Modern philanthropy around the globe is changing as donors look to become more involved, better informed and ensure that their charitable giving mirrors their personal values. A team of international experts have joined together to answer questions and identify challenges in modern philanthropy that wealth advisors need to understand as an integral part of their service offer. The next generation of philanthropists will reflect a new set of values and come to their giving with a vastly different set of expectations than their parents’ generation. Expert knowledge and evidence-based research will be essential for those guiding U/HNW clients in the decades to come.
The Global Philanthropy Network is an informal network of professionals, drawn together by the UK-based Charities Aid Foundation (CAF). Tapping into the expertise of senior members of our network from Brazil, America and Europe, we set out to answer a series of questions about modern philanthropy in order to bring clarity and guidance to our own work while also assisting advisors around the world on trends worth watching which are very likely to affect U/HNW clients.
Questions included what are the biggest changes ahead, what we need to do to encourage the wealthy to give more (and more effectively), where the research or knowledge gaps lie and, perhaps most interestingly, what the inevitable transfer of wealth to the next generation will herald for those of us guiding people on their giving journey.
Our answers paint a clear picture of considerable change and include some essential pointers for advisors across legal, accountancy, taxation and financial planning on how they can build trust and best work with clients to help them achieve their philanthropic ambitions.
Donors want to see results
Philanthropists are increasingly impact-oriented, a point picked up by colleagues around the globe. In order to remain relevant, philanthropy needs to take more risks and have new conversations that bolster communication between donors and charities. With transparency will come greater trust and stronger relationships.
Working in partnership is part of the ‘reinvention’ which means losing personal control in exchange for potentially scaling up impact. The Environmental Funders Network (EFN), for example, whose mission is to support environmental philanthropy by connecting individuals and organisations and producing resources to help donors give more effectively. Philanthropy will have to focus more than ever on the best ideas and on measuring impact on the beneficiaries. Philanthropists want a closer look at where their money goes - gone are the days of writing cheques and leaving charities to get on with the job.
To deliver on results, wealth advisors need to nurture those closer relationships between charities and donors, especially in steering donors away from the lure of short-term grants and dare them to take a longer term view, to look beyond the horizon in areas that are not already well-served in order to fund projects that produce the lasting impact that they tell us they are after. For example, is the donor interested in funding one local health project with their name above the door? or are they willing to take advice from a local charity telling them that the real need is a time-limited public information campaign about the importance of mass immunisation.
Particularly in the US and Europe, a new generation is making its presence felt and challenging traditional philanthropy, especially as part of a family affair.
This change is filtering through into family philanthropy and a willingness to test ideas such as shifting away from traditional grant-making and considering blended philanthropy that brings in impact investing, venture funding and support for social entrepreneurship.
In the UK, we expect to see more philanthropists looking to do good through not only their charity but also through their investments, business and networks. This comes at a time when there are more and more options that address social and environmental issues. This will no doubt prove to be a key moment for advisors in their approach to their clients as they grapple with these newfound expectations.
Encouraging the wealthy to give more
If the wealthy are to be asked to give more then trust needs to grow. The conversations around giving need to open up at all levels. We need a clear story to tell about where donor dollars go, how they are spent, what that means on the ground, specifically to the people that charities – and ultimately donors - hope to serve. These stories also need to not shy away from failures in order to demonstrate lessons learned.
As it stands, there is a lot of misunderstanding about the type of support charities really need, what already works to address problems and how donors could be most useful. By being clear about what is required, it becomes easier to ensure donors feel like they can make a difference.
For example, charities need to be forthright about the need for cash to pay for important overheads like fundraising capability, salaries or IT support. If these elements are not robust, then their ability to deliver on their mandate can falter. A lack of this type of investment restricts a charity’s growth, efficiency and ability to plan ahead.
And it would be naïve to not be open about tax incentives and the role they play in increasing the willingness to give among wealthy people. While tax incentives are often the first reason why people decide to donate, our members’ experience tells us that they often act as a catalyst for a meaningful, long term philanthropic journey.
Looking at why we need research has a lot to do with inspiring and demonstrating impact. Our experts pointed to research that exists to satisfy donors that their money is being well-spent in the short term, rather than focussing on the longer term outcomes achieved. It is the latter that is essential to affect change but speaks to one of the challenges facing charities, namely perceived short-termism on the part of donors.
Several recent grant-making programmes are countering this shortfall and taking long term views through systems change philanthropy. An example of this is the MacArthur 100&Change grant – a competitive process that awards $100 million USD to fund a single proposal that promises real and measurable progress to solving a critical problem of our time. The initial winner of the competition was the Sesame Workshop and International Rescue Committee’s joint bid to educate children displaced by conflict and persecution in the fallout of the Syrian conflict – a clear, long-term problem being addressed with a measurable impact.
Encouraging more of this nature of giving, targeting mid-level earning populations around the world and moving away from ad-hoc projects will help in scaling interventions that work to address the root causes of issues like poverty, climate change and inequality.
Wealth advisers and other professionals have a critical role to play in opening up the right conversations with their clients about philanthropy and social purpose. CAF’s research shows that wealthy people are very interested in these topics but they don’t get the advice they want. This is a risk to advisers and a lost opportunity to deepen relationships.
Other gaps in research identified include giving as an economic activity and the motivations for donor behavior. Colleagues have also pointed to a need for more evidence on the effectiveness of tax incentives and the end benefit to society – research that can serve as a vital tool in advocating governments to establish or enhance incentives.
Making research accessible, taking it out of the philanthropy realm and sharing findings across stakeholders, wider society and international borders were also picked up as a tool to bring about new collaborations, bolster the scale of major cause areas and open doors to new partnerships.
The next generation will focus on aligning the rest of their financial choices with their philanthropic values. Younger donors will see investing in organisations which damage life as anathema and will punish the brands which do this and migrate towards ethical investments, products and employers alongside their charitable giving.
They are already taking bolder risks and are more willing to try innovative solutions using all forms of money at their disposal, including philanthropic capital for impact investing. This emerging cohort will increasingly consider philanthropy to be a crucial element of their “financial morality” and prioritise lifetime giving over preserving wealth for future heirs.
The great transfer of wealth has produced a desire to see fast results – a challenge for charities as they try to reinforce longer-term solutions - and a generation less reticent than their parents to talk about their giving and seek out natural partners to achieve their goals.
For those of us guiding the next generation in their giving, we need to be nimble, informed and ready for increasingly blurred lines between traditional philanthropy, lifestyle and wider financial considerations. The end benefit will be both satisfied clients and a more dynamic philanthropic landscape.