Philanthropology

Kindly sponsored by

Introduction At a special panel event hosted by David Bell of the Private Client Dining Club and sponsored by Hawksford, Sianne Haldane, Head of Planned Giving Philanthropy at Cancer Research UK, chaired a panel with advisers from Farrer & Co., Hawksford, UBS and Prism the Gift Fund, and scientists from Cancer Research UK to discuss the important and evolving role of the adviser and the increasing focus on philanthropy in financial planning for HNWIs.

David Bell, Private Client Dining Club

3

Why is philanthropy becoming such big business for advisers?

Sianne Haldane, Head

of the adviser is, noting that “those who do

of Planned Giving

give and take professional advice to do so, give

Philanthropy at Cancer

more strategically have a greater experience

Research UK, began

and give 58% more than their peers.”

with the observation that, with a few

Sianne began by asking the panel, why is

notable exceptions like Further Education,

philanthropy becoming such an important

most charities in the UK, including

area for advisers?

Cancer Research UK, rely on relatively small donations. But the potential in the

James Maloney, Partner

philanthropy space is huge. Cancer Research

at law firm Farrer & Co.,

UK, for example, raised over £100 million

noted that the simple

through philanthropic gifts to help build

answer is that philanthropy

the groundbreaking Francis Crick Institute

is often the single most important thing for

where more than 1,500 scientists and

many HNW donors. As he explained, “when

staff work together collaboratively across

it comes to HNWIs, they may have been very

disciplines and disease types to understand the fundamental biology underlying human health and disease.

But there’s a long way to go. Sianne mentioned a

“I want you to work with me, this is the single most important thing that I’m going to do in my life.”

successful in other fields, but philanthropy can give them something new, a real sense of purpose.” As a result, donors are highly reluctant to outsource decisions here to professional advisers. As he reflected,

recent article where the

“I asked a HNW client recently - which of

Beacon Collaborative shared that just 10%

your team would you like me to work on this

of the UK’s wealthiest 18,000 people donate

philanthropic project with?” He looked me

anything at all. This is despite the fact that,

straight in the eye and said, “I don’t want you

according to the Wealth-X Billionaire report,

to work with anyone else, I want you to work

philanthropy is the leading passion amongst

with me, this is the single most important

UHNWIs. Sianne noted how pivotal the role

5

Anna Josse, CEO at Prism

thing that I’m going to do in my life.”

the Gift Fund, agreed

“When it comes to HNWIs, they may have

with Anthony, noting that

been very successful in other fields, but

in many cases, when a

philanthropy can give them something new, a

client opens a new philanthropic fund, “they

real sense of purpose.”

haven’t even taken away from their personal

Anthony Donatelli,

wealth, they’ve added more money. So not

Director of Philanthropy

only is the personal wealth looked after by that

Services UK from UBS

asset manager but their new charitable pot is

agreed and noted that

also looked after by their asset manager, so it’s

“beneficial owners of wealth don’t outsource

a route to more and new kinds of business for

philanthropy. It’s the topic where you’ll always

the adviser.”

get the meeting with the client in person.

Darren Kelland, Global

Someone like Bill Gates is not staying up

Head of Private Client

at night worrying about his 10% return,

Services from Hawksford

what really brings someone like that in for a

echoed the panel’s

meeting, is for them to understand - how can

views, adding that “the mere mention of

I part with this capital for the highest social

philanthropy gets clients’ attention … this has

return?”

become such a socially important issue that

Anthony acknowledged that there might be

clients are reaching out saying we want to do

an initial reluctance by advisers to engage

something or to give something back, even if

with philanthropic projects because of

they don’t yet know what that is.”

concerns that if clients give their money

Darren noted that there may well be a

away, it will negatively impact on their

mixture of motivations behind this kind

firm’s inflow of assets. But as he noted, “the

of giving: “Philanthropy is certainly quite

important point is what is best for the client, if

trendy at the moment. It used to be - I’ll buy

you are serving that client well, that will lead

a football team or I’ll buy a yacht, but now

to more business as long as you take a long

having a philanthropic foundation is a signal

term relationship view.”

