Helping to make a bigger difference
Every year, increasing numbers of wealthy families integrate philanthropy into how they choose to use their wealth to make a difference to the causes and communities they care about. At the same time, doing so gives them an opportunity to express their values, build a legacy and, ultimately, bring the family itself closer together.
Philanthropy, a word that means the ‘love of humankind’, is the giving of money, assets, time, encouragement or expertise to create a social or environmental impact. Philanthropy is different from charity or ad-hoc charitable giving, although both are important. By charity, we often refer to giving that is reactive, compassionate, and spontaneous, such as supporting disaster relief or sponsoring someone to run a marathon, or giving a one-off donation at a place of worship.
Philanthropy is driven by people’s passions, values, interests or concerns. It plays a critical role in fuelling countless civil society organisations throughout the world that enrich and improve people’s lives. It can also provide a deep sense of purpose and happiness to the philanthropist or philanthropic family themselves. In fact, for many families, philanthropy is an integral dimension in passing on family values by, for example, instilling the importance and value of money when preparing their children for the opportunities and responsibilities of wealth.
For the most part, philanthropy tends to be associated with the provision of financial support in the form of grants. However, there are many other approaches that philanthropists can adopt to make a difference, including the provision of loans, equity or patient capital to charitable organisations or social enterprises. This is an approach known as social investment or impact investing.
Families organise their philanthropy in different ways depending on their objectives. In some cases, families establish a family foundation to support causes that the family cares about. The Family Foundation provides an opportunity for the family to work together towards a common goal and it helps develop a sense of pride in belonging to the family around the values that family members share.
Some business families choose to do their philanthropy through their business. The objective may be to focus on making a difference to the communities that are important to the business, which also enhances staff morale.
Other business families may link their family and business objectives and engage the family and employees to work on a shared programme of philanthropy. This helps bind the family and business values and is an important way for members of a business family (who may or may not be working in the business) to work with staff and create shared value.
Family philanthropy can be very rewarding. At the same time, if not properly managed, it can give rise to emotions that can lead to family conflict. It is important to explore the views and passions of family members.
Developing a strategy: advisers and family offices can be a great source of advice and support
As Aristotle famously said: “To give away money is an easy matter and in any man’s power. But to decide to whom to give it, and how large, and when, and for what purpose and how, is neither in every man’s power nor an easy matter.”
As philanthropy itself is hugely diverse, the array of choices and understanding how best an individual or family can truly make a difference to the causes and communities they care about whilst at the same time achieving personal and family goals can be bewildering. This is where good philanthropy advisers and family offices can play a critical role. They help clients embed their philanthropy in their values, personal and family goals and, at the same time, help them develop their philanthropy strategy so that it makes a difference to the causes and communities they care about.
Developing a philanthropy strategy is a journey, going through many iterations, rather than a single event. It is useful for individuals and families to think about it in the following steps:
Understand one’s motivations and what role philanthropy may play in your family.
Consider who from the family wants to be involved.
Set up a vehicle (such as a trust or foundation) for their philanthropy, if appropriate.
Develop the family’s philanthropic objectives and a focus for their strategy.
Learn about the causes and the type of work they can support to make a difference.
Establish criteria for selecting non-profit organisations and social enterprises.
What resources can they bring to their philanthropy (including financial resources, time and expertise).
Review their philanthropy at the end of the year to see what worked and what didn’t from the family’s perspective.
A philanthropy strategy is about balancing heart and mind. Some families have very clear areas of focus as they may have been touched by a particular cause. Others may need to give it some more thought. It is also possible that different members of the family may be passionate about different causes.
To help develop a focus for philanthropy, it may be helpful for families to consider:
- What geographic communities would they would like to focus on? They may wish to support their local community (perhaps where they live, work or originate from), focus nationally or on communities abroad - or indeed work across many geographies.
- What causes or sectors would they like to focus on? There is a vast range of causes/sectors they could focus on such as education, culture, the arts, developing social enterprises, climate change or resource scarcity, disability, human rights, etc.
- Are there any specific demographic communities they would like to target? They may wish to have a focus on women, children, young people, older people, victims of violence, refugees, social entrepreneurs, etc.
To conclude, a family that carefully adopts the approach outlined above and works closely with a professional advisor can be confident of having a thorough, complete and effective philanthropic strategy whose societal, personal and family benefits far outweighs the initial giving impulse.
Maya Prabhu is a Managing Director at Coutts