The UK public is generous, donating more to charity than any other European country: three-quarters of the population give to charity every month. This largesse spans the wealth brackets: a third of millionaires see themselves as ‘philanthropists’ and the same proportion of people with £500,000-£1m say they intend to make a major gift within five years.
Given this enthusiasm for charitable giving, it is unsurprising clients want and expect advice: 41% of UK millionaires say it is important to discuss philanthropy with their adviser, and that figure is higher for the younger cohort, 57% of 18-34-year-old millionaires want help with their charitable giving.
Nonetheless, philanthropy advice is sorely lacking. Less than a third of advisers in the UK have a question about charitable giving as part of their initial fact-find for new high net worth clients; a figure which tallies with reports from clients – only 26% of UK millionaires report their adviser ever raising the subject. This is not a peculiarity of the UK, even in the US, where philanthropy plays a bigger role, only a tiny fraction (2%) of wealth management clients say they receive philanthropy advice, when the overarching majority (73%) would like such advice. Even the ultra-wealthy don’t seem to fare much better, only 4% are ‘very satisfied’ with the philanthropy advice they receive.
There are several possible factors behind the discrepancy between demand and supply of philanthropy advice. Firstly, it may go against the grain to potentially reduce assets under management by introducing charitable giving. Secondly, there may be a perceived risk of encountering awkward topics when probing a client’s personal values. Finally, advisers may feel unqualified in this area, only 5% feel ‘very confident’ to give philanthropy advice.
These concerns may not be grounded in reality. The evidence reveals that offering philanthropy advice is good for business: it boosts the bottom line and increases customer satisfaction. Recent research found that US firms offering philanthropy advice benefited from higher investment levels per customer, and median growth 3x higher than companies that do not offer such advice. Contrary to fears around awkwardness, advisers who offer philanthropy advice consistently report deeper client relationships than peers who do not.
So how might advisers build the confidence to start incorporating philanthropy advice into their services? Climate philanthropy can be an easy entry point, and enhance client conversations around ESG and sustainability. Just as with philanthropy advice, there is a gap between client expectation and reality when it comes to sustainability advice. Clients remain keen to integrate sustainability into their portfolios: 46% consider advice on ESG and sustainable investing to be ‘very important’ or ‘important’; and individual investors rank ‘Climate Change and the Environment’ as the personal value they most want to see reflected in their investments.
Despite this, less than a third of investors with an adviser or employer have been made aware of available environmentally sustainable products, and only 40% of investors with ESG investments are satisfied with their performance. There are many pitfalls in navigating sustainable investment advice: limited data on which to assess sustainability, flexible and opaque reporting frameworks, and uncertain outcomes. Indeed, it is telling that despite half of investors not wanting their pensions investing in oil and gas, UK pension funds are estimated to invest over £88bn in the fossil fuel industry.
Even when sustainable funds operate at their best, there remain certain vital climate solutions that are beyond their reach; for example, protecting endangered rainforest, researching and conserving ocean ecosystems and upholding environmental law. These activities are what people typically have in mind when they talk of sustainability, yet in most cases, they are not open to financialisation. When it comes to achieving these critically important sustainability goals, it is climate charities that have measurable and immediate impact.
It follows therefore, that offering climate philanthropy to clients is an easy way to solve three problems: insufficient philanthropy advice, insufficient sustainability advice, and unsatisfactory or uncertain ESG outcomes. Furthermore, taking immediate action to protect the planet is a perfect complement to all other investment; with global GDP on track to lose 10% of its value by 2050, every investor has a financial interest in limiting climate change. Similarly, other philanthropic goals such as those addressing health, or poverty, will be harder to achieve in a rapidly warming world.
The necessary selection, monitoring and impact reporting of climate and biodiversity charities can be effectively outsourced; there are climate philanthropy specialists who can provide the necessary expertise and capability, at no cost. The Global Returns Project, a UK-registered charity, is one example.
There is clear evidence of unmet demand for both philanthropy and sustainability advice in the wealth management market. Climate philanthropy could be one easy way for advisers to start to introduce this advice, with likely positive impacts on both the bottom line and client satisfaction.