6

of how wealthy clients are.”

observing, “we see philanthropists who say

But whether clients are giving for status or for more meaningful reasons, Darren noted that donors want more control and to see more direct impact from their giving,

- this is the most important thing in my life

“...this has become such a socially important issue that clients are reaching out saying we want to do something or to give something back, even if they don’t yet know what that is.”

so I want something that I can control and I want to see the real impact of the donations in the areas that are important to me.”

Taking back control Anthony expanded on

first place...most donors don’t want to fund

the importance of control

something forever, they want to solve one

and seeing social return

problem and exit their philanthropy, like they

for donors. As one of 50

exited their business and go on to the next problem”.

advisers at UBS in philanthropy services, his aim is to help individuals maximise impact

For Anthony, questions around how much

with their giving. Anthony noted how the

donors want to give, legal vehicles, taxation

global value of billionaires has risen to

etc. are the more straightforward aspects of

$8 trillion today, from $1 trillion in 2000.

the conversation. The hard graft starts with

Crucially, 70% of this wealth is self-made and many individuals, think Bill Gates or Warren Buffet, as well as those who have signed up to the Giving Pledge, have opted not to leave their money to their families but to give it away.

demonstrating real social

“You need both investment and philanthropy in order to solve the sustainable development goals.”

As Anthony observed,

return on investment, what UBS defines as “driving measurable impact over time”. That may often involve advisers gathering and sharing independent evidence from credible sources on, for example, how literacy rates have

given so much of this wealth has been

risen within a specific group or how

generated through entrepreneurial activities,

mortality rates have fallen in a particular

it’s not surprising that “donors come to

area over a specific time period as a result of

philanthropy with the same business-like

the donor’s intervention.

mindset that got them their wealth in the

Anthony noted that showing this kind

8

of granular impact is much harder to do

both types of investment as well as various

via what’s known as impact investing or

types of blended social finance mechanisms

sustainable investing, where investors are

all have their place: “You need both

looking for a risk adjusted financial return

investment and philanthropy in order to solve

whilst also doing some good. As he observed, the sustainable development goals”. “the philanthropic pot of capital is obviously smaller than the investment pot of capital, but the investment pot is not going to be able to have the same level of causal impact that the philanthropic pot can have”.

He referenced the example of an oncology fund set up by UBS. It was a private equity investment in companies that were trying to find the next drugs to cure different types of cancer, which raised $500M from

On this point, he noted that the ability

donors around the world. He explained

of impact investment funds to accurately

that while it will undoubtedly have a hugely

monitor impact may improve over time

positive impact, it’s harder to demonstrate

but for now, while positive impacts can be

measurable causal impact to donors in the

correlated, they can’t really be described as

short term.

being causally linked to investments. But,

Investment-Return Continuum

FOCUS

Societal Impact Mission Related Investment Continuum Achieving impact primarily through grant (some loan) funding

Seeking positive outcomes

Philanthropy Societal returns/ impact

FOCUS

Measurable high impact solutions to societal problems

Generally no financial returns to the social investor/ philanthropist

Venture Philanthropy

Social Investment

Matching the soul of philanthropy with the spirit of investment, resulting in high engagement and a long term approach to creating social impact

Societal return

Generally no financial returns to the social investor/ philanthropist

Secondary Focus: Below market financial return to the social investor or return not proven.

Sustainable investment, pursuing ESG practices/ positive outcome

Responsible investment, avoid harm/ negative outcomes

Impact *

SRI - ESG Investment

Relatively even balance on achieving a societal return as well as a competitive financial return

Maximising financial returns to investor Delivering competitive financial returns

Traditional Conventional Investment Maximising Financial Returns to investor, no regard for ESG

Secondary Focus: Creating societal returns

Delivering: Competitive financial returns

*Impact investment rests between social investment in social enterprises (whose primary purpose is a societal return of some type; and only secondary with some modified form financial return) and SRI/ESG investing (whose primary purpose is to maximise financial returns to investors whilst achieving some good which is secondary). Impact Investment is where there is an equal emphasis and balance between societal and financial returns on investment.

