Charities continue to be an important client segment for wealth managers. In the second part of a two-part feature, senior executives at the wealth and investment management division of Barclays discuss recent developments in this space and outline what their firm is doing to help UK-based charities in these straitened times.

Charities continue to be an important client segment for wealth managers. In the second part of a two-part feature, senior executives at the wealth and investment management division of Barclays discuss recent developments in this space and outline what their firm is doing to help UK-based charities in these straitened times. (To view the first article, click here.)

Barclays is evidently doing very well in garnering new charities business: since Sasha Wiggins took over the role of national head of charities the unit’s AuM has risen from £2.3 billion ($3.7 million) to £2.8 billion. But the change programme within the unit is not just aimed at increasing its assets, it’s about enhancing service levels, said Wiggins, adding that the complexity of a charity’s needs is not necessarily correlated to its size. “Some of the most demanding charities are the smallest,” she said.

A big part of Barclays’ efforts with charities clients is the provision of training and thought leadership for those undertaking the difficult task of running a charitable organisation. This is sorely needed because, as Edward Kirwan, head of charities investment management at Barclays, pointed out, there are three-quarters of a million charity trustees in the UK, and “of course not all of them will be experts in investing.” To help plug this knowledge gap Barclays puts on trustee training and educational events for clients and prospects, which can range from one-on-one training on asset classes to bringing in outside experts on thought-leadership topics. In fact, a lot of the provision is on topics “completely uncorrelated” to investments, said Wiggins, and the bank has in fact held an event focused on how charities can tempt top talent away from other sectors. “Ultimately, it’s all about making the offering accessible”, Wiggins continued.

Investment challenges

While value-adds like trustee training will of course be a boon to charities as they aim to improve their efficiency and governance, undoubtedly want they really need is an investment manager which will help them preserve and grow their capital as much as possible. Here, Barclays is just as ambitious in its aims, typically aiming to deliver 4-8 per cent outperformance over their chosen benchmark over three years (the firm has outperformed the WM Charity Index - the current standard benchmark for charities - by 7.5-8 per cent over three years). Securing this kind of return is often no easy task, explained Kirwan, since many charities’ articles will restrict what they can and can’t invest in. “Negative screening is typical,” he said, adding for example that 78 per cent of charities screen out “sin stocks”. They might also be prohibited from making investments which are contradictory to their core aims and which might put off potential donors, he said.

He further explained that there can be tension between the fiduciary duty to maximise investment returns and to invest in line with the spirit of a charity’s ethos, and that sometimes unfortunate gaps in product availability can arise. For example, many charities clients want global emerging markets exposure, but it’s difficult to find ethical emerging markets funds, he said. This is why many charities favour a direct equities approach as it makes it easier to satisfy SRI considerations. That said, Kirwan clearly enjoys the challenges which serving charities can bring since he has been focusing on this segment for seven years (he joined Barclays in March of this year having previously served charities clients at Coutts). “Once you get into this sector, you tend to stick with it. That’s the happy place where I am,” he said.

Wider synergies

While charities clients may represent a particularly challenging type of client, they are also clearly among the most rewarding – not just in terms of warming the heart, but also in terms of securing a steady stream of new business from an arguably “stickier” segment. The synergies created by a universal bank model like that of Barclays are also not to be underestimated: Barclays’ corporate bank currently has relationships with 60 per cent of the top 100 UK charities and so referrals are commonplace. This makes the onboarding of such clients far easier, said Wiggins, since the charities team can meet their bankers easily and already have their transactional banking history at their fingertips. And the synergies don’t stop there since there is also a lot of collaboration with the philanthropy team, which can help establish or run charities or advise on tax-efficiency and administration.

The team-based approach to serving charities really does go organisation-wide at Barclays, and this sharing of intellectual capital is foundational to the bank’s strategy as it deepens its links to the UK charity sector. “We want to apply multiple brains in multiple ways to get close to clients,” Wiggins concludes. Charities clients would certainly seem to require all the brain power banks can provide to carry out their good works optimally because, as Warren Buffet famously quipped, “it is far easier to make money than to give it away effectively”. Based on the enhancements it is making to its provision, Barclays seems to be highly committed to helping them to do both.