Throughout my professional career, I’ve seen examples of incredible philanthropy around the world.
The reality is, the global need has grown – but the good news is that the wealth has also grown, particularly amongst ultra-high net worth and high net worth individuals.
What we are now seeing, particularly in the UK and with the emergence of family offices, is what I regard as the professionalization of giving: smart philanthropists are increasingly seeing philanthropic advisors in the same way as other strategic consultants. They are looking at how they can maximise their emotional returns from giving their money away – but also at how impactful their giving is and what change it is making in the long term.
For fundraisers, this means that organisations should be a lot more aware of demonstrating the impact of gifts and how they will leverage new money to bring about change.
For philanthropists, this means they need to take their giving as seriously as their investments.
Often, philanthropists have made their money through a major, strategic process such as building and selling a business – and throughout that journey they have traditionally used the best corporate finance advisors, investment management house, law firm etc. They have not only gained expertise in their specialism, whatever that may be, but have also learnt the value of seeking out advice.
However, traditionally, they haven’t thought about using philanthropic advisors in the same way. But this is a contradiction in terms: the idea that philanthropy, simply because it is giving, does not merit spending anything on advice to make sure that the giving is effective, goes against how their money was made in the first place.
Large-scale financial investment relies on high-level consultants to identify the risks, analyse the climate, and draw up a strategy to maximise ROI at the lowest cost. The smart philanthropist now appreciates that major gift-giving requires similar stewardship; evaluating their projects, determining their motivations, prioritising quality, benchmarking and criteria, and devising a long-term strategy for their giving are all now seen as simply good governance.
For example, an individual that may be worth £30m and wishes to give away 10% of his or her wealth – £3m worth of giving – might choose to spend 3-5% of that on the administration of his or her giving, including philanthropic advice. If he or she didn’t invest a percentage on that advice, the money given away may end up making far less impact than it had the potential to – or even be used in a way contrary to their desires. It might even, in the worst case, result in some enormous problems and regrets.
So what will it be: 95% of your total gift money yielding maximum impact, or 100% of your gift yielding half of that?
Those philanthropists who do choose to partner with a philanthropic advisor also find it is simply a good experience. They find that someone else can act on their behalf anonymously, can help evaluate some of the strategic challenges around their giving, and work across the family unit to decide how succession planning through their philanthropy might be conducted.
They might also use advisors to benchmark the impact of their giving, review organisations that they may fund, and analyse how these organisations operate. All this information is helpful in informing their current and future giving. More generally, they gain an external perspective that’s rooted in many years of experience.
On a personal level, effective philanthropy advisors will also help align the donor’s core values more closely to their giving, which in turn increases the satisfaction and enjoyment of their generosity.
The biggest barrier – the question of “why should I spend money in the process of giving money away?” – has now, for many, been overcome. Individuals are no longer seeing advisors as a “cost of giving” but are increasingly recognising the real added value they bring to their philanthropic ROI in non-financial terms.
It is as Aristotle sees it: “to give away money is an easy matter and in any man’s power. But to decide to whom to give it and how large and when, and for what purpose and how, is neither in every man’s power nor an easy matter.”
Like making money, philanthropy is more an art than a mere act: the giver must learn not just to give, but also how.