NOTE: the term Impact Investment is also applied to the full societal impact continuum The chart above reflects returns from the perspective of the investee and their impact - societal and/or financial. Investors including intermediaries would decide on the appropriate investment mix depending on their objectives for capital and their values. Ref: Aperio and Bridges

www.philanthropy-impact.org | Tel: +44 (0)20 7407 7879 | Email: info@philanthropy-impact.org Philanthropy Impact, 7 - 14 Great Dover Street, London SE1 4YR

Venture philanthropy Dr Stephen Shaw,

the space of two years and leveraged over

Associate Director -

$100M of funding. That’s a company that’s

Commercial Partnerships

really going on to great things thanks to the

at Cancer Research UK

backing of early venture philanthropists”.

outlined the remit of the Commercial

Expanding on new types of philanthropic

Partnerships team which aims to translate

investment mentioned by Anthony,

early research into products (therapeutics

Stephen referenced the Investment

and diagnostics) that benefit patients. He

Return Continuum diagram (produced by

explained that CRUK has different commercialisation approaches: partner alliances, licences, collaborations and spin outs.

He expanded, “Cancer Research UK has been involved in the formation

Cancer Research UK welcomes entrepreneurs and investors with a successful track record in biotech to come onto advisory boards

and development of more

Philanthropy Impact). He explained how CRUK’s work spans the continuum with basic research being funded by Philanthropy and with alliances, start ups and new ventures funded through Impact Investing. He observed that the opportunity to change

than 30 spin out companies, one example is a

the way that research is funded and to speed

drug called Artios. It was spun out of Cancer

up its translation sits in the middle of the

Research UK funded research in May 2016

continuum - with Venture Philanthropy and

with a small amount of seed funding from

Social Investing.

Cancer Research UK and SB Health Investors,

He explained how Cancer Research UK

it went through a Series A and a Series B in

welcomes entrepreneurs and investors with

12

a successful track record in biotech to come

Anthony picked up on

onto advisory boards, become investor

this: “If your objective is a

angels and to discuss the science, see where

risk adjusted return, also

their donations are going and have a direct

doing some good and the

impact on decisions, rather than just asking

level to which you can measure that good

them to “give and forget”.

might vary, then you want an impact or

Sianne pointed out that Cancer Research UK is ideally placed to offer a range of bespoke and tailored opportunities right across the continuum from 'pure' philanthropy to impact investing.

sustainable investment. If your goal, which many philanthropists goal would be, is I want to solve this problem even if it means having a 100% capital loss, then you are looking more at the philanthropic end of the spectrum.”

Talkin’ bout my generation Sianne asked the panel

that Hawksford were noticing a general

how they were seeing

trend amongst many investors, especially

attitudes towards

younger ones who tend to be more socially

philanthropy playing out at

aware, to want to know more about the

a generational level.

institutions that their capital is invested in, so that they can judge whether those types of

Darren agreed with

business align with their personal and social

Anthony’s point that it is

values. He concluded that as the wealth

likely that, as the industry

management industry matures, proving

matures, the need to be able

causal impact of investments will become

to demonstrate causal impact from social

increasingly important.

investments will grow. Darren also observed

14

As he said, “clients are now asking the

both to make money and to do some good at

institution - what’s your corporate social

the same time.”

responsibility policy, what’s your attitude towards global warming, what are you doing about these things? It will no longer be enough to just say that we’re generating a return on capital return, clients want much more information about how the institution is

“Among younger philanthropists there is a different mindset. There is a sense of wanting both to make money and to do some good at the same time.”

giving back.”

Darren observed how younger clients “are much more alive to social issues [than older generations] and have a real hunger to make a difference. They’re also far more brazen about making their voice heard than the

“Among younger philanthropists there is a

older generation might have been.” He noted

different mindset. There is a sense of wanting

how this is having a knock on effect even for

both to make money and to do some good at

more traditional investors who are receiving

the same time”.

pressure from the younger members of their families.

