Philanthropy and financial planning: How they work together

06 April 2018

Close up of woman's hands holding small cluster of flowers, symbolising Philanthropy Australia

Sarah Davies

Sarah Davies is CEO of Philanthropy Australia, the peak body for giving in Australia.

No longer the exclusive domain of the wealthy, the rise of technology has democratised philanthropy like never before, making it attractive to mainstream Australia. And financial planners have a key contributing role to play in this rapidly evolving sector.

What’s the first thing that comes to mind when you hear the word ‘philanthropy’?

Is it a big name like Bill Gates or Warren Buffett? A loosely defined practice of charitable giving? Or perhaps you get the sense that philanthropy is something that happens in the U.S. but not so much here?

Put simply, philanthropy is the use of private wealth for public good.

In Australia, philanthropy has come of age. It is growing, both in terms of the amount given and the number of givers entering the arena.

Whereas philanthropy was once considered the exclusive domain of retired industry titans and billionaires, the rise of technology that connects people to causes and a growing desire to support positive social change, particularly among younger generations, has democratised philanthropy like never before.

Australians of all ages and professional backgrounds are moving beyond the occasional charitable donation towards more strategic and structured giving.

Research from Giving Australia 2016 tells us that 35.3 per cent of philanthropists are aged 60 or over, 46.6 per cent are aged 40-59 and 18.1 per cent are under 40. Younger philanthropists are impatient to start giving – they of all groups, express a strong desire to give while building their personal wealth.

This will likely come as no surprise to this readership, which is more aware than most, of the fact that we are on the cusp of the greatest intergenerational wealth transfer in history. In Australia and New Zealand that wealth transfer will exceed $600 billion over the next 20 years.

The motivation for giving by Australians spans a few key themes:

  • Making a difference by giving back to the community;
  • For the personal joy and satisfaction that comes from giving;
  • Intergenerational wealth concerns;
  • Sense of religious or moral duty; and
  • Tax minimisation or a change in personal circumstances.

The high-net-worth (HNW) market in Australia, which constitutes more than 200,000 people, is valued at more than $674 billion. Roughly 6 in 10 of the wealthiest Australians claim deductions for their charitable giving and combined donations into Public Ancillary Funds (PuAFs) and Private Ancillary Funds (PAFs) now represent 36.4 per cent of tax-deductible giving.

While contemporary philanthropic practice still includes grant making as a key tool, philanthropists are increasingly looking to deepen their ability to achieve impact and deepen their support of the causes most dear to them with new vehicles such as impact investments. In fact, 52 per cent of global philanthropists nominated impact investing as the top way to contribute to society in the future.

In my role at Philanthropy Australia, I speak with philanthropists, wealth managers and professional advisers every day. Thankfully, we all tend to share the conviction that philanthropy has the capacity to help make our communities, our country and our world a better place – now and for generations to come.

As the peak body for giving, Philanthropy Australia’s mission is not just to support philanthropy in this country, but to achieve more and better philanthropy. We provide a collective voice to the hundreds of funders, social investors, for-purpose organisations and change agents who are part of our membership community.

We use that voice to advocate for policy and regulatory environments that enable more philanthropy with impact in Australia. It’s a responsibility that we take seriously and our achievements in building understanding of philanthropy and influencing key policy positions that support positive outcomes for giving, are things that we’re very proud of.

Achieving more and better philanthropy is not something that we can do alone. Financial advisers, such as yourself, play a critical role as a conduit for clients of all wealth profiles to consider and realise their philanthropic ambitions. And increasingly, those ambitions amount to more than the most commonly reported philanthropic mechanisms advisers fall back upon: bequests or trusts.

While we’re seeing growing interest in the creation of PAFs and donor advised sub-funds as tax-effective structures for giving, the number one barrier to establishing a new fund is a perceived need for high levels of knowledge or advice. Philanthropists who participated in the Giving Australia 2016 research spoke directly of the need for more skilled advisers.

The challenge for advisers, of course, is knowing how and when to raise the topic of philanthropy with your clients. If it’s a subject that you haven’t felt confident about broaching, you’re not alone.

We know that, despite more than 70 per cent of advisers believing that being philanthropic adds to quality of life, 1-in-3 advisers don’t expect the topic of philanthropy to come up in the course of conversation with clients, and fewer than 5 per cent of advisers feel well-informed about providing philanthropic advice. More than a quarter of advisers admit to not discussing philanthropy with any of their high-net-worth clients.

The flip side is that the most recent research suggests that 9 out of 10 advisers are interested in being able to provide philanthropic advice to their clients. And that’s where Philanthropy Australia can help.

Our professional learning and development workshops include an affordable half day course for professional advisers (3 hours CPD – FPA) on How to Talk with Clients about Philanthropy and Impact Investing. Running across the country throughout the year, the workshops use practical examples and real-life case studies to step advisers through the basics of philanthropy, impact investing and structured giving options.

Rather than trying to come up with an answer on the spot the next time a client asks, ‘Which charity should I give to?’, advisers who’ve taken part in our workshops learn not only how to start a conversation about giving, but how to reframe it in a way that deepens the client relationship and adds value to their professional skill set.

The future of philanthropy in Australia has been popularly envisioned as a landscape characterised by collaboration, increased capacity and impact.

Financial advisers have a key contributing role to play in all three of those areas, so if you’ve been unsure about how best to advise your clients about philanthropy, the resources and expertise are here, and the time to get started is now.

 

 

Sources:

* Giving Australia 2016: Philanthropy and philanthropists: The Australian Centre for Philanthropy and Nonprofit Studies, Centre for Social Impact Swinburne and The Centre for Corporate Public Affairs, April 2017.

* A study of professional advisers in Australia: The Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology, February 2016.

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