Client Affairs

Philanthropy Takes Centre Stage in the UK

Alison Steed, 5 December 2006

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Wealthy UK investors are increasingly looking to use their money to do good, whether by donating or investing in social projects, and adviso...

Wealthy UK investors are increasingly looking to use their money to do good, whether by donating or investing in social projects, and advisors need to keep abreast of movements in this area if they want to keep high net worth clients happy.

An interesting trend has been noted by Coutts, the Queen’s private bank, where it is becoming more common for parents to try and limit the inheritance their children will get. The idea is to get them to try to make their own fortune, said Mark Evans, head of family business and philanthropy at the private bank. While this is not such good news for the children of the rich, charities and not-for-profit organisations will reap the benefit.

Mr Evans said: “We are definitely finding that more clients are asking for help in giving. People are thinking twice about leaving everything to their children, as they are now thinking that it could do more damage. They want to make sure they are properly educated and have their first home, but then they want to encourage them to build their own careers and make their own fortune. So they are increasingly looking at charitable giving as a way of distributing their wealth.

“More people are achieving financial success early on. Life one is about creating wealth, but then they have a life two, which is about creating significance within their life.”

There are many ways that the private banks and other institutions help their clients to give, and it is not just about signing a cheque and making sure the payment is tax efficient by using Gift Aid. This enables charities to claim back the tax you would have paid on the gift at 22 per cent, and one benefit to the giver is that if you are a 40 per cent taxpayer, you can reclaim the 18 per cent difference from HM Revenue & Customs.

Mr Evans said: “A lot of people see they have more to offer than money – they have intellectual capital and experience and they are keen to get involved.”

There are a wide range of ways that benefactors can get involved in helping different projects. Often the private banks will use other organisations that have a speciality in dealing with such issues to help their clients get the most out of their giving.

For example, Coutts has a relationship with the Community Foundation Network, the Charities Aid Foundation, and New Philanthropy Capital. There are around 180,000 registered charities in the UK, and if an individual wanted to try to identify which to give to, it could be a time consuming process. Also, there are around 3,000 or so cancer charities registered, but it is only the likes of Cancer Research that has a marketing budget that get noticed.

Often, philanthropists will have a specific reason for targeting a particular area to give money, whether it is because something has happened to a family or friend, or perhaps they want to help their local community.

Geoff Burnand of Investing for Good, says that his organisation is one that helps philanthropists identify the best way for them to give money in a cost effective way.

It is not always the case that the money is sent never to be seen again by the benefactor – in many cases, it is given as a loan that will be returned, although the interest paid will be very low.

Mr Burnand said: “You do have poorer liquidity and a lower rate of return. But if someone wants to make a social investment, I can get their money working for them in a socially deprived area of the world, and give regular reporting of how it is used.

“We would ask the client what they would really like to do, they may say they are interested in ethical investments, social welfare or young people. We would come up with a profile and show them the options as a social investor. We do not fund raise, the service is specifically for the client. We will come back with a portfolio of options that fits the UK and international interests of the client, and where there is the best fit. That is then agreed, and the money is invested with the organisations, and we will tell the client how their money is working.”

The amount invested in this way can vary considerably. Mr Burnand said he has one client with £70,000 to invest, while some clients want to put as much as £15 million to good causes in this way.

It would not be particularly cost effective to invest small amounts in this way however, as Investing for Good will charge around £100 an hour for its advice. The average rate to invest a portfolio is around £1,500, said Mr Burnand. He describes the organisation as “not for loss”.

He works closely with a number of organisations, including financial advisors who will pass on clients interested in this type of investing, if they have no expertise in this area themselves.

Heather Maizels at Barclays Wealth, said philanthropy is “an important asset management tool and key to helping our clients make sense of their wealth in the way that suits them best”.

She added: “We help our clients assess the choices available to them in getting monies to the causes they wish to help, whether directly, alongside others, through a specialist agency, through an established charity or a newer venture. We help our clients understand the risks and choose whether, for example, to help three children from age three until they finish university, or use the funds to work with policy makers to get tax from school books removed thereby giving ‘all’ children the opportunity to go to school. The risk is the almost certainty of helping three or the huge uncertainty in trying to achieve a real policy change in a country like India.”

Ms Maizels said that Barclays will secure the degree of recognition required by the donor, or the anonymity if that is preferred.

She added: “We also enable our clients to have a good look at what is around so they are best placed to achieve the impact they want with their funds - and manage the charity's expectation. And, of course, we provide wealth structuring and investment advice ensuring that the monies are transferred as tax effectively as possible so the charity secures the greatest possible benefit. Where non-cash assets can be gifted, like shares, we will facilitate this as well.”

Barclays’ Wealth for Women programme has a number of philanthropy events planned in 2007, said Ms Maizels, as “women are the greatest influencers of gifting significant sums”.

Mr Evans said: “People are enjoying giving their money away. There is a sense of enjoyment in making the money, but they enjoy giving it away more.”

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