James expanded on the generational mindset

Often their child has left university with

shift. Older generations,

no interest in a traditional career in law

he explained, had a more

or financial services. They are keen to do

traditional approach to philanthropy. The

something more meaningful. As a result,

standard road was to spend most of your life

Hawksford have noticed that often, “the

making your fortune and while away your

matriarch or patriarch in the family has said

twilight years giving it away. But as James

to them - why don’t you run the philanthropic

noted, while “that’s still the case for many

arm of the business, and increasingly this is

clients, among younger philanthropists there is

what we have been seeing.”

a different mindset. There is a sense of wanting

15

Stop, collaborate and listen Sianne and Dr

collaboration between advisers happens in

David Crosby,

the world of philanthropy.

Head of Early

James noted that there is

Detection

still much work to do here

Research at Cancer Research UK both

and referenced some recent

observed how historically, scientific research

research from Scorpio that

has been quite siloed. But inside the Crick Institute, a very different philosophy is at work. More than 1,500 scientists and staff work collaboratively across disciplines and disease types to understand the fundamental biology underlying human health and disease. That includes cancer, but also cardiovascular conditions, neurodegenerative illnesses and infectious diseases. The point being that insights into one disease will often reveal a lot about others.

Sianne asked the panel whether the same spirit of

revealed that, while the

“they are looking at their advisers [philanthropy consultants, wealth planners, legal or tax advisers etc.] and expecting them to work holistically, as part of a team who help to deliver across all the phases of work, from strategic planning, to implementation to the monitoring and evaluation phase.”

16

12% of HNWIs who take advice on their giving tend to give more than those who don’t, they are also often disappointed with the level of advice that they receive. He reflected that this is often because their network of advisers is not collaborating effectively with each other. As James noted, it isn’t enough for the lawyer or the tax planner or the wealth adviser to just cherish their own, separate piece of the jigsaw.

James was optimistic

however and observed that “increasingly I

James agreed and explained

am seeing advisers working together and not

that the need to collaborate

acting in silos”. And that’s being driven by

in deeper ways is the reason

the clients directly, as he elaborated, “what

why organisations like

I see increasingly with clients is that they

the Private Client Dining Club and STEP’s

are looking at their advisers [philanthropy

Special Interest Group are so important. The

consultants, wealth planners, legal or tax

STEP Special Interest Group, he explained,

advisers etc.] and expecting them to work

comprises 1600 advisers from 60 different

holistically, as part of a team who help to

countries, who pool and share knowledge

deliver across all the phases of work, from strategic planning, to implementation to the monitoring and evaluation phase”.

Sianne observed how she had seen how effective this type of collaboration could be with the example of

James agreed and explained that the need to collaborate in deeper ways is the reason why organisations like the Private Client Dining Club and STEP’s Special Interest Group are so important.

a recent Cancer Research UK donor who had pledged many millions following a holistic and joined up series of conversations involving her, the charity and her team of advisers, an experience she had found not only enlightening and empowering but also unexpectedly enjoyable.

17

for the benefit of their members, clients and external organisations such as Philanthropy Impact to provide events in which advisers can meet, share best practice and find new ways to collaborate.

Get in the right vehicle While collaboration

As James noted, “what is expected of charity

between advisers is

trustees has increased exponentially over

beginning to pick up the

the last few years, demands have become

pace, Sianne asked the

greater. The public view and the media

panel for their thoughts on some potentially

scrutiny of charities has changed as well.” In

slower moving areas, specifically over how

James’s view, this may well be driving some

donors might opt to structure their giving.

philanthropists to look to other jurisdictions in which to set up their philanthropic entity.

