Shifts in philanthropy towards financially impactful giving

Kerrin Land, CEO of Old Mutual Wealth.

Globally, the trend of giving is growing - especially among high-net-worth individuals (HNWI) - with 91% making charitable donations last year and 83% planning to donate as much, or more, over the next three years1.

According to Kerrin Land, CEO of Old Mutual Wealth – an advice-led, wealth management business – high-net-worth South Africans should be mindful with their philanthropic efforts, ensuring support of causes that promise to make a sustainable difference.

She points to the 2016 Nedbank Private Wealth Giving Report, which reveals that while 88% of local HNWIs donated money, time or goods to the combined value of R7 billion to charities in 2015, more than half of these givers did not have a budget or planned approach to giving, and that 70% do not measure the impact of their contributions.

“While benevolence of any kind is admirable, indiscriminate giving can be ineffective – both for that of the charitable cause and the aspirations behind the reason to donate.”

Over the past 15 years, the number of HNWI on the African continent has grown by 145%2, increasing the possibility of philanthropic activity across the region. As individuals prepare to give to those less fortunate these holidays, Land emphasises the importance of strategic giving.

The Wealth-X and Arton Capital Major Giving Index states that philanthropic financial donations are increasingly being channelled towards impact giving, which ranges from venture philanthropy, micro finance, impact investing and job creation.

An individual’s preference of where and how to contribute should be based on more than just their monetary contributions, but also what they hope to achieve with this philanthropic activity, says Land. “Integrating philanthropic initiatives into a financial plan will help achieve this. HNWI should identify what they are passionate about and how they want to make a difference, and then set up a funding plan to ensure that contributions are impactful. A scattergun approach, with small contributions spread across a wide variety of different causes each year, is often far less meaningful than engaging in a sustainable, ongoing relationship with a few well-chosen causes.”

She adds that by carefully selecting beneficiaries and building sustained relationships, HNWI’s may also be able to offer their skills and experience, thereby further leveraging the power of the monetary donation. “Skills which a HNWI may take for granted are often in short supply in a charitable institution. This could include knowledge and experience on budgeting, capital management, project management, legal matters, or even offering to connect the charity to their broader contact network.”

While each individual will understandably be motivated to give for different reasons, the majority of HNWI donated to a cause because they believe they are making a difference (44%) and want to give back to the community (27%), or for fulfilment and satisfaction (44%). Only 18% were driven mainly by tax benefits. However, 67% of HNWI reported identifying where to donate as their greatest challenges, followed shortly by ensuring that the donation has its intended impact (37%) 1.

Land says that in a society where charitable needs are widespread, choosing a cause is often the greatest challenge. “After deciding what cause to support, it needs to be determined whether it is a once-off donation or requires regular support. Should it be on-going, it’s worthwhile researching if a potential beneficiary organisation is merely providing the ‘feel good’ factor of sponsoring a cause, or whether it has a great team, action plans, an infrastructure and a track record of delivering sustainable solutions to the area you want to impact.”

Also, when deciding on a specific vehicle or structure to use for giving, Land points out the importance of meeting any legal or tax obligations that may be required. “Depending on the legal structure utilised, there are varying tax benefits and limits involved, and having a clear understanding of these is essential.”

Land concludes: “While setting out a clear strategy for philanthropic activities may seem overwhelming, or perhaps even unnecessary for an HNWI who simply wishes to give back, advice should be sought from an accredited financial planner who can assist with integrating a clear strategy into a financial plan to ensure that the impact of a charitable donation is maximised for its beneficiaries, as well as aligned with the personal overall financial and life goals of the benefactor.”