Philanthropic giving is at the core of Stanford Brown’s business. Jonathan Hoyle talks about what it means for a corporate organisation to be philanthropic.

There’s something a little bit different about Stanford Brown. It’s not so much its integrated private wealth division, or the numerous awards it has won, or even the fine views from its North Sydney location. Instead, it’s the firm’s strong focus on philanthropic giving that sets it apart from other similar sized businesses.

Ask Stanford Brown’s chief executive officer, Jonathan Hoyle, and he will tell you that its philanthropy service is a real point-of-difference for the business.

“Giving is something that runs deeply here at Stanford Brown,” says Jonathan. “Not only internally in the way we run the business, but also externally in the way we engage with our clients.”

‘Giving back’ is a core part of what the partners and staff at Stanford Brown believe. For them, it is the right thing to do and the right way to behave. It’s this conviction that underpins one of the firm’s eight beliefs that form part of its corporate identity, which is: As a business that enjoys the support of the community, we have an obligation to put resources and effort back into that community.

“Whether a client is involved in giving as part of a public charitable foundation or whether a planner is helping others through pro bono advice, giving makes you feel good. That’s why philanthropic giving is so important, yet so underrated,” Jonathan says.

Inspiration

Jonathan believes philanthropic giving is an ideal client engagement tool and an important service offering for any practice. But he concedes it’s a strategy that is probably most appealing to retiree clients.

“Our working clients tend to be time poor and more focused on raising a family, paying off their mortgage, building their careers and investing for their future. So, for the majority of these clients, the thought of building a philanthropic strategy just isn’t on the radar.”

Indeed, the typical client interested in philanthropic giving at Stanford Brown tends to be retired and have excess wealth above and beyond what it takes to have a comfortable retirement, so it’s not a strategy embraced by everyone.

“Once our clients come to the end of their full-time working lives and things become a little less hectic for them, we find that for many of them, they want to do something meaningful with their money and philanthropic giving is a wonderful way for them to build a legacy whilst they’re still living,” Jonathan says. “That’s when we really focus a lot of time with them on their giving strategy.”

And the reasons clients choose to engage in philanthropic giving, is as varied as the causes they support.

“It can range from the spiritual to the practical, such as: what do I believe in; what am I passionate about; what do I want to change; what skills do I have and can share with others; and how can I give back to the community,” Jonathan says. “But one thing is always consistent, giving is predicated on social conscience.”

He says a client’s decision to be involved in giving usually comes after they have helped their children financially, like getting into the property market, and after they have sorted out their own retirement needs.

For many people, retirement today means something completely different to what it did a generation ago. People still want to leave full-time work at roughly the same age but they are much healthier and living longer than previous generations. But increasingly, for today’s retirees who can afford it, they are wanting to leave a charitable legacy.

“Interestingly, what we are seeing with these retirees is they don’t want to die and leave all their money to the kids. Just like Warren Buffett and Bill Gates, they think that leaving all their wealth to their children may actually be damaging for them. The view that you can actually damage your children by leaving them too much, is a widely held one that is increasing amongst high-net-worth clients.”

So, the obvious alternative for these types of clients is to gift their wealth through charitable funds and foundations. With this in mind, Stanford Brown spends a good deal of time focusing on building intergenerational wealth transfer plans, with philanthropic giving being a huge part of that.

“We encourage our clients to consider a structured giving plan and the centrepiece of that is having your own charitable foundation,” Jonathan says.

Charitable Foundation

Surprisingly, Jonathan says setting up a charitable foundation is within the scope of most Australians, starting at just $50,000.

“At Stanford Brown, we have set up a Public Ancillary Fund – the Stanford Brown Charitable Foundation – from which our clients can set up their own sub funds. By doing so, they still get all the tax benefits of a charitable foundation, without any of the administrative hassle and at a significantly much lower cost. So, a client can set up a sub fund with a minimum of $50,000.”

The Charitable Foundation was set up in January 2017 and currently has just over $1 million in it. Currently, there are 10 clients involved in the Charitable Foundation and it is they who decide where the funds are distributed – not Stanford Brown. Recent fund recipients include the Sydney Dance Company and the Australian Chamber Orchestra.

Jonathan adds that the fund has a legal requirement to give away 4 per cent of the corpus each year, which means about $40,000 has to be donated to deductible gift recipients (DGRs).

“Our goal is to get our fund up to $2.5 million. That means we would have $100,000 to donate to various charities in perpetuity each year. And that’s a wonderful goal to have.”

In contrast, individuals also have the option of establishing their own Private Ancillary Fund, but that requires a minimum of $500,000, and the expenses of running such a fund are quite high.

Partnerships

According to Jonathan, clients at Stanford Brown have responded favourably to the Charitable Foundation, with the fund’s administration streamlined by partnering with Australian Philanthropic Services (APS) – one of the country’s largest administrators of Private and Public Ancillary Funds.

“APS checks to make sure the donations are eligible, it researches and reviews charities to match a client’s specific criteria, it checks that the charities are well run, and all the extra administration that is involved.

“APS also runs ‘giving strategy’ evenings. These seminars help people to find more structured and targeted strategies for their giving.”

