A decade of development: 10 years of advice

INCREASING THE FLOW OF CAPITAL FOR GOOD - INVESTING AND GIVING

Magazine article
The fledgling UK philanthropy advisory industry is approaching a tipping point; there is a belief by those working within it that in the next five years it could become a fully fledged market. Ten years ago the picture was very different.

Prior to the 1990s, only a handful of independent advisors and a few organisations existed to help donors in their philanthropic pursuits. While philanthropy continues to be very much a ‘heart felt’ activity, today’s donors are increasingly taking a business-like approach to their giving, which includes seeking professional advice.

One of the first philanthropy support organisations was the Charities Aid Foundation (CAF), which can boast an 85-year history, starting out as the ‘charities department’ of the National Council of Social Service, now the NCVO, to encourage more efficient giving to charity, becoming independent in 1974 as CAF.

The Community Foundation Network (CFN) was another trail-blazing organisation, whose founding concept of promoting grassroots giving was an import from the US. The first six UK community foundations were established in the 1980s, with seed funding from CAF and the government. In 1991 the national association for UK community foundations was founded, funded by the ‘CAF-Charles Stewart Mott Foundation Endowment Challenge’ which raised £6m. The Charles Stewart Mott Foundation continues funding CFN today.

Birdlife International, a charity supported by the Coutts Environmental Pilot Donor Advised Fund, runs translocation projects in the Pacific which benefit birds such as this Rimitara Lorikeet in the Cook Islands.

Birdlife International, a charity supported by the Coutts Environmental Pilot Donor Advised Fund, runs translocation projects in the Pacific which benefit birds such as this Rimitara Lorikeet in the Cook Islands. Photo © Phil Bender

‘New philanthropy’ arrives

The next milestone for UK philanthropy happened around the time of the millennium, when it experienced something of a ‘big bang’. In part this was a response to the general growing interest in philanthropy, but primarily driven by a new breed of philanthropist who had recently made a lot of money during the booming markets and wanted to do something more engaged and strategic with their own giving. Finding nowhere to turn, they came together with friends and colleagues to set up various organisations underscored by the business and investment principles that made them successful in their professional lives.

New Philanthropy Capital (NPC), which offers analysis and advice to charities and funders, was founded in 2001 by a group of leading City financiers. It was a typical example of this results-led approach. Cross-border specialist Geneva Global, established in 1999 in the US (and 2008 in the UK) was another advisor at the vanguard of this new movement focussed on maximising ‘impact’ and increasing the efficacy of giving. Both are now leaders in their sectors.

This approach was mirrored by philanthropy funds such as ARK (Absolute Return for Kids), founded in 2002 by a group of leaders in the alternative investment industry, and CIFF (Children’s Investment Fund Foundation), founded in 2002 by Chris and Jamie Cooper-Hohn. CIFF, led by Jamie, is funded by fees generated by the Children’s Investment Fund hedge fund run by her husband.

Support organisations also began to spring up around this time, such as the Institute for Philanthropy, founded in 2000 by Lady Browne-Wilkinson, a lawyer at the City law firm of Allen & Overy and a former chair of the Prince of Wales Foundation.

As the director of the Institute, her vision was to help charities to raise funds for good causes, by providing donors with greater incentives for giving.

As she explained, “We wanted to be a catalyst, to use our networks and knowledge to develop organisations and ideas for the benefit of British philanthropy.”

In 2001, to meet a growing demand for independent advice, the Association of Charitable Foundations (ACF) established Philanthropy UK, with an aim to promote new philanthropy, particularly among those with substantial resources. It was funded for its first three years by Esmée Fairbairn Foundation, the Gatsby Charitable Foundation and the Lloyds TSB Foundation for England & Wales.

Under the guidance of founding director Theresa Lloyd, a leading light of the independent philanthropy sector, its many early achievements include publications such as Why Rich People Give (2004), the first major British study into giving by the wealthy, and A Guide to Giving (2003, and now in its 3rd edition), the first comprehensive and independent guide to charitable giving in the UK. It established a simplified procedure for setting up a charitable trust, provision of guidance to organisations and individuals and undertook advocacy and lobbying activities, which it continues today. In 2002 Philanthropy UK launched this Newsletter, now read in over 70 countries.

Philanthropy had been set on a new path by these kinds of organisations. New avenues and concepts were being explored, such as ‘venture philanthropy’ which arrived in the UK in 2003 with the foundation of Impetus Trust1.

Impetus applies venture capital investment principles to charities and social enterprises, investing time and resources to build organisational capacity, taking a longer term view, for social return.

In 2004, a membership body was set up to support venture philanthropists: the European Venture Philanthropy Association (EVPA) had 110 members in 22 countries by the end of 2008.

In 2005 the government renewed its commitment to supporting charitable giving, (see ‘Legislating for philanthropy’) laying out its vision and priorities in A Generous Society, and funding new strategic partnerships to promote efficacy in giving, including Philanthropy UK, CFN, and Giving Nation.

Banking on philanthropy

2005 was a landmark year for commercial advisory services, with Mark Evans introducing philanthropy advice for private bank Coutts & Co clients. He was among the first to state the case for its importance as an integral element of wealth management. Many commercial client advisors followed suit, seeing the competitive advantage philanthropy advice could bring to a business, such as bolstering relationships and trust with clients.

