We continue our series of interviews with wealth management players about developments in philanthropy.

As part of this publication’s series of looking at philanthropy in different parts of the world, we talk to Victoria Blackburn, a senior manager, based in Luxembourg, at JTC Private Office. (To view other examples of coverage on philanthropy by this publication, see here.)

In the jurisdictions that you operate in, what sort of trends do you see in terms of what causes people want to support and why? What causes/objectives seem to be gaining ground, staying the same, or losing some momentum?
Blackburn: Whilst there are differences in the regional focus and type of philanthropic giving, what we are seeing more of these days is what one may call the “philanthropic investor”. It is no longer just a giving away of money or time but an investment in making an impact and driving change through a “hands on” approach. Younger generations are keen to have their thoughts heard and to take action to make the changes they feel are necessary; therefore, in some grounds, there appears to be a blurring between philanthropic giving, impact investing and sustainable investment. The former provides no monetary profit as such (but changes the world hopefully for the better). The second gives the hands on approach in another form, which so many are now seeking, and means that only positive results succeed in achieving government backing. The latter provides profit for the investor that may actually be used  in turn for charitable giving. Therefore, what we see today is an area of huge potential not only for philanthropic giving in its purest form, but also for a divergence in the investment space and a tendency to add more sustainable investment to one’s portfolio.

Historically, as we all know, the US has demonstrated a natural “tendency” towards philanthropic giving and similarly Europe has a strong tradition of charitable giving. In the US the tax system favours certain charitable donations which help giving from all strata of society, providing additional incentives to give. In Europe philanthropic giving is also steeped in history, driven historically by religion and later through many not for profit organisations.  

Recently we have seen that charitable giving from the wealthier in society, both from individuals but also via established family offices, has taken on a more hands on approach, driven by UHNWIs’ desire to be actively involved in driving change through charitable giving (as opposed to the previously one-off or multi donations to established causes). Also, the introduction of social impact bonds/structuring in Europe, but now also in the USA, has become popular, focusing on results-driven payments with the ‘hands on’ part for the donor achieved via their provision of management and working capital support. 

In the Middle East many ultra-high net worth families are beginning to set up charitable structures offshore that work alongside those they have set up onshore, allowing them greater flexibility in their charitable giving. Historically, as we know, the Middle East has a culture of philanthropic giving based on certain religious values. We find people are now looking at charitable giving through a longer-term lens; there is a drop in one-off donations and instead a more planned approach is taken.

Asia also has seen a huge rise in the number of wealthy individuals; again here the younger generations are having a big impact on how money is spent and they are taking the sustainable route. However, often charitable giving/structuring comes with complex regulatory undertakings which hinder investors’ good intentions, and tax breaks often favour only government-backed charitable giving.

Philanthropists are still wary of the role of NGOs and, with some headline grabbing scandals, these have dented the confidence of philanthropic “investors”.

What we see therefore is a touch point between philanthropic giving and sustainable investing in the form of impact investing with the younger generations driving results focused investing. Are you noticing differences in philanthropic goals/objectives depending on which countries people come from, their life experiences, whether they are self-made, inheritors, etc?
Younger generations are much more hands on today. We also see that self-made millionaires/billionaires tend to have a more philanthropic outlook. That is not to say that those families which have been wealthy for generations do not give, they do - but the self-made UHNWIs tend to take the lead nowadays and are very focused in their giving. One only has to look at the Bill and Melinda Gates of this world. Some of the traditionally wealthy, especially the younger generations, also see philanthropy as an antidote for what is sometimes seen as the toxicity of wealth. Therefore, they focus their investment on the preservation of the planet, improvements in healthcare and education - areas which see the majority of “philanthropic investment”.

Younger generations are also keen on sustainable investing alongside philanthropy and impact investing. Returns on certain sustainable investments have proved as good as many regular investments. So, essentially, if it pays well and helps the planet, why would you say “no”? Thus the money that is allocated for philanthropic giving/impact investing in future can derive from sustainable investing. Consequently, its generation and its effects are often having a positive impact and helping a range of good causes, from ridding the oceans of plastic to finding alternative ways to protect the Amazon rainforests. This double upside is very appealing, especially to the younger generations.

