How are families structuring their philanthropic activities to unlock maximum impact?

Philanthropy - the act of donating money, resources or time to support charitable causes or organisations - remains a key way for families to build a positive, long-term legacy that’s reflective of their values.

Our Head of Private Offices, James Wilcox, is highly involved in philanthropy – both as an adviser to clients who want to do good and effectively manage their legacy endeavours, and as a trustee to several charities, including former trustee of St. Pauls Cathedral and as a development board member for the Woolf Institute at Cambridge. More recently, he chairs AmazoniAlerta – who work with indigenous communities in Brazil to defend against illegal logging and is actively involved in his local church.

We recently sat down with James to discuss how, in a challenging market environment, families are structuring their activities in a way that helps maximise impact.

A clear message to come across was the importance of taking a focussed approach – both in terms of the causes being supported and the ongoing measurement of impact. Below is a snapshot of the key points raised.

What are the benefits of giving? 

Aside from the obvious – supporting charities and worthy causes – a philanthropic pot can be a brilliant way to bind a family. It often goes that there are family members who aren’t all that passionate about the financing aspect, but a charitable pot presents a method for them to participate in the family’s legacy and create a bond with others.

In addition, many countries offer tax incentives for philanthropy and charitable giving. In the UK, philanthropic entitles receive tax relief in relation to donations or other activities, meaning philanthropy can be a popular strategy for reducing an estate after death.

What’s the process for devising an effective strategy?

Each case will be different but, whether its supporting disadvantaged children or the Amazon rainforest, the first thing to establish are the cause areas a family are most passionate about. These passions should then be used to direct where time and resources are invested.

The next step is agreeing how endeavours will be structured. There are countless ways to do this, from giving to existing charities to establishing a charitable foundation of their own, but most important is selecting a structure that allows a family to focus directly on the specific cause areas previously identified.

Whichever structure is selected, families must have confidence that they will be able to clearly measure impact. It is becoming increasingly common to ask for statistics and case studies on how other donations have been spent before committing any capital.

What about a more diverse family with different values?

Within a family, it’s natural that different people will be passionate about different things. A key current trend is younger family members pushing older generations to support climate-related causes, for instance.

While taking a focussed approach is key, it’s important to allow some flexibility – for example through setting aside a certain amount for outliers to direct smaller grants towards their own personal passions.

Every cause is important so the answer isn’t simply about saying yes or no, but asking those with different values the questions that will help them come to a decision themselves, through a lens of what they are most passionate about and with the available resources. This is particularly true of those new to philanthropy.

Key questions to ask include: Why do you want to support this organisation? What are you looking to achieve by giving to them? If you say yes to this cause, are you happy to say no to something else?

What are the key governance considerations? 

First and foremost, if a family starts supporting a charity, then they need to understand that they have a responsibility over the agreed period of time. If a three-year donation agreement has been entered, then this responsibility will be upheld even if circumstances change.

From a tax point of view, having proof of donations is essential to earning tax relief. Keeping a clear record of all donations made is the best way to do this, including details of when donations start and end.

It’s also important to have a reporting mechanism that will flag up if funds are being mismanaged or not having the agreed impact. Only then can the trustees be held to account and frank conversations had about what needs to happen in order for funding to continue.

How can families measure success? 

Be clear on what good looks like for all involved. Starting with the end in mind and setting SMART objectives is the best place to start.

Families also need to adapt the metrics being used for each cause area. Rather than seeking to blindly impose their own metrics and methods of reporting, it’s far better to gain input on this from organisations being funded.

Key to this is a family being confident they trust their partners enough to have frank, constructive conversations around measuring success and the ongoing impact achieved.

What impact are market challenges having on charities and foundations? How best can families support through their philanthropic endeavours? 

During the COVID-19 pandemic, some charities lost all their revenue overnight. Now, a cost-of-living crisis and geopolitical issues have brought a whole new set of challenges to organisations that simply want to do the right thing.

Even the best run charities are finding it difficult to meet objectives set 12 months ago, so there needs to be an open dialogue with existing partners around the factors that might stand in the way of goals being met.

But there is also the question of how we can ensure all charities get enough resources. This is where flexibility comes in once again. More than ever, food banks can truly step up and do great things with proper funding, and this is one area those involved with philanthropy are looking to adjust existing commitments to support.