James noted that when it

comes to donors who “want James reflected that from a tax relief, to give in a strategic way,

legal and cultural perspective, “the US is

who are thinking about

obviously very far ahead.” When it comes to

involving the next generation in their family,

Europe though, “Switzerland is one of the

or who want more control over projects”, it’s

more advanced jurisdictions. It’s a popular

still likely that they will want to set up their

destination for internationally mobile

own charitable vehicle. He observed that a

philanthropists looking to set up a charity.”

central question for many clients is around

He noted the example of a recent client who

which jurisdiction they wanted to establish

had “found the regulatory scrutiny in the UK

their charity in. The UK for example, is the

intrusive and wanted to move to Switzerland”

gold standard when it comes to regulation

where the regulations are not so oppressive.

and transparency. That can be wonderful,

While some philanthropists

especially for donors wanting to set up

might want to set up their

vehicles to continue beyond their lifetime.

own charitable vehicles,

But for others, the high level of scrutiny

Anna observed how Donor

and transparency can become overbearing.

Advised Funds (DAFs) are an increasingly

18

attractive option. Anna explained how she

environment, why would you create your

founded Prism, a DAF to administer the

own charitable entity, whether that’s a grant

giving of individuals, groups and foundations making foundation or an operational charity?” making significant gifts to charities all over

Anna noted how a number of high profile

the world, especially those in the mid-upper

recent breaches of trust had only made the

end of the market. Anna agreed with James that the regulatory environment in the UK is increasingly fierce and this is partly

Donors can gift cash, shares, property, even works of art

regulatory environment more implacable, “the reality is that when [scandals] happen…think Kids Company, Presidents Club, Save the Children,

driving the growth of the DAF market. As she explained, “unless

Oxfam etc...the Charity Commission and

you have highly knowledgeable trustees who

HMRC jump straight in and create more

regularly keep abreast of the tight regulatory

rules.”

But as Anna explained, a DAF is a simple

But in reality, very few people, including the

way of avoiding all of this regulatory burden

adviser, know what options are available.

for donors: “The beauty of a DAF is that you

And when advisers work in silos, the

can simply open an account and label it an

situation can only get worse.

Own Name Foundation. So you can call it the

As she explains, “there is no reason why, if

Joe Bloggs Foundation. To the end charity, to

you’re a corporate lawyer you should know

Cancer Research UK for example, it appears

about certain charitable reliefs. But they exist

they know exactly who it’s coming from.

Conversely as the donor, you may be very happy for Cancer Research UK to know about my £5 million gift, but actually regarding this other charity, I want to remain anonymous. So it gives enormous flexibility.

It also deals with the issue of jurisdiction”, as she explains, “you could be a resident non-dom, Prism

and when a donor becomes

“There is about £750 million unclaimed every year just in Gift Aid. When I talk to those donors they are horrified.

They say - but why didn’t my accountant tell me?”

has an off-shore bank

aware of it, it’s a revelation.

I’ve met people who are incredibly sophisticated and are amazingly philanthropic and I’ve simply mentioned Gift Aid and giving cash, and they have not been aware that they could claim a further 25% on their gross donation. They simply didn’t know. There is about £750 million I believe unclaimed every year just in Gift Aid.

account so you can make a gift as a non-

When I talk to those donors they are horrified.

taxable remittance, but still benefit from Gift

They say - but why didn’t my accountant tell

Aid.”

me?”

Anna explained that Prism also works

Anna observed that often when she does

with advisers to educate them so that they

speak to the accountant, because they

can let the donor know about the most tax

aren’t looped into conversations with other

effective methods of giving. Donors can gift

advisers, they simply haven’t thought to

cash, shares, property, even works of art.

20

ask (or have been too embarrassed to ask)

regulations to work more as it does in the US

questions about charitable giving. One

where you can deduct tax at source rather

solution of course, as had been mentioned,

than having to claim it back from HMRC.

is for the advisory world to “learn to

But as Anna wryly mused, this is unlikely

collaborate” in James’s phrase.

to change any time soon, as the perception from government is that Gift Aid is working

“There is about £750 million unclaimed every

like a well oiled machine and despite the

year just in Gift Aid. When I talk to those

best efforts of a number of stakeholders to

donors they are horrified. They say - but why

improve the situation, “thirty years on, we

didn’t my accountant tell me?”

are having the same conversation, just with different governments”.