When you talk to clients, in your experience is it the client or advisor who brings up philanthropy first? Is this changing? If it is the client, what do they often say? If it is the advisor, what does the advisor say?
It very much depends. If a client is very passionate about a particular cause or indeed already has some sort of charitable programme in place or charitable structure, then it’s a conversation they will start. If not, then we will touch on the subject during our early discussions, and especially those surrounding family legacy and governance. Then we are able to assess a client’s appetite for charitable giving and explore opportunities for impact investing and sustainable investing as well.

Philanthropic giving often has a very personal edge and there can be many visible as well as hidden sensitivities. We see our role as supporting our clients in their philanthropic ventures and making their “investment” in their chosen charitable form work as well as it can. We are also conscious that there are often historical/family reasons for particular charitable donations, such as a family tragedy that we must be mindful of and tread carefully. We are also conscious that we need to help charitable funds work well and work with chosen charities or recipients of funds for adequate reporting to ensure that funds are used appropriately. Finally we must also be conscious of reputational management when it comes to the family that donates.  

In your view what are the main added-value offerings that you can give to a client in helping their philanthropy goals? How has your organisation developed these in recent years (types of expertise, reporting, due diligence checks on charities, access, connections with the beneficiaries of the philanthropy, engagement of children, others)? Have you recruited more people to handle this work, invested in resources, etc?
We are Expert Generalists - we don’t profess to know everything about philanthropy or sustainable investing but our private office team all have experience in managing charitable structures of one form or another on a large scale. Some of the team are also trustees or hold other management positions at charitable organisations. We also work closely with large organised charitable advisory services and many well-established investment houses/banks. As a result, we have a network of those with real in-depth knowledge who are able to help put together fully tailored and trackable programmes for charitable giving and also provide a range of sustainable investment ideas backed by results. In this way, we are able to sit with the family and help them decide what options suit their particular needs and to set up and engage in meaningful discussions with third-party advisors.

As part of these discussions and to future proof charitable giving through the generations (as yes, this can be the time it goes wrong when the patriarch/founder is no longer around and everyone is left guessing as to what the future should look like) we help our clients to take steps to safeguard their philanthropic models by:

•    Clearly defining their charitable mission. This means writing it down! Record what they like and don’t like about giving;
•    Helping them to choose the right trustees/staff who can carry out their charitable mission, family members and friends are not always the best choice. Again, it is horses for courses;
•    Making sure that there is a clear line between philanthropic giving and business operations;
•    Being hands on where they can, show the younger generations your passion, your commitment and help them understand what you wish to achieve in the short and longer term. This can be through giving the right direction, or physically helping the cause;
•    Ensuring perpetuity - that any structure that is set up to carry on the mission for generations to come has a good organisation and means of electing its staff/trustees/advisors to continue running once the first generation is no longer around; and
•    Above all - ensuring proper and effective communication and reporting to and from a charitable organisation, with the family and advisors and between themselves. This way everyone is kept informed and new ideas can also come to the fold. Having a good structure and understanding of what the patriarch wanted is great, but only if it is working. We can help ensure that the charitable mission remains current and effective by ensuring communication and flexibility of approach within the confines of sound reporting and structuring.

How do you think firms should position the philanthropy offering? Should it be a core offering, or an add-on? Should firms charge separately for philanthropy advice and support, or include it in an overall fee?
Charitable giving can be a sensitive issue and therefore the fees associated with any work behind it also can cause waves, from salaries of executives of charities considered too high to institutions charging administration fees for running charitable structures that “give away” whilst they “take away”.

The work undertaken from our Private Office perspective is still administrative work, whether it be for charitable intent or for investing in standard portfolios etc. Ultimately, in the crudest sense, we still have to charge for this work in some form or another, as without fees there would be no funds for salaries and no staff to undertake the work. Whilst large private banks may offer philanthropic advisory services for “free” to their wealthiest customers, they are still paying for the service in their ongoing fees. So, some fees although seemingly “free”, are not always.

What is important is transparency over fees and having both initial and ongoing discussions with clients about how much it costs to give money away! After all, the “giving away” needs to be properly managed to ensure that it does not waste away, and this means that there is always a certain level of behind-the-scenes work going on. These fees can be split out accordingly or not as a client wishes.

Firms may also like to consider offsetting an amount of their fees as part of their wider CSR commitments.