it is not surprising that donors come to philanthropy with the same business-like mindset that has earned them their wealth in the first place. Most HNW clients do not want to fund something forever; they want to solve a problem and then redirect their philanthropy, in the same way as they may have exited a business and then gone on to tackle the next problem. He explained that advisors need to rise to the challenge of demonstrating real social return on investment – not just showing how positive impacts can be correlated to investment, but how they are causally linked.
HOW IS THIS RELEVANT NOW?
Although the demonstration of impact is really important in philanthropy, at this point in time, many charities are asking for unrestricted funds in order to weather the storm, balancing serving beneficiaries with maintaining operations and staff who carry out their duties. The impact of the current global pandemic may test this perspective, since charities and non-profits that are struggling in the current climate will need access to unrestricted funding if they are to be able to have the resilience to survive, and then to demonstrate the social return on investment that so many philanthropists seek. It will be fascinating to see how philanthropists and charities work together to respond to this challenge.
The panel discussed a significant mindset shift among younger philanthropists who want to both make money and do good at the same time, rather than following the more traditional approach where wealth individuals would spend their working years making as much money as possible and their later years giving it away. Darren added that he is seeing more traditional philanthropists coming under pressure from the next generation to adopt a more active and involved approach to philanthropic investment.
The panel agreed that collaboration between different specialist advisors (philanthropy consultants, wealth planners, not for profits, lawyers and tax advisors) is crucial and is being driven by clients who are quite often not satisfied with the quality of the advice they receive. James Maloney welcomed the signs that silos are coming down, as advisors are increasingly acting as part of a team working on behalf of their client to deliver across the strategic planning, implementation and monitoring and evaluation stages of the philanthropic journey.
COLLABORATION IN CRISIS IS KEY
Sianne Haldane reflected on the willingness of advisors to come together and to seek more information on how to respond now, guiding their clients through this time. Across the philanthropic community, sharing knowledge and information of where funding is being deployed has also been really helpful, as well as understanding what trends are being seen, sharing due diligence measures and what new innovative responses and practices are
happening to be able to deploy funds speedily.
GET IN THE RIGHT VEHICLE
The panel considered the importance of putting in place the optimal structure for philanthropic giving that meets the needs of clients. For clients who want to set up their own charitable vehicle, particularly those with global interests, the choice of jurisdiction may be a fundamental preliminary concern. Some clients (particularly those who wish to collaborate with and perhaps even to raise funds from others) will choose the UK because it offers a well-regulated and well-respected environment, while others who favour anonymity may find the high level of scrutiny less attractive. Anna Josse observed how Donor Advised Funds (DAFs) are an attractive option for those who prefer to avoid the very significant regulatory burden on charity trustees. She founded Prism The Gift Fund to help individuals, groups and foundations to make significant gifts – whether of cash, shares, property or works of art – to charities all over the world. She emphasised the need for advisors to work together and provide joined up information and advice to clients, especially in a climate where as much as £750 million of Gift Aid remains
A GLOBAL PERSPECTIVE
Sianne Haldane explained that Cancer Research UK is increasingly working in more global ways, funding research in 36 countries and conducting 25 per cent of their trials with collaborators overseas. Darren Kelland stated that Hawksford’s teams in Asia have not yet seen a huge demand from Asian clients, but that he sees the more recent generation of greater wealth there as an exciting opportunity to grow philanthropy. He added that he had also worked with Middle Eastern clients to set upstructures to facilitate the requirement of Sharia Law that mandates charitable giving. Right now we are seeing how COVID-19 provides a very powerful illustration that the world’s greatest challenges do not stop at national borders, and that philanthropy on an international (as well as local, or national) scale will be needed to tackle the current pandemic.
LOOKING TO THE FUTURE
The event showed how philanthropy is becoming more sophisticated, linking giving with investment to meet the needs of the new generation of entrepreneurial philanthropists. Clients are increasingly seeking advice on philanthropy and this is a clear opportunity for the advisor community. Advisors have a key role to play in being proactive and ensuring that their clients are well informed on the options for philanthropic structures and charitable tax relief, and clients are increasingly expecting their different professional advisors (whether wealth, legal, tax or philanthropy consultants) to work collaboratively to meet their objectives. Philanthropy and collaboration are becoming a crucial part of the advice that wealthy clients demand from their advisors and in the wake of the coronavirus out break and beyond, the need for this advice will increase as we draw on all our resources to stabilise the