Kleinwort Hambros, the UK wealth management arm of Societe Generale Private Banking, has experienced a 25% increase over the last five years in the number of clients who are actively engaging with the firm in connection with philanthropy.
Rebecca Constable, private banking director and head of philanthropy at Kleinwort Hambros, discusses how a new partnership with Global Philanthropic is benefiting ultra-wealthy clients, the rise of impact investing and where, why and how clients are engaging in charitable giving.
What trends are you seeing in philanthropy at this time?
There is a growing trend towards a new more entrepreneurial, social impact giver we define as the 'new philanthropist'. We are increasingly meeting and working with these individuals through our partnership with Global Philanthropic. The 'new philanthropist' wants to be much more actively involved in the impact of their giving. They want to see more accountability and benefit, and they are attracted to charities that respond to this involvement.
We are seeing new charities and non-governmental organizations that welcome this trend and are becoming more accountable and running their charities in a more commercial way. The philanthropists are not just giving financial support, but also providing skills and expertise as well and getting more actively involved in the strategic aims of the charity.
We are seeing this trend among ultra-wealthy individuals, but also at the other end of the financial spectrum because it is about getting involved. Entrepreneurs see the benefit of philanthropy and social impact as part of the culture of their business. They are encouraging engagement in philanthropic activities amongst their employees as a way of giving a sense of purpose behind what they are doing.
It is very interesting to see the overlap between the mission and culture of businesses and philanthropy. It is not just about giving charities millions, it is about getting engaged and involved in charitable activities.
Is this new philanthropy what people are calling social impact investing, or impact investing, or is this a different variety you're seeing?
I think social impact investing is one aspect of this developing trend. Impact investing is aligned with greater accountability and needs to become easier to measure. Impact investing is playing an increasingly important role as government funding is stretched. It could be associated with the demands of the 'new philanthropist'- it will be interesting to see how this develops.
How are your clients approaching philanthropy?
In the past charitable giving would be part of our clients' broader succession planning, or broader financial and wealth planning and those clients were more in established wealth rather than new wealth creators. Increasingly part of the conversations we are having with our clients is around the purpose and legacy of their wealth. Through the partnership with Global Philanthropic, we are able to offer advisory services to assist in effective giving.
Global Philanthropic's experience of working with philanthropists, effective philanthropy and the form it takes is very much determined by helping the philanthropist define what is 'effectiveness' i.e. making a difference and what this means to them. This is highly individualistic, and can range from the complex, such as seeing an increase in adult literacy in the philanthropist's own community to providing opportunities to involve the next generation in philanthropy.
Global Philanthropic have helped philanthropists at every stage. For example, they have assisted an American philanthropist with a long and successful history of giving to refocus his support for international development towards areas where his support could leverage other funding in less recognised areas. This was a critical measure of success for him.
In another instance, they were able to advise a relatively new philanthropist on how to expand the impact of his support, which led to stronger recognition and sharing of best practice by NGOs in the sector he supports.
Philanthropic giving should be a source of great personal satisfaction for an individual. Understanding what makes it satisfying in a world where philanthropists are being asked to help tackle increasingly complex issues is where a partnership such Kleinwort Hambros and Global Philanthropic can work to a philanthropist's benefit.
Global Philanthropic had the privilege of working with The UN Foundation, which was established and funded by Ted Turner. He was the first philanthropist in the world to give $1bn personally and was, in the view of Global Philanthropic, not only the pioneer of major gifts but also one of the first really strategic philanthropists. That was nearly twenty years ago and was a game changing moment in the history of strategic philanthropy. The whole market has become much more sophisticated since then and now really big philanthropists look for impact as a key part of their giving. Global Philanthropic is doing much more work in this space with some of the worlds leading UHNWs.
Also younger beneficiaries of substantial wealth, either self-created or inherited want to be philanthropic and there are high profile role models in this area for example Mark Zuckerberg and the Chan Zuckerberg Initiative.
What prompted Kleinwort Hambros to partner with Global Philanthropic earlier this year?
Global Philanthropic offers an advisory service, providing strategic advice on effective giving to wealthy individuals. They work with individuals to support them, but also advise the fundraising charitable sector strategically so the two are aligned.
This partnership with Global Philanthropic allows our clients at Kleinwort Hambros to use their expertise. We are wealth managers and bankers but, as part of the broader wealth management of our clients' assets, we are providing advice about impactful ways in which they can give. I think this will flow into areas where they can invest as well, but that is something which is developing.
