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Executive Matters

The growing tide of hands-on philanthropy
Executive Matters

Executive MattersIssue 2 | December 2017

Date
13 December 2017

Katie Doyle Associate

Alexander Rhodes Managing Associate

The next generation of high net worth individuals is taking on a wider range of projects than their parents, and becoming actively involved far more quickly.


The growing tide of hands-on philanthropy

The next generation of high net worth individuals is taking on a wider range of projects than their parents, and becoming actively involved far more quickly. Their goal is to see for themselves the difference they can make, but they still need a structured approach to their work, and some sound advice

Philanthropy has long been an important part of high net worth individuals’ lives – and it is vital for the causes that are supported. The 2017 Sunday Times Giving List, which charts charitable donations, found that the UK’s wealthiest philanthropists had given a total of £2.3bn last year, a 20% increase on the previous 12 months.

In traditional philanthropy, favoured causes or organisations are at first given financial support, then, when business interests need less attention and allow it, time is given as well; individuals in later life move on to be trustees or board directors.

But this two-step approach increasingly does not appeal to the next generation. Advisors to the wealthy report that, in a complete break with their parents’ approach, the children want to be inside their chosen causes far earlier.

Recent research focused on American high net worth individuals also highlighted how the younger generations were giving to a wider range of causes – and being more focused on the impact of their donation – than their older counterparts. British advisors report a similar trend in the UK.

Why might this be? A report by think-tank Demos recently found that young people did not trust traditional political institutions and felt that the most common forms of political action – writing to an MP, or even voting – were ineffective. In other words, the next generation wants to be socially engaged but wants that involvement to lead to a tangible, visible, difference quickly.

Investing twenty years in a cause before seeing tangible results – as their parents might have been content to do – does not sit well with this mind-set. Making a change, the younger generation seems to be saying, involves rolling up one’s sleeves and getting on with it.

Look for example at Prince Harry and the Invictus Games for injured servicemen. The second son of the UK’s next monarch came up with the idea after watching the Warrior Games in the US in 2013. It is not unusual for the royal family to lend its time and names to a range of charities and projects; but here Prince Harry came up with the idea himself and then used his role in the military to bring the concept to fruition. The whole thing took just ten months. He then donated £1m of funding through The Royal Foundation, a charity founded by Prince Harry and the Duke and Duchess of Cambridge.

A strong philanthropic framework is still needed

For high net worth individuals considering this approach to philanthropy, however, good advice is essential and the considerations are very different to those of traditional philanthropy. There are a host of small organisations desperate for help, but choosing which ones to become involved with should be a measured process; due diligence is vital. Fresh judgments must be made about how much the high net worth individual can give, of both time and money, every time they move on to a new project.

Some advisors report that their clients want to avoid publicity, becoming involved for the sense of social engagement alone. Others are happy to use their own reputations to bolster the projects they are backing. Whatever approach is adopted, it needs to be carefully managed; the explosion in social media means little stays private for long and it is harder to maintain a controlled, uniform message about projects.

Younger clients still need their advisors to provide traditional services, such as due diligence and the drawing up of contracts, and they also need judgment and another pair of eyes. All parties need to work together to assess and decide which roles are best suited to the individual diving into a role at a charity: spearheading fundraising for a specific short term project, for instance, such as new facilities, or using the individual’s reputation to bolster the cause’s profile during lobbying.

Expectations of what is practically achievable – and feasible – need to be managed: how much time and money will the charity expect and is the individual prepared to give? Does the charity fully appreciate the philanthropist is looking to be involved temporarily rather than provide life-long patronage?

As younger family members look to take a more hands-on approach they are well advised to consider the impact of their involvement on their private lives and reputation. Framing their relationship with a cause or an organisation, whether as a volunteer, champion, trustee, patron or donor, is critical to get right at the outset. Donations and the amount given in particular can have a distorting effect on how individuals are perceived, both within the charity, the sector and more widely. Social media, similarly cuts across different parts of life, and how recipient organisations may use the client's information needs to be considered. Simple legal structuring, combined with a clear human approach can head many of these potential pitfalls off before they arise.

Over the next few years this new way of donating could make a significant impact as a wider range of projects and organisations benefit. But while the methods may be different, a strong framework and approach are arguably more important than ever as families – whatever the generation – need to ensure wealth and reputation are protected as well as their philanthropic objectives met.