Economic downturn, philanthropic upturn

Economic downturn, Philanthropic upturn

Despite the recession, the popularity of philanthropy continues to grow, as we found at the Coutts Forum for Philanthropy in April 2009. We surveyed a panel of philanthropists at the forum and 87% said they are expecting to either increase or maintain their giving over the next year, despite the economic downturn.

So what’s driving them? Though there are many reasons for giving, the most often cited is that it is an enjoyable and rewarding experience. Victor Hugo once said that “as the purse is emptied, so the heart is filled”, and for many, philanthropy does just that. It gives people pleasure and enriches their lives by knowing they are making a difference. In fact, Coutts recent pulse survey found that a ‘desire to give back’ to the community is one of the key motivations for philanthropy.

In our work with clients, we have found that it also allows them to achieve a spend/give balance. For instance, while he had no problem amassing his wealth, the hedge fund manager, Arpad Busson said in an interview to the Guardian that his decision to embrace philanthropy was because he found it impossible to enjoy his wealth, knowing there are people out there who were much less fortunate than himself.

For others, philanthropy can be the ideal way of instilling family values and educating their children, as showing the next generation what a difference wealth can make to others can help prepare them for the responsibilities of inheritance. When asked what he would leave his children, Warren Buffet famously remarked: “A very rich person would leave his kids enough to do anything but not enough to do nothing.” Worried about stifling their offsprings’ ambitions by giving them everything on a plate, entrepreneurs in particular are increasingly leaving the majority of their wealth to good causes or charitable foundations that they have created.

Dragon’s Den star Peter Jones has established a trust fund to reward his children for the good they do, their yearly allowance dictated by their choice of future career. He hopes it will encourage them to consider professions that make a difference to others such as nursing or teaching, rather than purely focussing on jobs with the best salaries. Likewise, his co-star, Duncan Bannatyne intends to leave the bulk of his fortune to the Bannatyne Foundation. He fears that leaving his children vast sums of money would rob their lives of any purpose.

But as well as allowing children to follow their own path, we have found amongst our clients that philanthropy can also bring families closer together. For instance, for those owning a family business, setting up a charitable foundation can allow relatives not involved in the day-to-day running of the company to work together for a common goal or purpose.

And for those that have sold their business or are beginning to take a step back from their profession, but are not quite ready to sit back, philanthropy is an opportunity to apply both financial capital and life experience in order to solve social problems. Rather than simply writing out a cheque, the alternative could be to create a dedicated foundation or to take a hands-on approach to the cause the individual supports. This should ensure the money and expertise acquired over the years have the greatest impact.

Whatever the motivation getting involved with philanthropy, knowing how, where and when can prove challenging. With so many deserving causes, choosing the right one is always going to be a tough decision. And once that choice is made there are further difficulties: how much to give; whether to make a single donation or regular payments; how to gauge a specific charity’s performance before supporting it and how to monitor the impact individual support is having.

Further information

Please contact either Mark Evans, Head of Philanthropy on mark.evans@coutts.com or Maya Prabhu, Senior Philanthropy Advisor on maya.prabhu@coutts.com for more information on the Coutts Philanthropy Advisory Service.