Wealthy families are known for their dedication not only to the businesses that grow their wealth, but the causes and charities they choose to support through philanthropy. But how much is actually known about the patterns of family giving and how philanthropists choose the causes they support?
Understanding family philanthropy has come more sharply into focus over the last year as resources come under threat and the wealth of ultra high net worth individuals and families dwindles. However, what has not dwindled or even faltered is their commitment to the philanthropic causes they choose to support.
The purpose of the BNP Paribas/Campden Research Global Family Philanthropy Report 2009 was to advance the understanding of those commitments, their roots and the structure of family philanthropy today. The report is a detailed look at the motivations behind and problems facing family philanthropists. It is an attempt to understand how families and individuals select, manage and execute their philanthropy and it documents the relationship between families and the non-profit organisations they support. This summary gives an overview of the findings, to purchase the full report visit www.campden.com/research.
The structure and process of giving
The report shows the majority of philanthropists give away less than 5% of their assets. It also suggests the amount families choose to give is wealth dependent; those with the most give away the greatest percentage of their assets. Nearly 30% of those worth $1 billion or more set aside 15% or more of their assets; for those worth less than $500 million the figure is just under 20%. However, the amount given did not appear to have any impact on the level of commitment from philanthropists to their chosen causes.
An American in his 70s who gives away over 25% of his wealth said: "I don't think it's that unusual or something to be particularly proud about. It's natural and what one would expect. Philanthropy is important, and at the heart of what I care about."
What also became clear was the overwhelming importance of family to those engaging in philanthropy, from involving the next generation to using the family as a whole to make decisions about which causes are supported by the family fortune. Seventy percent of respondents involve their children under the age of 21 in their philanthropy and 55% turn to their families and peers for advice on their philanthropic endeavours. Others also look to professional advisors and the family office for advice. Only a small percentage look to specific philanthropic advisors (11%) or banks (3%) for guidance.
A quarter of respondents said they plan their philanthropy strategically so it fits into a wider objective. Sixty-one percent also said they choose the causes they support based on them meeting their philanthropic objectives. In many cases giving is not ad-hoc or random, it is measured and follows a set pattern. Europeans and those in Latin America are more likely to follow strategies than those in North America.
Donors do seem to be willing to fund long-term projects as long as there is some demonstration of impact. They will only remove their support if they believe resources have been mismanaged or the organisation has been poorly managed.
The most important aspect for philanthropists when choosing charities is that they understand and complement family philosophy. "If a charity does not understand our values as a family it certainly makes it difficult for us to choose them," said a philanthropist from Lebanon.
And there will be certain issues that are always off limits to specific families, as outlined by an Indian philanthropist. "We have a strict ban on religious giving. We think it could potentially create conflict in the next generation," he said.
Motivations behind giving
Due to the nature of family wealth, those who grow up in a multi-generational business family are often exposed to philanthropy from a very early age. This instils in them a sense of social responsibility they take with them for the rest of their lives and explains why 53% said this was their primary reason for giving. "I was brought up with philanthropy and I can't imagine my life without an element of giving back to society. We were brought up with that obligation," said one female in her late 20s.
Social responsibility was closely followed by ethical reasons and the desire to have a measurable impact as the
primary motivations for engaging in philanthropy.
Although many who took the survey did not see creating a public legacy as important, creating a legacy within the family was viewed as a desirable outcome. "I'm not fussed about being remembered in public but I would like my children to remember me by virtue of my giving'" said one philanthropist. Survey respondents were also driven by the desire to have a positive impact on their community and society as a whole.
However, some motivations behind family philanthropy go deeper than the desire to make a difference; philanthropists hope they can further family unity and crystallise family philosophy through the causes they choose to give their continuing support to. Bringing the next generation into the fold is also an important aspect for many philanthropists, who see it as a way to build a closer family relationship through shared values and activities. "Philanthropy is critically important to embracing and maintaining family continuity and cohesion," said one male from Hong Kong.
Age and gender do not appear to make a significant difference to philanthropic motivations; in fact the older and the younger generations showed a close alignment in their motivations. This may be due in part to the fact the older generation often plays a role in educating the next generation on the role of philanthropy in their lives. "Growing up, it was my grandmother more than anyone else who involved us in philanthropy. My father and uncles were too busy running the family business and it was up to the elder generations to educate us in the family way," said one Singaporean male.
Choosing the recipients
Although age did not have an impact on the motivations behind philanthropy, it does affect the causes and issues that philanthropists choose to support. Young people are much more likely to see poverty as a priority, while those in middle age choose education and the older generation put health care and humanitarian issues at the forefront.
However, there is one issue that brings all ages together in their support and that is children. Nearly 70% saw children's issues as "very important" and a massive 93% saw them as either very or somewhat important to their philanthropy. Overall family philanthropists placed children's issues higher than any other.