Another solution, in the case of Gift Aid at least, is for the UK government to change the

21

A global perspective Dr David

International Research Partnership and

Crosby and

convened the International Early Detection

Dr Stephen

Alliance which marries the best minds

Shaw observed

around the world with the most advanced

that Cancer Research UK is increasingly

technologies so that cancers can be detected

working in more global ways, funding

at the earliest stage when they are easier to

research in 36 countries and conducting 25%

treat.

of their trials with collaborators overseas.

Sianne Haldane asked the

Not only that, but half of the PHD students

panel how philanthropy is

that are funded by Cancer Research UK are

working at an international

from outside the UK. David cited CRUK’s

level.

Grand Challenge competition as an example of this global multi-disciplinary approach.

Darren noted that while

Through awards of £20 million, this

Hawksford have 50% of

programme aims to stimulate new behaviour

their staff in Asia they have

in science and to bring together large-scale

yet to see a wholesale desire

teams of the best people globally to confront

to set up philanthropic structures from

the really big challenges in cancer research.

that part of the world, potentially because

Another example is a collaboration with

a lot of wealth there has only been recently

the Indian Government bringing the best minds together to explore how to deliver innovation in cancer treatment in a low cost setting. CRUK is also at the heart of the

“So the UK takes a very impact led sort of focus and other parts of the world are starting to pay attention.”

22

generated. That in itself provides an opportunity.

As he noted, “if you get it right at the start in terms of properly setting up philanthropic structures and encouraging clients to think

about their charitable giving, it can have much

Anthony gamely flew the

more impact over the long term.”

flag for the UK, noting that

Darren also observed how in the Middle East, particularly under Sharia Law “there are principles that encourage everybody to donate a proportion of their lifetime wealth to charity.

Hawksford are having conversations with a number of Middle Eastern clients to encourage them to set up structures in Jersey to facilitate that element of Sharia Law that necessitates charitable giving.”

philanthropy is one area where certain aspects of the UK model are actually being exported to the rest of the world, including Switzerland, US and Asia. As he explained, this is often around “the way the UK banks tend to be more proactive about offering advice if a client is doing something which is harmful or could be more impactful. In the UK, UBS aims to let them know that what they are doing is

“If you get it right at the start in terms of

actually causing harm or they could think

properly setting up philanthropic structures

about it a bit differently and potentially have

and encouraging clients to think about their

more impact. So the UK takes a very impact

charitable giving, it can have much more

led sort of focus and other parts of the world

impact over the long term.”

are starting to pay attention.”

Looking to the future The excellent contributions from the speakers, panellists and audience highlighted the way that philanthropy is becoming more sophisticated, linking charitable giving with investment to meet the needs of the new generation of entrepreneurial philanthropists. Clients will increasingly seek advice on philanthropy and this is an opportunity for the adviser community. Advisers have a key role to play in being proactive and ensuring that their clients are well informed on the options for philanthropic structures, charitable tax relief and clients will increasingly expect their different advisers (wealth, legal, tax) to work collaboratively to meet their objectives. Philanthropic advice is becoming the most important advice that one will be giving their clients.

Authors Sianne Haldane

Darren Kelland

Head of Planned Giving

Global Head of Private

Philanthropy at Cancer

Client Services at

Research UK

Hawksford

James Maloney

Anthony Donatelli

Charities and Philanthropy

Head of Phillanthropy

Partner at Farrer & Co.,

Services UK at UBS

Deputy Chair of STEP Philanthropy Special Interest Group

Anna Josse

Report written by Ewen

CEO of Prism the Gift

Haldane of Studio Loki

Fund

on behalf of Private Client Dining Club and Cancer Research UK

25

Private Client Dining Club is the premier

We are the largest independent funder of

business networking club for international

cancer research, supporting pioneering

private client professionals.

science to bring forward the day when all cancers are cured.

Contact: www.pcd.club

Contact: www.cancerresearchuk.org