According to research, 93 percent of next generation wealth holders are making philanthropic gifts of time and money. Learn how to start your giving journey.
So you want to become a philanthropist but, don’t know where to start? You’re not alone. It’s a noble and increasingly common goal. In fact, 93 percent of next generation wealth holders are already making philanthropic gifts of time and money, and a further 34 percent plan to give away substantial portions of their financial resources after they pass, according to a recent survey by RBC and Campden Wealth.
Governments also want to get more people actively participating in philanthropy. “We urgently need a new flowering of the entrepreneurial, communitarian spirit,” writes MP Danny Kruger in a recent report. “A big part of this is the role of private philanthropy. Already considerable philanthropy represents an enormous potential source of support for communities.”
Anyone who has the desire to give away their time or their money, should ask themselves some important questions. Doing so will help focus on specific goals and ensure efforts are more effective.
A key decision, and probably the first one to make, is where do you want to focus your philanthropic efforts, says Alan Binnington, director, Fiduciary Specialist Team, RBC Wealth Management in the British Channel Islands. “If you want to feel you’re making a difference, then it’s probably better to focus on one thing,” he says.
“If you’re passionate about education that may be your theme,” Binnington says. Of course, the passions that people have vary considerably and for some that may involve concentrating on helping people in a single geographic area, for others it may be picking a cause such as helping find a cure for a specific disease. “The very fact that you’ve embarked on a philanthropic journey says you have a passion,” he says.
Another vital question to answer is whether you want your philanthropic efforts to be public or whether you want to remain anonymous. This often comes down to cultural norms. In some countries, being public about giving to worthy causes is common. In Britain, it is less so. “In the UK, we’re not as out there as much as those in the U.S.,” says Fiona Waite, director, Relationship Management at RBC Wealth Management in the British Channel Islands. “We have clients who don’t want to be in the public eye. It’s very much a personal decision.”
However, there are benefits to being public about your philanthropic efforts. “Publicity may attract like-minded individuals to get involved,” Binnington says. “It may also mean that people come along with much-needed expertise or additional funds.”
Some philanthropists want to set up an organisation and run it themselves. That’s certainly feasible for those with the resources to do so. However, sometimes it makes sense to donate to existing institutions that already have the infrastructure and expertise in place.
For instance, what if one day you decide you want to give to a cause that goes beyond what you usually do as a philanthropist? Instead of setting up something new, it may be worth finding an NGO (non-government organisation) that’s already doing such work and then writing them a cheque. That can save time and energy to get the money to where it’s needed faster.
“They have the infrastructure on the ground to get the projects running quickly,” Binnington says. “The counterargument is that some of the funds will be spent on admin costs.”
In business and personal life, most people want to be sure they’re getting value for money. The same is true in philanthropy—most people want to know their funds and efforts are channelled appropriately. And that means would-be donors will likely want to do some research before donating. “You have to do some prelim work,” says Waite.
Clients vary greatly in how much detail they require. Some just want to write a cheque to a reputable organisation, while others want a report on how the money gets spent. Fortunately there’s a growing business in helping determine how effective philanthropic organisations are in reaching their stated goals.
“There are lots of firms that do impact reporting on philanthropy,” Waite says. “They see what the organisation is doing and come back with progress reports.” RBC takes its duty to do the necessary due diligence on behalf of their clients seriously, she says.
Some donors want to make sure their resources can continue to make a positive contribution to society after they pass away.
There are different ways to make that happen, says Binnington. One way is to set up a foundation with an endowment where investment gains get distributed over a long period.
Alternatively, some decide to set up organisations that make microloans to entrepreneurs in developing countries. The loans help grow businesses, and the repaid loans along with interest helps grow the philanthropic organisation’s resources. Those increased resources can then get passed on to other enterprising business people.
“Hopefully it sustains itself, and you don’t need to put in any more money,” Binnington says. “That could continue after your lifetime.”
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