Whether it is sunset clauses on foundations, arguments about purpose, help with clients about complexity, or other tasks, the role of philanthropic advice isn't a "soft" topic for wealth managers and banks. This feature is part of our "giving season" overview of the sector.

The role of philanthropy advisors is becoming more demanding, especially when arguments erupt about purpose and values. At the same time, the sector isn’t always appreciated for its ability to innovate more nimbly than governments. 

These are some of the observations from senior figures in the philanthropy advisory space in the US and Europe who spoke to this news service about the kind of year they’ve been through. 

A broad takeaway is that philanthropy isn’t just a “nice-to-have” non-core wealth management offering. The values and ambitions of clients, and those of family members, often come to light most vividly when charity is on the table.

Philanthropy can be controversial, and managing disputes among founders and families is part of the mix. Disputes about how heirs to philanthropists can fall out over purpose creates the need to find ways of preventing conflict, and keep philanthropy fresh, Sarah Salomon, head of family advisory and philanthropy, Americas, UBS, told this news service.

There is a trend of foundations incorporating sunset provisions so that they can reach an end point.

“There is a very famous example that was just announced in late November 2023: Warren Buffett,” she said, quoting the renowned investor’s comment to the effect that the “testamentary trust will be self-liquidating after a decade or so and operate with a lean staff.” Another example is the Gates Foundation which intends to sunset in 25 years, she continued.

Sunset clauses aren’t cure-alls but they can mitigate difficulties over time. To give an example of disputes that arise, in late August 2022 a story broke about how two daughters of the late Hollywood movie star, Paul Newman, had sued the Newman’s Own Foundation he had created, saying that its leaders had moved from the actor’s wishes and limited their involvement in its charitable giving. The charity was created in 2005, three years before the actor died. The non-profit controls a food company called Newman’s Own that funds the private foundation with its after-tax profits.

In another case (2018), at the University of Chicago, a $100 million charitable bequest to finance conflict-resolution research via the university turned into a row. 

(On a related front, this news service has opened nominations for the third annual Wealth For Good Awards 2024.)

Inflection point
Philanthropy is changing and conversations with clients must be handled sensitively, Juliet Agnew, head of philanthropy at Barclays Private Bank in the UK, told this news service. 

“We are at an inflection point in the philanthropy space. On the one hand, there has been greater visibility, a drive towards professionalisation and increased scrutiny in recent years; and with that questions are also being asked about how philanthropy could derive from and exacerbate inequity,” Agnew said. “It has become complicated at times for clients to navigate the polarised views about philanthropy. Does it help or harm? Should the wealthy have control over how private wealth is used for public benefit? Some people take the very strong view that you should only think about giving in terms of redistribution of wealth. We are not about telling our clients what to do, but we do help them understand and confront both the possibilities as well as the challenges of modern philanthropy,” Agnew said. 

An important point for HNW and ultra-HNW individuals to grasp is that trying to create philanthropic ventures from scratch may not be wise if they’re better served working with those already working on a shared goal. And giving money away to causes is not as easy as it sounds.

That’s the view of Maryann Bell of Wingspan Legacy Partners, a US-headquartered advisor that helps families frame conversations on important topics. 

“While most HNW families are very generous and want to give back (90 per cent of HNW investors give to charity), giving away money is more difficult than it appears. To whom do you donate? How much? Is it a one-time gift or multi-year? How do you evaluate success? These are shrewd businesspeople who have been successful in their pursuits, but measuring success in philanthropy can be very different,” Bell said. “As an example, Warren Buffet has chosen to give over $36 billion to the Gates Foundation rather than give it away himself because he thinks they are better suited to make the most of the money.”

Gates Foundation
After several references to the Gates Foundation, it is natural to ask it directly about its philanthropy focus. And health and wellbeing appear to be dominant themes.

A real benefit of philanthropy is the first-mover advantage. Philanthropists can enter areas and start conversations that governments, under political constraints, can find harder to do, at least initially, Jennifer Alcorn, deputy director on the foundation’s philanthropic partnerships team, told this news service. Alcorn also leads Gates Philanthropy Partners (GPP), an independent 501c3 charity.

“I have seen an incredible increase in philanthropic giving for global issues and that wasn’t quite there before. There are ups and downs [in giving],” Alcorn said. 

This point about the philanthropist as an innovator isn’t a new one, but bears repeating. A recent book, Advising Philanthropists: Principles and Practice, by Emma Beeston and Dr Beth Breeze, spells out some criticisms of philanthropy and defences of the space, such as how charities can go into difficult areas that governments, for understandable political reasons, might not want to enter. (This news service has written editorial about the issues here.)

“We believe that philanthropy has a very important role in society – and we want to encourage more and better philanthropy,” Barclays’ Agnew said. “It has a particular role to play because of the way it can work. Philanthropy can do certain things that the public sector can’t easily do, such as flow quickly to areas that are underfunded, neglected, too high risk to attract investor or government capital, and help to build the strength of organisations or sectors that need investment over very long time frames.”

Many causes 
Philanthropists haven’t lacked for causes, whether it be helping young people raise education standards after the disruptions caused by the pandemic; mental health, natural and human-caused woes such as earthquakes, wars and civil strife. 

Generosity endures. To take the US, a study from Bank of America Private Bank and the Indiana University Lilly Family School of Philanthropy at IUPUI found that 85 per cent of affluent households gave to charity in 2022 with the value of their average gifts rose 19 per cent.

Large banks have had philanthropy offerings in place for some time. At UBS, the Swiss bank created the Family Advisory & Philanthropy Services business in 2015; the Family Advisory group existed in Europe and Asia-Pacific from 2010 and the UBS Optimus Foundation, focused on helping clients deploy philanthropic capital, originated in 1999.

Salomon at UBS talked about the “UBS Wealth Way” approach that helps clients organise their financial lives into three strategies: Liquidity – to help provide cash flow for short-term expenses; Longevity – for longer-term needs; and Legacy – for needs that go beyond those of your client. Each “bucket” has a corresponding asset allocation that is commensurate with the client's risk profile and time horizon.

“When advising clients on their philanthropy, we parlay the same methodology into a giving allocation. Beginning with forming a philanthropic vision, mission, and strategy, this is then activated through a philanthropic allocation or `bucketing strategy’ to decide what to fund and what not to fund. Pre-determined amounts of money or percentages of your budget can be allotted to differing interests or specific missions,” Salomon said. 

“This allows clients to dedicate more resources to issues they strive to have the most impact, and to decline grant requests that are unrelated to their mission. Some families allocate a set percentage of their gifting to a project or area they work on together, with the rest to be spent in a discretionary manner by the board. Other families might keep their private foundation focused on a specific mission, using their donor-advised fund for anonymous gifts and discretionary projects,” she said. 

Time in the trenches
One feature of philanthropy advice is that those who engage in it tend to have had plenty of experience. For example, Alcorn has been at the Gates Foundation for 15 years and, prior to this, worked at the United Nations Foundation, created by media figure Ted Turner. Agnew at Barclays has worked in the social impact space for 20 years. For the past 10 years, she has worked with high net worth families to help them set up and manage their giving. 

That experience matters. Agnew said her role is often to act as a sounding board for UHNW clients wondering what to do about philanthropy. “It is often overwhelming [for them],” she said.