INCREASING THE FLOW OF CAPITAL FOR GOOD - INVESTING AND GIVING
Magazine article
6 February 2018
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.
Need for advice and support
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.
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.
However, the Philanthropy Impact research suggested that less than 20% of UK advisery firms currently offer specialist philanthropic advice, and the depth and breadth of this advice varies significantly, with respondents giving an average score for the advice they receive of just 5.9 out of 10.
Nevertheless, that research found that offering expertise on philanthropic giving and impact investing is not only good for the client, but for the adviser too. Providing this service helps attract new clients and align advisery firms with their clients’ core values and interests. It is also more sustainable because it encourages clients to talk about their long-term goals and addresses the shifting values of the next generation and millennials, and of course the growing role of women in wealth.
Areas advice is needed
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.
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.
Moreover, with philanthropy being a truly international affair now, support needs to be global in scope too. A white paper, produced by Jersey Finance in conjunction with Hubbis in 2016, explored key trends in one of the world’s fastest growing wealth markets – mainland China. The paper, The internationalisation of Chinese wealth, concluded that ‘Chinese clients increasingly say they want to leave the majority of their estate to charity, or for philanthropic purposes’ and that ‘philanthropy is a concept which is gaining some traction among families, although domestic laws are not well developed yet in this respect’, suggesting some real scope for specialist international support.
Overall, the picture is one of HNWIs wanting to pursue philanthropic endeavours and needing broad professional advisery services to realise their ambitions and have a genuinely positive impact in communities around the world.
Jersey’s approach to philanthropy
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:
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.
However, Jersey’s Charities Law continues to be introduced in phases to enhance its framework and help meet the requirements of the modernday philanthropist. The Law has already seen the appointment of a new, independent Charities Commissioner, who has responsibility for establishing a charities register – expected to come on stream this year – and for ensuring that charities registered on it meet their legal requirements.
The Law has also introduced standards that those who run charities on the Island will have to abide by and a new test for what is charitable (the ‘Charity Test’), whilst in due course it will also enable a Charity Tribunal to be established. Ultimately, it is hoped that the Law will enable the Island to flourish as a centre for the administration of charitable structures.
Conclusion
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.
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.
