Wealth managers are increasingly integrating philanthropic services as a core part of their offering as clients become ever more sophisticated in their approach towards charitable giving.
Private bankers are known to get offbeat requests from clients from time to time; wishing to provide excellent service, private bankers will naturally do their best to oblige. But when it comes to providing philanthropy advice to private clients, the requests can require an extraordinary level of creativity and ingenuity.
For Lisa Philp, head of Philanthropic Services at J.P. Morgan’s Private Bank, the unusual is simply business as usual. Clients rely on her and her team to advise them on a variety of issues surrounding their giving, and in a number of instances even make decisions on their behalf after they have died. Pop quiz – how do you create a park that serves as a memorial to a client’s father, the necktie salesman, and her brother, the dentist? And what if the client died before she could make her vision for the project completely clear? The answer, Ms Philp and her team decided, was to find a suitable plot of land in the client’s home community and build a playground… with a giant necktie jungle gym, toothbrush balance beams, and big white molars for children to play on.
Other publicly-known examples include administering an award funded by the Dorothy and Lillian Gish Foundation to annually honor a person who “had made an outstanding contribution to the beauty of the world and to mankind’s enjoyment and understanding of life.” J.P. Morgan is the sole trustee overseeing the Gish Prize and every year selects a small committee from the art world to choose a recipient.
Another example is The Booth Ferris Foundation, started in 1957 with $27 million by a married couple who had no heir, which is today worth $250 million and all disbursements are made by J.P. Morgan. For over 40 years, J.P. Morgan worked with a co-trustee, a close confidante of the donors, until he passed away. Together they developed a pattern of grant-making focused on capital and capacity-building support for the arts, civic affairs and education that the bank now oversees in perpetuity as the foundation’s sole trustee.
The philanthropic cycle
In the wake of the credit crunch, Ms Philp has seen no dip in her team’s workload. With a legacy of more than 50 years helping clients pursue philanthropic endeavors, J.P. Morgan is one of the oldest private banking firms to offer a philanthropy advice program and is most well known within the top tier of wealthy Americans who want help crafting or refining their philanthropy strategy. Ms Philp herself joined the group in 1998 and the other seven members of the team also have long tenure, with extensive backgrounds in various sectors of the non-profit world including the arts, education, health care, and social services.
“Everyone has different experience that relates to philanthropy in some way,” Ms Philp explains. “It means we can cover all areas of the philanthropy cycle.”
The team provides advice ranging from the early stages of helping clients create a giving strategy to monitoring the progress of a running foundation and even running the foundation on behalf of the client, as seen in the examples above. There are important decisions to be made up front, which can affect how the donor’s legacy looks for years to come. A donor acting alone risks limiting the impact their giving can make, particularly since laws can vary from state to state.
“Professional advice from people who know the ins and outs of giving can make all the difference. The choice of whether to run the foundation as a trust or a corporation, for example, has great implications,” Ms Philp says. “A corporation allows for greater protection from personal liability and for a change to the basic mission, while a trust can help preserve the donor’s philanthropic intent.”
“Having a clear succession plan can prevent the foundation from being closed down early, and sometimes having a third-party broker the way that looks in a larger family is the only way it can be done to everyone’s agreement. Also, the discussion on whether the foundation runs in perpetuity or has a sunset date is very important.”
An enviable offering
While many private banks offer some kind of philanthropy advice, the level of staffing is usually much lower than J.P. Morgan’s. The majority of private banks do not have a dedicated staff for philanthropy, instead training one person or a small team of relationship managers to double as internal experts for interested clients to consult. On rare occasions where there is a team dedicated to philanthropy, it is no more than one or two people.
“We would love to be able to offer something similar to J.P. Morgan because we have client inquiries on a regular basis,” said a senior executive with another New York wealth management firm. “We just do not have the resources to fund a team like theirs. We have a short list of good outside advisors we refer to, which is fine, but our relationship managers can’t always keep track of what exactly happens when our clients go there so that is one form of connection we lose out on, unfortunately.”
As interest in philanthropy has swelled in other countries, and the bank has expanded its service to match: a team member in New York is designated to look after Latin American clients, and last year the bank hired a dedicated philanthropy advisor in London.
“With families being so much more global these days than ever, we have to provide international service to help them coordinate strategies across geographies,” Ms Philp says. “It’s not enough any more to just offer service in the US.”