By Sima Patel,Senior Private Client Manager,Charities Aid Foundation
It is common to think of wealth as the accumulation of money and assets. Fewer consider the wealth that can come from giving,which is equally if not more important. This wealth is typically less financial than it is social and emotional. It is all about the personal prosperity that comes from contributing to society and helping to better the lives of others.
Given the immense benefits to wellbeing that come from being charitable, it makes sense to argue that charity and philanthropy should occupy a pivotal place within wealth planning. As Winston Churchill once said, “we make a living by what we get, but we make a life by what we give.”
So how might philanthropy factor into wealth planning? What are some of the key conversations being had around philanthropy, and how can individuals make informed investments in charitable causes?
These questions underpin much of the work being done by the Charities Aid Foundation (CAF), a registered charity that aims to maximise the effectiveness of charitable giving and deliver large-scale grant-making programmes, in partnership with Government, businesses, and philanthropic donors.As members of CAF’s philanthropic services team, my colleagues and Iwork on these issues every day and are well-placed to share insight on the place of philanthropy in the context of wealth planning. Through CAF, we help clients support thousands of organisations and individuals across the UK and around the world every year.
Here are mytop tips to becoming an effective, change-making philanthropist:
Choose impactful, new approaches to investing
As a philanthropist, you don’t need to just simply deposit money and forget about it – rather, there are opportunities to get involved on a personal level that can lead to a more engaged and rewarding investment. At CAF, for example, we offer a range of support to assist our clients in their grant making plans, including advisory and charity verification support, enabling our clients to send grants worldwide without needing to navigate the significant legal, operational and regulatory issues. This can lead to philanthropists investing more intentionally and effectively.
Engaging with philanthropy personally can also be a way to find opportunities for effective investment that might otherwise go overlooked. At CAF, we work closely with our partners, including wealth advisers by introducing conversations that help them understand their clients on a much more individual level. Combining our expertise in philanthropy with wealth managementspecialistsis a way to unlock new collaborations and opportunities to make our Donor Advised Fund offerings the most effective for our clients.This can inspire donors to transform their giving.
Philanthropists can also explore unconventional but highly effective forms of giving, such as social investment. Social investment uses money to achieve a social as well as financial return. For instance, at CAF, we offer our philanthropic clients the opportunity to support high impact social enterprises and charities through our social investment fund, CAF Venturesome.Our philanthropic clients can choose to lend or grant money to CAF Venturesome from their charitable trust account and we use the loan capital in social investments, recycling the funds over and over again and thereby achieving an even greater social impact than making a one-off grant.Opportunities like these offer ways for philanthropists to support people and organisations over a long-term basis and are therefore well worth being aware of.
Choose a cause that matters but which is sometimes overlooked
Making investments in charitable causes involves researching where funding might make the greatest positive impact. Some causes consistently receive funding year after year: according to CAF’s UK Giving Report 2020, animal welfare, medical research, and children and young people have consistently been among top cause areas over the past five years. Of course, all of these cause areas are important. But there are also other areas where investment can go a long way – and perhaps even further if fewer people are investing in them. For example, investing in disadvantaged farming communities and sustainable farming or investing in good-quality water and sanitation. Look for areas where even a small investment might make a major difference.
Talk about succession planning and philanthropy with the next generation
Change is a constant for wealth managers – however,are the industry and the families involved in it ready for the upcoming millennial generation of investors? A major shift is on the way and the new generation of wealth holders come with a new investing outlook and priorities to consider. The next cohortof private investors are characteristically more risk averse, more socially conscious, have strong views on their goals, and areopen to a range of investment vehicles.
Therefore, being open about succession planning and educating those who are inheriting about the legacy you want to leave behind is critical to the ongoing success of philanthropic investments. Preparing for a smooth transfer of wealth and working with new investors canopen up a host of opportunities for growth, a new pool of clients, and also a more adventurous portfolio. So don’t just invest in a cause – make sure you also invest in the future of the philanthropic frameworks you create. A good gift can last for generations.