Since the start of the 21st century, there has been a noticeable shift globally in trends of philanthropic giving, with philanthropic advisers, most notably family offices and private banks, playing a significant role within this landscape.
Andrew Carnegie's premise at the end of the 19th century that "it is more difficult to give money away intelligently than to earn it in the first place" is of even more relevance today against a backdrop of growing global wealth. UBS predicts in its 2023 Global Wealth Report that global wealth will reach $629tn by 2027, the number of millionaires will total 86m, with ultra-high net individuals to hit 372,000.
However, while wealth is rising for many, huge levels of wealth inequality remain. A growing number of geopolitical and environmental crises are leading to greater focus by wealth holders on ‘legacy’ and thinking more critically about the purpose and impact of their wealth.
Positive societal change
How ambitious, strategic and holistically wealth holders wish to approach philanthropy will vary enormously, but often the immediate challenge is knowing where to begin and how to achieve real impact. However, as Dr Beth Breeze and Emma Beeston flag in their seminal 2023 guide ‘Advising Philanthropists’: philanthropy advice is the solution to “analysis paralysis”, providing donors with information, suggestions and recommendations to come up with a plan for their philanthropic giving.
Since the start of the 21st century, there has been a noticeable shift globally in trends of philanthropic giving, with philanthropic advisers, most notably family offices and private banks, playing a significant role within this landscape. Family offices increasingly provide expert advice to philanthropists around charitable giving. UBS's Global Family Office Report 2024 outlines that almost a third (32 per cent) of family offices globally are focusing on philanthropy, looking to better understand it. Private banks are also key players in the field, with increasing numbers operating in-house philanthropy departments to serve their high net worth customer base.
There will be a range of opportunities available to wealth holders to achieve effective positive societal and environmental change. These include: giving money to charities; setting up their own charity; opening an account with a Donor Advised Fund; changing their investment approach to focus more on impact investments; or even reassessing how they operate their businesses. Whether all of these activities fall under the heading of ‘philanthropy’ depends very much on the views of the wealth holder.
However, advisers within the wealth management sector have had to become pretty adept at covering a wide range of areas and, most importantly, developing a black book of philanthropy contacts, who can be called upon to provide subject matter expertise.
Shaping philanthropic strategies
Developing clients’ thinking on what they care about and where they feel they want to focus their time is often the starting point. The initial adviser will then help identify who else can be called upon to support the client in developing their philanthropic approach.
Invariably, a core part of the advising team will be a lawyer who can provide support on how best to structure their philanthropic giving, identifying key legal and tax considerations. But there will be a range of other people to call upon such as independent philanthropic consultants; philanthropy specialists within banks, senior executives at other charities, fellow philanthropists, academic institutions and researchers, network and member organisations and more – all of whom will readily share their knowledge and experience to help a philanthropist develop and shape their thinking. As the network and knowledge grows, so do the opportunities and many philanthropists welcome the changes it brings to their life and professional outlook, creating a whole new chapter.
Impact potential
But it isn't just about giving money away. Many philanthropists adopt a holistic approach across their wealth, ensuring their money is achieving good. It has become markedly easier over recent years for families to invest for positive impact and achieve good returns. A budding industry is emerging, with the global impact investing market sized at $1.64tn in 2021, £58bn ($74bn) of this sourced from the UK in 2020.
However, current constraints within the family office sector, relating to lack of specialist expertise and transparency about impact, can affect growth potential. UBS's Global Family Office Report 2024 outlines that more than half (55 per cent) of family offices globally agree difficulties in accurately measuring impact are holding them back from allocating more money to such investments.
It is clear that philanthropic and impact investing advisory sectors are growing at pace, and what was once seen as niche is becoming ever more mainstream. This growth is particularly driven by demand from a next generation of wealth holders who need to see their wealth working well and achieving good for both the environment and society. As one wealth holder stated in our recent "Lessons in Legacy" research: “Our children will not thank us for a bountiful financial legacy if the eco system as a whole is utterly screwed and we have massive societal disruption.”
Clare Stirzaker, private wealth partner, Boodle Hatfield
