20 January 2020
8 minute read
The lack of faith between charities and wealthy individuals is one of several barriers to giving in the UK. Nevertheless, the future for this evolving sector is bright, according to a new report by Barclays Private Bank.
There can be no doubt that philanthropy is a powerful force, transforming lives on both sides of the giving equation. But many misunderstandings and barriers exist around the subject, which can deter potential givers from donating money and time to deserving causes. Barriers to Giving, a new report by Barclays Private Bank, delves deeper into these challenges to reveal what’s driving them – and how they can be addressed.
Drawing on interviews with 400 high net worth individuals (who hold assets of £5m or more) in key wealth markets, as well as charity heads, family offices and relevant intermediaries, the report provides a fascinating snapshot of the current state of play in charitable giving. Crucially, it also reveals how the sector can evolve to become an even greater force for good.
One thing I tell potential philanthropists is that the work of our foundation has been the most rewarding work I can imagine. Bill would say the same.
In 2009, in the wake of the global financial crisis, Barclays conducted research in an attempt to define barriers to charitable giving among high net worth individuals (HNWIs) in both the UK and the US. The report highlighted the difference in the philanthropic culture in the two countries. Although their levels of income and capital were similar, wealthy individuals in the US were giving a far larger proportion of their income to charitable causes than those in the UK.
Ten years on, new research published by Barclays Private Bank shows that little has changed. The resulting Barriers to Giving report found that while a small number of ‘major givers’ donated sums measured in tens of millions of pounds, around half of multimillionaires donated less than 1% of their annual income to charitable causes in 2018, according to figures on wealthy individuals outside the US.
There are a multitude of reasons for the UK’s wealthy givers not donating more, but some are more significant than others.
Almost a third of the UK’s wealthy say their business and family take precedence over giving. Their commitments include providing for and educating their children, buying and improving their homes, funding family holidays, investing in their business and simply preserving their wealth for later in life to safeguard against illness and old age. But this should not be seen as selfishness. Wealthy individuals are typically looked to for financial help by friends and family, so perhaps it’s no surprise that many use so little of their annual income for giving outside of this circle.
Advisors can play a key role in helping wealthy individuals to overcome concerns regarding their ability to make donations. Typically, advice from wealth managers and private bankers outside of the US revolves around three key goals: wealth growth, preservation and succession. This leaves little room for discussion or consideration of charitable giving. A more holistic approach, presenting giving as an opportunity rather than as a threat, is likely to bear more fruit. At the same time, advisors can help charities understand how their wealthy clients think and feel, providing a more balanced view of how they can work together.
Finally, advisors can help potential donors by adopting a more strategic, ‘balance sheet’ approach, itemising their wealth and demonstrating how much they could donate – enabling them to make more significant donations and more of an impact.
Another barrier to giving among the UK’s wealthy is a feeling that it’s the responsibility of others to give – whether that means the state or those who are wealthier than them. Nevertheless, there are ways for potential donors to be shown that they really can make a difference – and how to begin their giving journey. Greater first-hand exposure to international causes can certainly help, convincing some to make larger donations.
Barclays Private Bank’s research found that bigger donors have often been more affected by seeing and experiencing major issues around the world. More than half of those who gave £500,000 or more donated towards global causes, rather than local ones.
In recent times it’s not been difficult to find negative stories about charities in the media, fuelling worries about how they are run, and feeding mistrust. At the same time, around one in four wealthy givers say they don’t feel they have enough knowledge or experience when it comes to charities, which can also engender a lack of trust. Charities can make assumptions of their own: that wealthy individuals always have more to give, for example, or that they will always want to take more control over their giving.
In the US, where philanthropy among the wealthy is more commonplace and where wealth creation is generally celebrated, fundraisers are more likely to feel they understand what makes the wealthy tick. They therefore shape the relationship as being one of teamwork rather than merely extracting funding. For wealthy givers, having a sense of control – engendered through involvement and partnership – can be key.
The perceived lack of control between givers and charities can be overcome by demonstrating how donations have made a difference and communicating information that reassures that money is well spent, giving a sense of transparency to givers. Charities in particular could benefit from thinking of wealthy individuals not simply as money trees to be shaken but as repositories of many other benefits, including skills, knowledge and influence. Coupled with this, they could see the relationship as more of a hand-in-hand strategic partnership.
‘Restricted giving’ is one option that can help wealthy givers feel more in control of where their money is going. This is where donors designate the use of their donations to a particular purpose, for example, a gift to a special scholarship fund in education. In a world that has become increasingly personalised, offering a richer choice of giving options to donors can build engagement as it helps them feel like they are making a specific, actionable impact.
Transparency is also important. Allowing potential donors to conduct due diligence – not just studying the accounts and the cause but also getting to know the people involved in the organisation – can create reassurance. In general, the more a charity can show openness, the more a benefactor is likely to feel in control.
There are signs that the involvement of wealthy individuals in charitable giving has a bright future. Not only will there be an increased acknowledgment of the necessity for it, with future generations beginning to step up to reframe the concept for a new era, there’s also now a great deal of information available on the positive effects of major giving, including research on the neurological benefits of empathetic thinking. Crucially, one of the most promising developments for the charitable sector is how differently the younger generation are thinking about giving, in comparison with their predecessors.
There is also evidence from charities and sector experts that younger people, particularly the large millennial cohort, are travelling more, seeing problems and imbalances the world faces early on in their lives, and seeking to take action relatively quickly. The younger generation may help influence their parents’ commitment to charitable giving, as well as emphasising social and environmental aspects in family business.
What’s clear from these findings is that for philanthropy to further evolve, new thinking is needed. Deeper knowledge sharing from charities to donors, together with radical openness and transparency, will all help build more significant partnerships. A new age of philanthropy can be built from these foundations, to meet the challenges of some of the world’s most intractable problems.
This article draws on a report commissioned by Barclays Private Bank and compiled by Savanta, an intelligence business. Through best-in-class market research and data collection, Savanta provides the intelligence that underpins better decision-making for a variety of market sectors including wealth and not-for-profit.
A ‘lack of faith’ between wealthy individuals and charities is a key obstacle to giving in the UK, our latest report Barriers to Giving has found. The UK’s philanthropic donations amount to just 0.5% of national GDP, compared with 2.1% in the US. This lack of major donors is having a considerable impact on UK charitable funding.
There is no doubt that philanthropy is a powerful force, transforming lives on both sides of the giving equation. But many misunderstandings and barriers exist around the subject, deterring potential givers from donating money and time to deserving causes.
