Why families are turning to experts in philanthropy

Lisa Springate
June 10, 2020

Philanthropy and impact investing have never been so much under the spotlight as in 2020. With the global coronavirus pandemic, opportunities to help fund good causes have fallen into the laps of the wealthy.

Philanthropy in private wealth is something Jersey Finance has invested significant time and research into, supporting private clients with philanthropic giving through our member firms for almost 60 years. This is because ultra-high-net-worth individuals (UHNWIs) are going through a major shift in who’s managing family wealth and, consequently, how it is being used and why.

The ‘Great Wealth Transfer’ from older UHNWIs to generation X and millennials over the next 25 years is set to be a defining trend in wealth management. Several estimates of the value of the transfer have been published, with Cerulli Associates expecting to see as much as USD68 trillion changing hands in the US alone.

A generational shift is causing friction in Asia

While the Great Wealth Transfer and its philanthropic implications are evident across the globe, the trend is particularly relevant in Asia, where the demographic and generational shift is causing friction in a culture steeped in tradition.

‘Historically, in Asia, philanthropic endeavours have been more around donation, rather than dedicated charitable foundations, which are more commonly set up in Europe and the US,’ says Dr Ruzhen Li, Head of Advisory at Enhance Group.

‘The framework of charitable efforts is less established in terms of structuring and professional management, and there are concerns around safety and reputation. Public profile is often, and inevitably, associated with charitable giving.

‘But now philanthropic endeavours are more professionally set up, managed and publicly promoted, quite often with a specific theme, such as education, healthcare, the environment or gender inequality.’

Women now hold 40 per cent of global wealth

Throughout the rest of the world, the same shift has been taking place, but with different challenges and opportunities attached.

John Harris, Chairman at Crestbridge, explains the global changes: ‘Greater private wealth accumulation globally, coupled with intergenerational sharing of this wealth through family succession structures and wider generational involvement in decision-making, will mean an inevitable democratisation of philanthropic practice.

‘This means decision-makers are more often female – a 2018 Credit Suisse report points out that women hold 40 per cent of global wealth. They are also younger and more geographically diverse. Inevitably, this will also mean more diversified beneficiary interests.’

Simon Howard, Principal at Howard Consulting, notes that while this shift is being seen on an individual and family basis, it is also beginning to edge its way into corporate territory, blurring the lines between philanthropy, business and impact investing.

Tech as a driver for change

A significant element of managing the preference for philanthropy and impact investment is the efficient use of technology, explains Richard Joynt, Executive Director, Private Client, at Ocorian: ‘Philanthropists now see that if they can embrace new ways of resolving issues for groups of disadvantaged people via technological solutions, the technology itself can become both a driver of change for good and something to invest in.’

Harris adds that the core challenges in harnessing technology are data availability and application, and beneficiary outreach: ‘Obtaining and using data can identify and size up a problem, drive its analysis and model its trends, leading to a demonstration as to how intervention will change its course and model an outcome.

‘At the demand end – i.e. the beneficiaries – distributed messaging via technology opens up a plethora of opportunity to raise awareness and seek engagement through inexpensive advertising, virtual reality storyboards, endorsement and advocacy.’

So how can one bridge this gap smoothly? ‘Awareness, education and involvement are critical,’ says Ryan Lambotte, Senior Relationship Director at HSBC Commercial Banking.

‘First, an awareness of the issue itself and a desire to spend the time to organise an appropriate transition of responsibility. Then the education and involvement of the next generation. One final question to consider is: what are the objectives? Throughout the approach, it will be important for there to be sufficient flexibility to allow each generation to pivot according to different values and the changing environment.’

How Jersey supports philanthropy

Jersey, as an international finance centre (IFC), has used the ‘flexible yet stable’ mantra as a guiding principle through the years. It has supported philanthropic giving through various structures and initiatives, one successful example being the Jersey Foundation. Since its introduction in 2009, the foundation has become increasingly popular, with over 390 registered by March 2020.

In addition, Howard explains that the island’s Charities (Jersey) Law 2014 demonstrates its support for the philanthropic movement: ‘Through the “restricted section” of the charities register maintained by the Jersey Charity Commissioner, this law provides a means for privately endowed non-profit entities to achieve endorsement and formal recognition of the charitable status of qualifying non-profit entities funded by these clients.

‘Entry on the restricted register allows these entities certain relaxations from the transparency requirements that apply to charities on the general part of the charities register, justified on the basis that these entities are privately endowed and are not seeking to raise monies from the public.’

COVID-19 is redrawing the philanthropic landscape

This year, philanthropic donors have truly had to step up to the plate. Unrestricted by the pressures placed on governmental and corporate entities, UHNWIs have provided some of the most direct solutions to many elements of the coronavirus pandemic.

‘It is my experience that US clients are still giving more than European clients,’ says Joynt. ‘There are, of course, exceptions to every rule, and the responsiveness from European clients to the COVID-19 call to action has been remarkable – perhaps we are witnessing a current shift in European mindsets as a result of this unprecedented crisis.’

Delving deeper into exactly how this is materialising, Harris explains: ‘The COVID-19 global emergency gives us an insight into how such an event may change the philanthropic landscape to a degree, as it suggests an increasing place for a targeted, rather than a strategic, philanthropic response.

‘The most obvious example is Formula One car manufacturing being shifted to making ventilators, but a more general trend may take greater hold in favour of one-off projects with highly visible and shorter-term outcomes, particularly in the medical field.’

Clearly, the focus has indeed shifted in the short term and it is empowering for UHNWIs and their advisors to play a part in funnelling wealth exactly where it is needed.

Understanding long-term philanthropic trends

Philanthropy and impact investing will always be difficult to measure due to the privacy and protection of wealthy donors, and of course the fact that many donors wish to remain anonymous in order not to deflect from the donation itself.

However, IFCs such as Jersey have a strong talent base of experts who understand these concerns, as well as how to address the wishes and ideals of wealthy individuals and families in a professional, discreet and forward-minded way.

There are long-term trends such as purpose-driven (infinite) investments, and then there are times at which plans must be altered for the greater, more immediate good. Plotting and understanding these trajectories is key, while also ensuring our experts are up to speed with the latest technology to ensure UHNW clients can manage their wealth effectively, quickly and safely, with a course set firmly on their values.

About the Author

Lisa Springate

Head of Legal and Technical at Jersey Finance

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