Since then we have seen the advisory sector expand in all directions. Today, private bankers, wealth managers, trust and estate lawyers, accountants, trust and family office managers, family and community foundations, financial planners, and family business consultants offer a growing range of ‘philanthropy solutions’, alongside charitable organisations and independent advisors.

In recent months Barclays Wealth, JP Morgan Private Bank, Cazenove Capital Management, Kleinwort Benson, The Standard Chartered Private Bank and Spencer-Churchill Miller Private have all confirmed expansion in the sector.

The web has been another revolutionary force, increasing the depth, breadth and reach of philanthropy advice. Online resources, tools and giving vehicles have made philanthropy more accessible – and Philanthropy UK has taken a lead in this; Giving in Europe and GlobalGiving UK are two others.

Today’s philanthropists can even give through online applications on Myspace, Facebook and Twitter.

The IntoUniversity FOCUS Programme offers disadvantaged young people challenging and stimulating experiences which aim to promote a love of learning. The charity is funded by Impetus Trust. Photo courtesy of IntoUniversity.

The IntoUniversity FOCUS Programme offers disadvantaged young people challenging and stimulating experiences which aim to promote a love of learning. The charity is funded by Impetus Trust. Photo courtesy of IntoUniversity.

Looking ahead

The UK non-profit sector has undergone a decade of development and the ancillary advisory market has tried to keep pace. Though the US remains years ahead of the UK in this respect, the gap is closing and the UK ‘market’ is more developed and sophisticated than in continental Europe or Ireland, though there is still some way to go.

UK advisors are ‘positive’ about the outlook.

Most advisors interviewed believe that in the next five years more ‘niche’ operators will enter the fray, and the sector will further fragment and there will be a broader range of highly specialised services. Along with increased competition, this will usher in a new era of collaboration and a need for flexible, strategic partnerships between advisors, intermediaries and charities in order that donors can fulfil their unique giving needs.

Maya Prabhu, senior philanthropy adviser at private bank Coutts & Co, believes the market “will no doubt become more sophisticated and organisations will have to do what they currently do well and respond with new services or refresh products and content to stay ahead of the competition.”

She adds: “Lawyers and intermediaries who are already engaged in setting up giving vehicles for their clients may also offer advice, either through partners or hire their own philanthropy advisors.”

Rebecca Eastmond, vice president of JP Morgan Private Bank, predicts philanthropy advice “will become a standard part of any wealth management solution – whether provided in-house or outsourced to a consultant. I predict that professional  philanthropy advisory organisations will become more obviously linked in to banks and multi-family offices.”

The universal aim is to establish a bona fide advisory ‘market’ in the UK and across Europe; one where donors will perceive real value in professional advice and services - and will be happy to pay for them.

But some interconnected challenges lie ahead before this cultural transformation can happen, according to those currently working within the sector. There is a need to communicate more clearly the value philanthropy advice delivers to donors to overcome the resistance in paying for it. And to deliver that value, the sector, which currently has no entry requirement, will have to be ‘professionalised’.

Lloyd, now an independent philanthropy advisor, says of the next five years: “I sense and hope that the advisory market will have grown, become more professional and more recognised as a useful contributor to the development of informed philanthropic strategies.”

She is one of many who propose the formation of a professional body that sets standards, monitors adherence, delivers qualifications and undertakes generic marketing.

NPC held a conference last May that proposed creating an association of non-profit analysts and in a forthcoming research report explores the outlook for the advisory sector and makes some practical recommendations on how to ‘build the market’ (see 'The business of philanthropy').

Also in order to take the sector forward, a new generation of advisors will need to be trained.

Etienne Eichenberger, of Geneva-based advisor wise, whose pioneering work with major donors has been rewarded this year by being named Advisor of the Year by City Wealth, says, “There is a search on for talent, knowledge and experience – particularly in middle management. This is compounded by the fact that, as advisors gain knowledge and experience, they then set up their own practices, further fragmenting the market.”

Barclays Wealth’s head of client philanthropy Emma Turner says her vision is for the sector to become, “an active, competitive and collaborative market place which is populated with established advisors working across the sector.”

Russell Prior, executive director of Enterprise and Philanthropy Development at CAF, says, “There is a very positive outlook for the market. We expect that it will become more competitive and that is good news for donors. I also think there will be more collaboration in the sector, especially across borders, and that is welcome too.”

Ceris Gardner, a partner of Maurice Turnor Gardner, a newly established independent law firm (the recently demerged Private Client Department of Allen & Overy LLP) providing international wealth management solutions, adds: “The signs are that the gap is slowly closing between the UK and the US and that we are shifting closer towards the US model where individual and corporates feel a growing sense of obligation to ‘give back’. This will inevitably create exciting opportunities for professional philanthropy advisors to develop and grow their philanthropy practices.”

1 Andrews Charitable Trust, founded in 1965 as the Phyllis Trust by Cecil Jackson-Cole, was effectively the first 'venture philanthropy' in the UK. Impetus Trust is widely recognised as the UK's first contemporary VP fund.