Boosting philanthropy will be vital during this economic crisis
As Christmas approaches and the cost of living continues to drive up need for support, charities will be launching their winter giving campaigns.
But while fundraising teams around the country struggle to bring in much-needed donations, there are some simple policy changes that could help those charities raise much more. This month, the APPG on Philanthropy and Social Investment, which we co-chair, launched a report titled Unleashing the Potential of Philanthropy and Social Investment, which outlines some of these changes.
While philanthropy cannot and must not be considered a substitute for government intervention and action, it plays an important positive role in society and that needs to be harnessed. The pandemic has shown us that many people who have financial resources keep up their giving to the charities and causes they care about even in uncertain times. Tax and philanthropy are not mutually exclusive and encouraging generosity is not only desirable, it is essential to ensure stronger communities are at the core of our response to the current economic hardship.
There is no one better placed to talk about money with the richest than those who already do
The British public is generous. Each year, the population donates around £20bn to good causes, from cancer research to fixing the roof of the much-loved village hall. But even in difficult times, many could be giving more. If the United Kingdom population donated as much of their wealth on average as the people of New Zealand or Canada, there would be an additional £5bn given to charities in this country annually.
Research by the Beacon Collaborative suggests that if the UK’s high net worth individuals doubled the level of their giving, we would be almost halfway towards that target.
Small charities can find it difficult to win funding from this group. If you run a homelessness outreach programme or are a recovered addict trying to make a difference, you might not have strong links to your local millionaire, and you certainly won’t have the kind of specialist fundraising teams employed by the big charities. But there is another group of people with unrivalled access to the wealthiest in the UK who could play a transformational role in driving up charitable donations from the people who have the most to give.
Financial advisers have incomparable channels into the wealthiest in society. After all, there is no one better placed to talk about money with the richest than those who already do. If financial advisers were to simply ask clients about their charitable intentions more often, it could make a difference - as prompts to give alone are shown to drive up donations. But if the financial advice sector spoke to every client about philanthropy – offering high quality advice about the benefits of giving to charity – it could generate millions.
In the United States, the overwhelming majority of financial advisers do this. They know that offering high quality advice on philanthropy is good for their clients and good for business. Overall, 80 per cent of financial advisers across the pond talk to their clients about philanthropy as a matter of regular practice.
It has helped to drive huge growth in donor-advised funds. These giving vehicles have more than tripled between 2015 and 2020, hitting one million funds in the midst of the pandemic. From assets of $160bn under management in these vehicles, $35bn in charitable grants was paid out in 2020, up from $14bn in 2015 – demonstrating the speed and scale at which positive social impact can be achieved through good financial advice.
With a world-leading financial services sector in the UK and a growing pool of wealthy citizens, our country should be able to achieve something comparable.
There are various barriers stopping the UK’s financial advisers from providing high quality philanthropy advice to their clients. But ultimately, it comes down to two simple reasons: uncertainty and understanding. There is a lack of clarity from the regulator, the Financial Conduct Authority (FCA), on how financial advisers can support their clients to have social impact when it comes at the cost of profit. And most financial advisers don’t know enough about philanthropy to give useful advice on it anyway.
But both obstacles can be easily removed. The FCA could produce clear guidance on this topic, which would fit in well with its evolving agenda for ESG. And, as the regulator which approves the courses and qualifications financial advisers must take, it could insist that philanthropy appears on the curriculum for anyone providing financial advice to the wealthy.
These are just two simple ways that we could channel more donations to charity, at no or negligible cost to the taxpayer. To harness them all, the UK government needs to appoint a philanthropy commissioner: a senior official with a strong team dedicated to producing policy on charitable giving and driving a philanthropy strategy forward.
The appointment of a philanthropy commissioner and action to encourage wider philanthropy advice from financial advisers would be the perfect Christmas present for charities in the UK at a time when they need it most.
Danny Kruger, Conservative MP for Devizes. Rushanara Ali, Labour MP for Bethnal Green and Bow. They are co-chairs of the APPG on Philanthropy and Social Investment.
Get the inside track on what MPs and Peers are talking about. Sign up to The House's morning email for the latest insight and reaction from Parliamentarians, policy-makers and organisations.