The term philanthropy is commonly defined as benevolent behaviour towards others in society, usually in the form of making charitable gifts. It is a term that has long existed but a topic that has, in recent years, appeared with increasing frequency during conversations with clients regarding their own personal wealth planning. Whereas, historically, topics such as protection and tax efficiency were key discussion points, we are now finding that the concept of philanthropy is also of growing importance to our clients.
Philanthropy is more than a word
Some of the world's wealthiest people, such as the
entrepreneurs Bill Gates, Mark Zuckerberg and Jeff Bezos, among
many others, have committed to donating a significant proportion of
their wealth to philanthropic endeavours. Closer to home, John
Caudwell, founder of phone retailer Phones 4u, has pledged to
donate at least 70% of his wealth to good causes during his
lifetime, while the Welsh actor Michael Sheen last year declared
himself to be a "not for profit" performer who will
donate his future earnings to worthy causes. These news stories
have certainly raised awareness of philanthropy, with a common
theme invoking the old adage that "you can't take it with
you", so why not give some or all of your accumulated wealth
away, have control of where it goes and see the positive results
with your own eyes?
There may be some who believe that those pursuing philanthropic
aims are doing so to salve their conscience regarding the size of
their estates, or are simply seeking publicity. Interestingly, some
of the most significant philanthropy that takes place is on a
strictly anonymous basis, and in many cases our role as advisors is
to help facilitate this. John Caudwell is often quoted as saying
that philanthropy gives him far more pleasure and satisfaction than
making money, and his aim now is to use the wealth he generates to
benefit others.
Is philanthropy only for society's wealthiest?
Witnessing celebrities commit vast sums of money to charitable
causes, in the hope of solving environmental, economic and social
issues, has led to more people embracing philanthropy, even if
their ambitions and commitments include significantly fewer zeros.
There is a growing sentiment that we can all contribute to good
causes. As wealth passes down through generations, those that hold
the family wealth are becoming increasingly interested in using it
for social change.
Having identified the importance of this to their clients, many
major banks now have dedicated teams to assist their high net worth
clients in pursuing their philanthropic ideals. Some also operate
anonymous and discrete philanthropy-focused round table events for
clients to share ideas and speak to like-minded people, and we
often collaborate with financial advisors in these
discussions
Do you need to be a billionaire or even a millionaire to be a
philanthropist? Absolutely not.
Although you have to be in the position to give wealth away, you
certainly do not need to hold a place on the rich list to make over
some of your wealth or set up a charity - during your lifetime or
through your will. More and more clients are choosing to do just
that, leaving clear instructions to those that they entrust to
follow their wishes after they are gone.
As trusted advisors to our clients, we have a unique insight into
the planning and thought behind these wishes, and it is clear there
is no exclusivity to philanthropy. In fact, there are many
philanthropists who simply either do not recognise that they are a
philanthropist, or would not willingly identify as one. The rise in
new wealth created by cryptocurrency trading has brought another
pool of philanthropists, many of whom embrace philanthropic ideals
from the outset. And although it remains a niche form of donating,
advocates for cryptocurrency philanthropy are anticipating a boom
in donors this year, with the founders of The Giving Block claiming the donation
platform is on track to process over $1 billion in crypto donations
over the next 12 months.
A different type of family planning
We are often involved in discussions where parents plan their
charitable commitments with their children or grandchildren,
educating the next generations in the processes of who, how and -
most importantly - why they are making charitable commitments. It
is certainly never too early to start creating a legacy that can
promote social responsibility. Raising a generation of people who
wish to drive positive change may go some way to avoiding future
social and economic problems. There are also additional estate
planning benefits such as the reduction of your estate for
inheritance tax purposes, especially if you planned to leave your
estate to beneficiaries who would then undertake philanthropic
activities of their own.
It could be argued that a more strategic purpose and process in
identifying how philanthropic endeavours will make a difference in
the longer term is what differentiates philanthropy from charity.
Yet the two sit side by side, playing a crucial role in fostering a
fairer and more sustainable society.
One of the greatest pleasures when working as a trusted advisor to
individuals and families is being a party to discussions of this
nature. The desire for philanthropic giving can build up over time
or simply come out of the blue following an impactful event in a
client's personal or professional life.
In some cases, clients and their families have a very clear idea
of how they wish to contribute and require some assistance merely
with the logistics, whereas others wish to undertake charitable
acts but are not quite clear how to go about making a change. We
welcome these opportunities to be a part of the philanthropic
journey with clients old and new.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