It is a new partnership and we have already directed a number of significant clients their way and vice versa.
Which areas of society are ultra-wealthy philanthropists interested in supporting?
Crises happen periodically in the world, which means there is a flurry of philanthropic activity. There has been a general trend towards education and health, perhaps because these areas are well known and the impact is slightly easier to measure.
Certainly this is a trend we have seen across a number of our larger foundations however it does vary. Some clients will want to have more of a global impact, others will want to be more local. That is the fascinating side of it and it is a very individual choice.
Part of the advice we would give to clients is not to be too narrow in relation to their philanthropic focus because it could be limiting. When setting up a charity or foundation if the aim is very restrictive it prevents the causes and benefits evolving over generations.
How do ultra-wealthy clients structure their philanthropic efforts?
Wealthier clients may wish to create their own foundation or a charity. Interestingly, a trend across ultra-high net worth clients is not necessarily to set up their own foundation, but to support established foundations or team up with other charities. The 'new philanthropist' wants to be part of something which is successful and is increasingly keen to focus their energies on the impact of the cause rather than the governance and the running of the foundation.
Philanthropist are also using donor advised funds, rather than setting up their own bespoke foundation. These are for clients who want to give in the most tax efficient way. We would always advise our clients seek tax advice for these funds as we are not tax advisors.
Philanthropy is a way of engaging the next generation and involving them in something which is meaningful and has an impact and a purpose. Purpose is a really important part of it i.e. putting energy and finance to good cause.
What points are there to consider in philanthropic governance?
All charities and foundations need to comply with the regulatory and reporting requirements set out by the Charity Commission. In addition the trustees need to be aware of the responsibility of governance.
Philanthropist should be aware of these requirements and can either focus their energies and financial support on working with charities that can demonstrate strong compliance in this area, or if the philanthropist is keen to set up a charity the advice is to work with expert who understand the governance required. Having a professional trustee involved to make sure governance is conducted correctly is very important. It can also assist by providing an unbiased view if different family members wish to do very different things, and hence reduce tension particularly across generations.
What kind of generational differences are you seeing in philanthropy?
There may be a trend of the younger generation wanting to see more impact and involvement with the causes they are supporting. Charities are responding by involving their donors more and allowing donors to personally experience the benefit and impact made by the charity. This is cross-generational and it assists in creating sustainability which is key.
Charities are increasingly seeking sustainable and predictable donations, particularly if government funding is drying up or reducing, as this allows them to support long-term projects. Engagement of donors allows charities to promote the benefits of sustained giving.
What motivates clients in philanthropy – goodwill, status or a chance to exert power or influence?
The 'new philanthropist' has a real passion and interest in the cause they wish to support. This initial motivation varies from personal experience, crisis management, to a desire to create a new purpose and participate in success.
Power and influence are not words that immediately resonate with philanthropy but developing skills, mission and culture are certainly new words supporting this motivation. Charities can work with philanthropists in developing these skills. We have seen examples where family members work for not for profit organizations as part of their development for future business roles.
Are your clients interested in impact investing?
This is a developing area, our philanthropic clients are starting to show interest in this. Therefore we hope to be able to work with them in this area, through the partnership with Global Philanthropic. However it is important that donor investors understand the investments they are making. This involves education as this type of investing is not easily available to individual donors. Impact and commercial benefit are sometimes opposing forces and it is important that donor investors understand the risks and potential benefits.
Is impact investing commercialising philanthropy?
The commercial drivers of impact investing are evolving and this may be a good development as philanthropists and charities evolve. We have identified that charities are becoming more commercial as they are responding to the demands of the 'new philanthropist'. NGOs and charities need to be able to show the benefit of the donations/investments made.
Is this commercializing philanthropy? If the implication is that the motivation is more for the return rather than the impact, I am not sure. But I think that the sector is becoming more commercial, demonstrating the benefit of philanthropic giving, and this assists future sustainability.
Do you see social impact investing overtaking traditional philanthropy?
It is certainly a growing area of philanthropy and potentially very important. Through our partnership with Global Philanthropic we may be able to understand the trend in more detail.
What advice would you give to ultra-wealthy family business principals who are looking to invest in philanthropy themselves?
Seek advice from philanthropic advisers, like Global Philanthropic who work with their clients to really understand, from a strategic point of view, how to give with the most impact and understand from the charities standpoint how to respond to the changing trends in philanthropy.
Work on mission and culture to really understand what the family business is trying to achieve and how sustainable this mission will be in the future.