Maximising philanthropic impact
Charity With more guidance on investing our money philanthropically, not only could we all be giving more but our money could also be making a bigger impact.
In 2015 wealthy people in the UK gave £1.3 billion to good causes, according to research conducted by Philanthropy Impact. Whilst that’s certainly a sum to be celebrated, if you consider that the private wealth of high-net-worth individuals in the UK is £1.5 trillion; it’s barely 0.1%.
However, these facts don’t tell the full story. According to the Charities Aid Foundation’s World Giving Index 2016, the UK ranks in eighth place globally for charitable giving, volunteering and helping others. Moreover, research conducted for Philanthropy Impact among 500 of the UK’s wealthiest individuals shows that 95% give regularly, occasionally or in response to an appeal and the other 5% volunteer for good causes.
Better advice leads to better outcomes
So what’s the reason for the disconnect between the positive attitude toward giving and the actual financial investment? John Pepin, Chief Executive of Philanthropy Impact, believes it often comes down to advice. “We know from our research that philanthropists who take professional wealth advice give 17 times more than those who do not,” explains Pepin. “But at the moment very few financial advisers are offering this support.”
Currently only 1 in 5 firms of professional wealth advisers provide advice on how to make philanthropic donations. Whilst they may well be able to advise on things like tax planning, they don’t have the expertise to help individuals select charitable organisations to support or provide assistance with monitoring the social impact of their investment.
More than giving money
It’s worth pointing out that philanthropy is not merely about ‘giving money away’ – it’s about investing in societal change. That can take many forms – from purely leaving a legacy to making social investments, investing in venture philanthropy or even giving time, services or sharing knowledge. As with any investment, philanthropists have to weigh up the appropriate mix depending on their capital objectives, time scale and values - alongside their aims in terms of societal and financial returns on investment.
It’s a complex area that requires detailed planning, astute implementation and thorough monitoring and reviewing. Whilst it’s unrealistic to expect in-house financial wealth advisers to have the skills that touch all these bases, it’s very achievable for firms to have processes in place so they can work with other experts who can meet their clients’ needs.
Greater cross-sector collaboration
Pepin believes greater collaboration on this level could have huge results. “We’re not talking about making every financial adviser an expert in philanthropic giving, but if they have enough information to know how to direct investors, that’s a good start,” explains Pepin. “We know that investors who receive advice give more and our research indicates that minimally an additional £735 million could be donated each year simply by supporting investors more effectively.”
To truly maximize giving, Pepin believes that practical change needs to be supported by a cultural shift in thinking about giving – not just for high net worth individuals and wealth management professionals but across the board. “In the UK we’re not so good about talking about our giving,” says Pepin. “There’s more we can do to celebrate our giving and to build philanthropy into our culture.”
That cultural shift will take time and investment from a whole variety of different sectors. To encourage a move in the right direction, Philanthropy Impact is encouraging greater collaboration between philanthropists, financial advisers and charitable organisations. Together they hope to share knowledge to develop more strategic partnerships that really can tackle some of the critical issues faced by society today by increasing donations and making sure those donations achieve their maximum impact.