Tax within the context of philanthropic giving
As attitudes towards philanthropy and impact investing have continued to evolve and as philanthropic endeavour has become more sophisticated, a gap has emerged between the desire to engage in philanthropic activity and the knowledge and tools required to bring that ambition to fruition.
The clear indications are that philanthropy is becoming increasingly embedded as a core part of a comprehensive wealth management strategy, and as a result advisers and specialist wealth management jurisdictions are having to adapt quickly and appropriately to ensure they adequately meet the philanthropic objectives of high net worth individuals (HNWIs) and their families.
For example, research carried out by Philanthropy Impact in 2016 points clearly to the fact that clients are wanting more high-quality philanthropy advice and guidance than ever before, and are actually investing not just for financial return but based more on their personal values. Evidencing the rise in philanthropic endeavour, the 2016 Coutts Million Dollar Donors Report, which logs donations of US$1 million or more, logged 2,197 donations worth US$56bn in total across the UK, USA and Middle East (Gulf Cooperation Council) in 2015. That represents a dramatic and rapid increase on the US$17bn donated the previous year.
At the same time, those wishing to engage in philanthropy are actively seeking expert support – but support that, it appears, can be difficult to find. For instance, a report published last year by State Street Global Advisers – The heart of wealth management: Helping clients align philanthropic and financial goals – showed that clients who are able to receive guidance on philanthropic planning from their adviser are 40% more likely to be very satisfied with them. It also found that 62% of investors agree it is important to educate the new generation about family values and legacy.
There is undoubtedly a growing need for high-quality professional advice, guidance and education when it comes to philanthropy. According to a study by the Charities Aid Foundation and Scorpio Partnership (2015), philanthropists are looking for advice in a broad range of areas. Unsurprisingly, tax is a key issue (17% of respondents), but understanding need and selecting social causes (12%), selecting charitable organisations and projects (11%) and monitoring the impact of giving (11%) are all important areas where guidance is needed as well.
Against this evolving backdrop, Jersey has set out on a journey in recent years to create a robust professional environment for philanthropy and provide a framework for advisers to deliver high-quality philanthropic advice. Jersey is already home to a number of internationally focused philanthropic projects, for instance:
- Trust and corporate services provider Minerva works with the Meghraj Charitable Foundation to target philanthropic activity on sustainable business or welfare-orientated projects making a social impact in East Africa and South Asia
- Jersey was selected by RBC Wealth Management’s client as the place of incorporation for a foundation providing scholarships and training for young people in Asia
- BKS Family Office has created a philanthropic charitable trust to manage the inheritance of a European client who wished to have the monies used for medical aid, education, water distribution and helping the elderly, predominantly in Latin America, Africa and India.
It’s clear that there is a need for a more tailored approach to philanthropy as part of holistic wealth management strategies, and doing so can not only empower investors and families but also helps advisers deepen their relationships with clients and enable them to support clients better in achieving their long-term goals. Underpinned by a strong pool of philanthropic expertise, Jersey’s new law and regulatory regime is a clear demonstration of the commitment that Jersey is making to the evolving philanthropic landscape and an acknowledgement that more needs to be done globally to bridge the gap between philanthropic desire and implementation.