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Giving your best

29 September 2015

Leaving a legacy through philanthropy can achieve more with some careful planning.

The world is enjoying a great wave of philanthropy, led by Bill and Melinda Gates, Warren Buffett and, in the UK, Lord Sainsbury. It is even more generous than the last one, set off at the end of the nineteenth century by millionaires such as Andrew Carnegie, John D. Rockefeller and Joseph Rowntree. You don’t have to be a Gates or a Carnegie to become a philanthropist but, to be effective, you should do some careful planning.

The philanthropy of these super-rich donors has been on a magnificent scale. The Carnegie Corporation and Joseph Rowntree Foundation are still funding the same kind of projects more than a century after they were originally established. The sheer size of the Gates and Sainsbury legacies – $28 billion1 and over £1 billion2 respectively – suggests that they are also likely to endure. But others of (relatively speaking) more modest means also want to leave a lasting legacy through philanthropy, and they want to be sure that their donations are used to create maximum benefit.

The moderately wealthy are being increasingly generous, according to the Charities Aid Foundation (CAF), which says that, although general consumer giving fell globally during the economic crisis, giving by high net worth individuals has increased. “In the toughest times you see some of the brightest philanthropists step up and do some incredible things,” says Amy Clarke, head of private clients at CAF.

Recent research by the fiduciary management services company, SEI, found that the wealthy are intrinsically generous, driven mostly by the need to give purpose to their wealth. However, many of those surveyed would be willing to give even more – almost twice as much – if they were able to move beyond an impulsive approach to a well-considered giving strategy.

Disciplined donations

Benefactors who made their money by being professional and organised in their approach to business want to see the same discipline being exercised with their charitable donations. If they are giving away large amounts of money, they want to be sure that it is being used wisely. Alexandra Loydon, head of private client services at St. James’s Place, says many benefactors prefer to establish a trust or foundation, rather than make direct donations, as this enables them to retain better control over how the money is distributed and used.

“This approach has benefits for both philanthropists and charities,” Loydon says. “The benefactor can specify exactly how they want the money to be used, and how it should be invested so with potential growth will further funds for good causes. Money can also be given to smaller charities or programmes which might benefit more from small but regular donations, rather than a large one-off payment.”

CAF can help new philanthropists get a better understanding of what they want to achieve and how to maximise the value of what they do. It does not favour any particular charities but, once benefactors have identified the type of causes they want to support, it will draw up a short list of potential beneficiaries and carry out due diligence to make sure the organisations are delivering on their promises. It can also, if requested, advise benefactors on the level of impact charities are achieving with the money they raise.

Bearing gifts

While many of the biggest benefactors have trusts and foundations bearing their name, not everyone likes their donations to be quite so public. One of the key decisions will be whether to retain anonymity or whether to use your own generosity to encourage the same behaviour in others.

“We never discuss our private clients by name, and their trust or foundation can remain anonymous or have a name that would not identify them,” says Clarke. “But many people like to have their trust named after a specific person, or for their foundation to take the family name. If someone has a brand name, it can be used to galvanise support for the causes that they are helping.”

The advisory process also helps benefactors to work out what kind of involvement they would like. “This should help develop a strong emotional and intellectual connection, and can take anything from a couple of hours to months,” says Clarke. “We have one high net worth individual who, one year on, is still working on this. The value of the assets under management is very significant and he really wants to take care that he gets this right.”

1 www.forbes.com, November 2012

www.fundraising.co.uk, April 2009

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

Trusts are not regulated by the Financial Conduct Authority.

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