Wealth managers are still behind the curve when it comes to philanthropy advice, but the opportunities are considerable with many ageing Baby Boomers looking to create a lasting legacy, according to a senior figure in the industry.

The comments came from Russell Prior, executive director of the not-for-profit, UK-based Charities Aid Foundation. He was speaking to WealthBriefing on the sidelines of the Elite Wealth Management and Private Banking Summit in Montreux, Switzerland.

“A recent survey by Scorpio Partnership found that 90 per cent of wealthy individuals believe that they are not getting enough support in the area of philanthropy from their wealth managers,” said Prior.

“Many front line staff have little idea how to help in this area and aren’t asking the key questions – Have you thought about Philanthropy? How much is too much to leave your kids?” he continued.

One of the presentations at the summit had been on investment into the West from ultra high net worth individuals from BRIC economies. The Charities Aid Foundation has been present in Russia for 17 years, India and Brazil for over 10 years and working with charitable and philanthropic organisations in China for 3 years – which Prior admits has been challenging given the enormous change and growth over this period.

CAF has teams active locally in these and other countries and both administers philanthropic ventures (making grants and donations in over 80 countries in a typical year) and advises those seeking to set up their own structures.

Yet in another recent survey of family offices, the majority believed that philanthropy advice will become a core service by 2013. Indeed Prior believes that we could be on the cusp of a decade (or two) of massive philanthropic activity. This belief is supported by four factors:

-- Demographics. Baby boomers in the West are looking to their legacy as they face the transfer of their assets to the next generation; as are the Chinese as the first transfer of wealth in memory starts to take place.

-- Entrepreneurial wealth. So much money has been created in the last 50 years and many people are looking to do good with much of what they have made.

-- Lifetime philanthropy. People are giving earlier and especially before they die as they want to see the effects of their generosity.

-- Consciousness. The publicity surrounding the gifts of Bill and Melinda Gates and Warren Buffet (to name but two) has raised the profile of large scale philanthropy.

Philanthropy is a vast field. To a Baby Boomer it may mean supporting the arts or having a university building named after him. To his or her children it may mean conservation, environmental issues or poverty reduction and the fight against preventable disease. But whichever cause a person wishes to support, he or she should follow certain principles according to Prior.

“Philanthropy must be approached strategically,” he says. “It must result from informed planning, be impactful and effective. This takes time and some expertise to assess the effects on the beneficiaries rather than focusing on the donor’s interests. You must take advice and plan your structure, its governance, the time frame of your activity and know and articulate the values that underpin that which you are trying to achieve.

Prior said that the Bill and Melinda Gates Foundation has to spend all its money on its causes within 50 years of the founders’ deaths. Not every big foundation is forever.

“You need to plan for funding and investment decisions and then run the programme, evaluate it and make sure that you are maximising your impact,” Prior continued.

“And you must also consider what to do and what is allowed if your selected cause ceases to be an issue,” he said. This would be the case if a cure were found for the disease into which you support research, for example. 

It is important that projects that individuals support fit in with the development of the local community or context. There is no point building a school in an underprivileged country if cannot be staffed and supplied with materials, and students with food and accommodation.

CAF already co-operates with around 30 financial and legal entities to give advice in philanthropy. Prior regards having these discussions as “part of your duty of care to your clients”.

 He also believes that talking to clients about such complex subjects as taxation and giving helps deepens the relationship and may get them more closely involved with other family members and the next generation.

At present many wealth managers offer little help with the result that clients “just do this sort of thing themselves”.

Judging from the queue of people wanting to shake Prior’s hand and exchange business cards there is indeed interest amongst the wealthy in advice on effective impactful philanthropy. Will wealth managers start to sit up and take notice or will they continue to ignore this important area of financial services – not how to spend it, but how to give it away?