Wealthy fail to find good charity advice
By John Willman in London
Published: September 19 2007 03:00 at the Financial Times
Bankers and financial advisers to the rich and super-rich are failing to give them good advice on how to give their money away, interviews with some of Europe's wealthiest philanthropists have revealed.
Most of the wealthy individuals and families were highly focused on their philanthropy and wanted to contribute towards a particular area or cause of interest to them.
But they complained that it was hard to find qualified independent advisers to help them plan their giving programmes and to select suitable charitable projects.
"More people would get involved if they knew how to do it," said one interviewed in the study carried out by Scorpio Partnership, a wealth management consultancy, for three organisations that promote effective philanthropy: New Philanthropy Capital of the UK, Wise from Switzerland and Germany's Bertelsmann Foundation.
The interviews revealed that many potential philanthropists had a clear idea of what they wanted to achieve and were willing to pay for advice and support. Yet most found their wealth management advisers were not meeting their needs.
One common problem was advice on starting out with philanthropy, where donors wanted guidance on how to structure their giving. Although most wanted to be anonymous, they also wanted feedback to measure the success of their giving.
The majority regarded themselves as strategic philanthropists, looking for "tangible outcomes to their philanthropic endeavours" and "quantitative metrics as a measure for success". Yet they found it hard to find independent bespoke advice to help them form their strategies and evaluate the results.
"Because I have made money does not mean I am good at giving it away," said one. "It is a completely different skill."
The findings were based on 34 interviews conducted in the UK, Switzerland and Germany with ultra-high net worth individuals and family offices set up to manage the wealth of families in the UK, Switzerland and Germany. Their wealth ranged from $90m (€65m, £45m) to $2.5bn and they gave away on average 5 per cent of their net worth each year.
The interviewees came from countries including the US, Gulf states and Asia as well as Europe. Around half were new philanthropists, while the rest were from wealthy families with traditions of philanthropy.
The study concludes that advisers need to build their knowledge on philanthropy to provide a better service. It also urges charities to change their marketing to attract results-oriented donors
Apparently there is a trend moving towards a more acountable, transparent and, in some cases, profitable, style of philanthropy. The world wealthiest man, Bill Gates, has established a perfect example through his Bill and Miranda Gates Foundation. Passing a development proposal at the foundation can be as difficult as that of a business plan at Microsoft. The evolutionary movement, while seemingly very sensible and has its advantages, also carries a potential risk.
The world has been talking about the advantages of such a movement for a while. In the past, anybody donating money cannot expect too much, apart from occasional snacks or certificates as a return. Knowing how the money is spent and if it is well spent is almost an impossibility. Imagine if you are an investor and you cannot even ask how your money is spent, you gotta feel very angry. Nonetheless, it has been how the philanthropy world has been working in the past.
Now accountability and transparency have gained much more emphasis. Sometimes philanthrapists themselves are even included in the management of the money. Through this fresh way of investment-style philanthropy, the money hard-earned by the donaters will be spent more efficiently. It is especially important when the lack of donations for the vast number of poor people in the world is obvious.
However, investment requires returns. While a large part of the world remains poor because there is lack of capital or expertise or information and bringing in these things can help eliminate poverty rather effectively, there is also a large part of the world which is geographically disadvantageous, frequently hit by diseases and plagued with inefficient and corrupt governments. For the latter cases, help is, of course, needed, but the invesment-style philanthropists may overlook these places where help is, in fact, most needed.
The Grameen Bank has given us hope that the poor, with better supplies of capital, information and expertise, etc, can thrive themselves. Nonetheless, we'd better be realistic and accept the fact some poor people, afterall, may not be able to develop their own businesses and be self-sustainable. Then it is up to our moral judgement to decide if we should continue to put food on their tables.