Geography also has an impact on the causes families choose to support, with the survey revealing philanthropy remains largely a local affair. Nearly three quarters of respondents said local issues were the most important to them. "Our philanthropy has always been geared towards the local and it was only when the business started to take roots in other regions of the world that we began giving there. Of course we still consider that local to wherever it is we are based," said a French philanthropist of her family's experience.
When it comes to international issues, only 15% of North Americans considered them to be of personal importance, compared to 29% of Asians and 54% of Europeans. "You don't have the control over your impact when you give to international charities," said one Canadian philanthropist. However, he is not supported by all the respondents. "I like to give to international causes above local and national because I feel these projects can make more of a difference. I find local charities come and go and can be quite sporadic," said a German man in his 40s.
Assessing the impact of giving
Increasingly, philanthropists are showing a desire to judge the effect of their giving, but 60% said measurement of impact was the most difficult challenge they face. This is due to the fact the techniques used to measure impact are under-developed and charities often find it difficult to trace and monitor impact.
It is not just the end result that is important either, those surveyed placed a high priority on regular feedback from the recipients of their philanthropy. And this feedback needs to be more than anecdotes and stories about specific cases that their money has helped, 62% prefer to receive detailed data on the impact of their giving and nearly half want to receive their feedback in the form of face to face dialogue. "Written reports are all well and fine but we want a face-to-face Q&A once every six months, detailing the impact of the organisations initiatives," said one American woman.
The favoured method of assessing impact for the philanthropists surveyed was a benchmarking system. Some employed key performance indicators similar to those used in business, while others used peer comparisons and corporate philanthropy data to measure impact. The expectations of philanthropists can prove challenging for charities to live up to, but they do understand the need for those giving vast sums to measure the impact they are having.
The longer philanthropists have been involved with a charity or organisation the more interested they become in the impact they are having. Sixty-three percent of those who have been involved in philanthropy for more than 25 years consider measurable impact "very important" compared to those who are just starting out, of which only 26% said measurable impact was very important.
Collaboration to solve problems
In recent difficult economic times fewer resources are available but require philanthropists to confront larger and more pressing problems. This may be one reason for the recent rise in collaborative philanthropy, where families come together either with each other or other organisations in order to combat larger problems with a combined weight of capital and influence.
Just under half of all respondents have collaborated in attempting to solve long-term problems. "Collaborating with other families is something we have always done. It's just the nature of family life. You work with those close to you whom you trust. Often that will be other families you know well," said an Italian family principal. Collaboration can be with other families or governments but the most common partners families choose are independent foundations.
The overwhelming motivation behind working with others is the desire to solve a long-term problem. Of those who said long-term problem-solving was important to them, 71% had collaborated with other philanthropists or foundations. "Government, business and philanthropy should be able to all work together," said one British woman. "If they do, then giving can take on a whole new age."
Family philanthropy is evolving. It has moved away from many of the stereotypes previously associated with large-scale giving. The survey highlights areas where the traditional stereotypes simply do not hold up to scrutiny.
Philanthropy is no longer about individual giving, it is part of a family process. Family members decide together which causes and organisations they wish to support and often choose these on the basis they reflect individual family values. Priority is given to involving the next generation and engaging in philanthropy that can actually make a difference that is measurable. Impact is hugely important to the philanthropists in the survey.
Motivations for giving have also moved away from the traditional stereotypes. Giving in order to receive tax breaks was only stated as a motivation by a tiny minority of our surveyed philanthropists. Creating a legacy was important to them, but a legacy within the family not a public legacy of the great community philanthropist.
That those in the ultra high net worth community see themselves as wealth custodians is apparent throughout this research. Many said they engage in philanthropy through a sense of social responsibility they have been aware of since a young age. There are two areas in which the survey has shown continuity with the stereotypes however; the priority given to local and children's issues. The research shows regardless of differences in age, gender and geographical region these two issues are paramount to philanthropists. Past these continuities, age has an impact on the causes philanthropists choose to support. Gender has less of an impact but the survey did highlight that women's issues are predominantly supported by women.
Philanthropy is more measured and even businesslike than previously assumed. Regular reporting, benchmarking systems and a consistent, planned strategy are all very important to today's philanthropists. Anecdotes are no longer accepted as a means of measuring the effectiveness of a donation, however measuring impact, although desirable, is still seen as the single biggest challenge faced by family philanthropists.
There has also been an increase in the number of philanthropists who collaborate with other families, trusts, foundations and even governments in an attempt to solve greater problems.
This willingness, even desire, to collaborate illustrates one of the fundamental reasons those surveyed participated in philanthropy; they want to make a difference, a noticeable, measurable, marked difference to the world we live in.
The other fundamental reason that shone through was even more basic than the desire to make a difference; it was the desire to unite the family across the generations through a common cause and an understanding of the intrinsic values a family holds most closely. Once we understand this we understand why family philanthropists show the level of commitment they do, because philanthropy is about more than charity, it is about social responsibility, impact and ultimately it is about family.