And while APS does the legal work required for the Stanford Brown Charitable Foundation, for high-net-worth clients running their own Private Ancillary Funds, Stanford Brown uses separate law firms it has partnered with for this purpose.

Suitability

So, is putting together a philanthropic offering, like Stanford Brown’s Charitable Foundation, appropriate for all practices or is it something that’s more specialised? For Jonathan, it’s the latter.

“Putting together a Public Ancillary Fund is not straightforward. It took us 12 months to launch our Charitable Foundation and another 12 months to cross the $1 million mark. The whole implementation process took a great deal of work and explanation to clients, because this type of fund is a very poorly understood and known structure.

“So, I don’t think Public Ancillary Funds are for every practice,” Jonathan says. “I think for those firms with Gen X and Gen Y clients, this would be a peripheral offering. However, I do think it’s more suitable for practices with older high-net-worth clients, and very much for those firms dealing with the complexity of intergenerational wealth transfer.”

Philanthropy committee

As part of its giving ethos, Stanford Brown has set up a philanthropy committee – comprising of three staff members – to oversee the various charitable initiatives that the business and staff undertake internally.

“The philanthropic committee really runs Stanford Brown’s philanthropic program. Each year, a percentage of Stanford Brown’s profits are set aside for charitable giving. The three staff members on the committee decide which charities to support and how much is allocated, and what activities to run within the business. This is the centrepiece of our staff giving program,” Jonathan says.

Committee member and private wealth adviser, Cris Abellar says the committee meets once a quarter, where it reviews charitable initiatives the business has been involved with and discusses new charitable opportunities nominated by staff members.

“Stanford Brown takes philanthropy very seriously,” Cris says. “Each staff member is entitled to take one day off each year for philanthropic purposes.”

She says the business gives back to the community in many ways, including dollar matching the fundraising efforts of staff and clients.

In October 2017, the business raised $127,000 for the Children’s Medical Research Institute, and more recently, staff participated in a Red Cross blood donation drive, demonstrating that charitable participation doesn’t have to involve monetary donations.

Other philanthropic areas the business is involved with includes a pro bono advice program. As part of the program, which has been operating for five years, each client can nominate one friend or family member every two years for assistance. However, Jonathan concedes that the business has limited capacity for pro bono, so it needs to be selective in the cases it takes on.

In addition, Stanford Brown has also recently signed up to the Cancer Council’s Pro Bono Financial Planning Referral Service, which the FPA became involved with in June 2017.

“This program is completely voluntary for our planners, but a lot of our planners get a great deal of personal fulfilment being part of it,” Jonathan says. “It’s wonderful being able to use our knowledge and skill set to help people who are in desperate need of advice but who otherwise probably couldn’t afford it.”

Best kept secret

Some of the key learnings experienced by Stanford Brown in rolling out its Charitable Foundation include the lack of client awareness of ancillary funds and their structure.

“Ancillary funds are one of Australia’s best kept secrets but even so, we were surprised at just how poorly known and understood they were. And, of course, they are complicated. With the latest changes to superannuation, ancillary funds now have the unique status of being the only tax structure that is entirely tax-free.”

However, perhaps the biggest learning for Stanford Brown was around the permanency of giving.

“Because the money going into a Public Ancillary Fund is one way, it’s irreversible. So, once you put money into a Public Ancillary Fund, you can never get it back. It did take our clients a long time to get over that mental hurdle. Just like any charitable donations, it’s irreversible.

“A Public Ancillary Fund means you’re front-loading your charitable giving into one big hit. And people tend to do that when they have a big taxable gain to offset, because it’s fully tax deductible.”

Although philanthropic giving is perhaps more relevant to high-net-worth retirees, Jonathan is adamant that the concept of ‘giving’ should be part of every client’s spending plan, just as it should be part of any financial advice offering.

“I encourage every financial planning firm to look at ways of incorporating giving into their client and staff programs. By being involved in giving, you get as much benefit yourself, as does the recipient,” Jonathan says.

“Charitable giving, whether for staff or clients, is a wonderful thing to do and be part of, and it’s definitely uplifting for everybody involved.”

Practice: Stanford Brown

Established: October 1987

Licensee: The Lunar Group

Number of staff: 44

Number of practitioners: 14

Number of CFP^® practitioners: 3 (although CFP^® Certification is now a mandatory requirement for all planners)

What is an ancillary fund?

Ancillary funds are special funds that provide a link between people who want to give (donors) and organisations that can receive tax deductible donations as deductible gift recipients (DGRs). Ancillary funds are set up for the purpose of providing money, property or benefits to DGRs.

There are two types of ancillary funds that fall within a DGR category:

* private ancillary funds; and

* public ancillary funds.

A private ancillary fund is a type of charitable trust. It exists for the purpose of providing grants to eligible charities over time, and is an efficient and tax-effective way to put a structure around a client’s philanthropy or giving.

A public ancillary fund is a communal philanthropic structure established by a will or trust deed for the purpose of making distributions to DGRs that are not ancillary funds. A public ancillary fund is itself a DGR and is therefore eligible for income tax exemptions.