_A question of priorities: the business of philanthropy
The results of The Wealth Report Attitudes Survey, which this year is based on responses from almost 900 of the world’s leading private bankers and wealth managers, offer an annual window on the issues that are influencing UHNWI investment and lifestyle decisions.
All the survey results are collated on a regional basis in the Databank section of the report ( download a copy for full data), but over the next few pages we use market-leading data and insights to delve deeper into some of the areas covered by the survey that are receiving increasing attention from the wealth industry: travel, education and philanthropy.
The results of previous Attitudes Surveys have consistently shown that philanthropy is becoming more important to UHNWIs around the world. So this year, we dug a bit deeper in order to find out how important philanthropy was in their overall wealth management strategies.
"We have had children as young as six brought along to the workshops that we facilitate for families to help them articulate their values and craft their philanthropy strategy together."
Despite the rising popularity of impact investing, philanthropic outcomes were considered one of the least important considerations. Perhaps surprisingly, this position didn’t change when we asked specifically about the priorities of the respondent’s millennial clients.
According to Lenka Setkova, Executive Director at the Coutts Institute, who advises the bank’s clients on philanthropy, UHNWIs very often still view philanthropy in isolation from their wealth creation. Nevertheless, she says, “We are certainly seeing more wealthy families actively consider the social and environmental impact of the businesses they own or the investments they make.”
"A 2016 survey by the charity Philanthropy Impact also found that UHNWIs donate up to 17 times more when they are professionally advised".
Ms Setkova adds that the firm’s clients are very interested in the benefits of involving the next generation in philanthropy. “We have had children as young as six brought along to the workshops that we facilitate for families to help them articulate their values and craft their philanthropy strategy together.”
The Coutts’ Million Dollar Donors Report (which tracks donations over US$1m or £1m in the UK, US and Middle East) also found a dramatic increase in the number of major donations – up 57% to 2,197 in 2015 compared with the previous year.
A 2016 survey by the charity Philanthropy Impact also found that UHNWIs donate up to 17 times more when they are professionally advised – currently, only 12% of UK UHNWI philanthropists use a special advisor.
The Legatum Group is a private investment partnership based in Dubai, whose partners share the belief that philanthropy is at its most effective when fully integrated into the core strategy of a business.
“We don’t talk about the need ‘to give something back’, because we don’t think businesses should have to apologise for what they do. We believe that free market capitalism in itself is an engine of social good,” says Alan McCormick, one of the Group’s four partners.
“We have a distinctive mission. While generating capital is our core business, allocating capital to help others prosper is key to all that we do.”
"Training people, particularly women – “teach a woman and you teach a generation” – to become more entrepreneurial is the key to lifting families and communities out of poverty."
The group applies a business-like approach to identifying the causes it supports. It tends to focus on areas that have received little attention from other philanthropists or aid agencies, first testing ideas on a small scale to prove they are credible and will make a real difference to a significant number of people by creating long-term systemic change.
Major initiatives to date have included tackling modern slavery; “speed schools” for children who have fallen out of the education system; and a programme to eradicate neglected, mainly worm-based, tropical diseases.
“In total, more than 220 million people have received de-worming drugs via this particular project, including the whole of Burundi and Rwanda,” says Mr McCormick.
Swedish businessman Percy Barnevik is another ambitious philanthropist – his autobiography is tellingly titled I Want to Change the World – who believes that incorporating successful strategies from the corporate world makes philanthropy more effective and sustainable.
“You have to be transparent, keep tight control of your overheads – 90% of our donations go directly to programmes – and not tolerate any corruption,” says Dr Barnevik, who founded the charity Hand in Hand International 14 years ago after retiring from a career that included senior roles with Astra Zeneca, ABB, Sandvik, Skanska, General Motors, Investor and DuPont.
Dr Barnevik believes that training people, particularly women – “teach a woman and you teach a generation” – to become more entrepreneurial is the key to lifting families and communities out of poverty. “It was the missing link in the aid world. Too many young people that had been educated hadn’t gone into employment, and that bred hatred and resentment.”
The charity’s ethos resonates with donors, who are encouraged to visit the villages they have sponsored. “People are becoming more generous,” says Dr Barnevik, “but they are increasingly focusing on what they get for their money. Every quarter we send them a report detailing how many people have been trained and how many businesses have been created.”
So far, he says, Hand in Hand has helped to create 1.9 million new businesses in India, Afghanistan and Africa. Eventually, the goal is to create 10 million jobs, lifting 50 million people out of poverty.