Continuing the examination of philanthropy at this time of year, as customary, we take a look at the development of a structure in Jersey which has been in place for the past 15 years.

With this year marking the 15th anniversary of the Jersey Foundation – a structure used for philanthropic endeavours – Daniel Channing, director at Crestbridge Family Office Services, explores how international finance centres like Jersey craft their proposition to support family philanthropic aims. The editors of this news service are pleased to share these views; the usual disclaimers apply about the views of guest writers. Email tom.burroughes@wealthbriefing.com if you wish to comment.

Over the past three decades, there has undoubtedly been a natural gravitation towards philanthropic structures as families have become increasingly sophisticated and outward looking with their wealth. 

The global value of philanthropic capital, for instance, is estimated to stand at more than $2.5 trillion (Philanthropy and the Global Economy, Citi Bank 2022), with 73 per cent of family offices now managing philanthropic efforts in some capacity (BNY Mellon, February 2022).

Family philanthropic efforts are becoming more professional, more sophisticated and more targeted – and there are good reasons for this evolution. 

Increasingly, for instance, families are understanding that the very process of philanthropic professionalisation – from opening up conversations around philanthropy to developing and implementing purpose-driven strategies – has the potential for bringing multiple benefits to the family, through better governance, more efficient structuring and family cohesion.

Jurisdictions that support family wealth structuring have responded to this drive. Jersey, for example, had the foresight to establish the Jersey Foundation structure 15 years ago. It combines aspects of a trust and a company vehicle to provide an alternative structure for wealth planning and, since its introduction, more than 450 Jersey Foundations have been established. Today, around a third of those are being used to support philanthropic and charitable objectives.

Family values
From an external perspective, the clear need for private capital to step up and support good causes remains strong. UN figures show, for instance, that if the Sustainable Development Goals (SDG) investment needs to 2030 are to be met, some $30 trillion of additional investment must be found. Private capital, including through philanthropy, will play a key part in that.

Beyond these external impacts, though, families are increasingly embracing philanthropy to help reinforce family values and promote family cohesion. 

Whilst in the past, philanthropy might have been driven by the personal values and goals of a patriarch or matriarch, a truly joined-up family approach to philanthropy can provide a platform to help bring different voices to the table, engender better understanding between family members, and create a unified dynamic that reinforces a family’s values.

A genuinely shared family philanthropic strategy can provide a good ‘ringfenced’ channel for families to educate the next generation. Philanthropy can create a training ground for the Next Gen, providing them with an environment to develop financial skills and better understand the environment they operate in, whilst empowering them to apply themselves to a cause they are passionate about.

Practical outcomes
Building strong family cohesion through philanthropy can be a powerful process that can have a number of additional practical implications too.

Roles such as head of philanthropy are increasingly common within family offices, giving them a more formal organisational model to help develop and implement bespoke strategies professionally and with confidence. It can also provide a good opportunity to revisit governance frameworks and family charters, to ensure documentation is clear and aligned with purpose-driven values.

In turn, this is helping families undertake robust reviews of how they structure their philanthropic activities. Seed funding or “venture philanthropy” to support startups or higher risk social benefit projects, for instance, might require very different structuring options to more straightforward “pure giving” to a charity.

Meanwhile, co-projects with other families are also becoming more common as families consider pooling resources where values, objectives and approaches are complementary, with a view to achieving greater impact. Families are also integrating philanthropy more with their wider wealth, business and investment activities.

Against this backdrop, it is those jurisdictions that can offer a broad range of vehicles to cater for diverse and bespoke strategies that aim to integrate philanthropy in different ways. Jersey has benefited considerably from this trend, thanks to its well-established fund regime – the Jersey Private Fund for instance has become a go-to vehicle for families venturing into new asset classes – as well as its company legislation, all of which complement the perhaps more familiar trust and foundation vehicles.

Expertise
It’s telling that although 71 per cent of family offices believe they have a role to play in alleviating economic inequality, only 41 per cent have a philanthropic strategy in place to do that (Milken Institute, 2021).

In that light, external advisors across the IFC landscape are set to become increasingly important when it comes to enabling conversations amongst family members so they can set out their visions and agree a way forward.

There’s no doubt that philanthropy continues to evolve at pace, as families continue to take a fresh, open and coherent approach to make a real impact. Jurisdictions such as Jersey which have the right expertise, regulatory frameworks and structuring landscape, will continue to be at the forefront in enabling families to realise those ambitions.