Top Tips for New Philanthropists
Philanthropy is greatly rewarding and can be a lot of fun. But how do you turn good intentions into a lasting change? Through my career spanning more than twelve years in the social impact space - from running charities to international foundations, advising high net worth individuals on giving and crafting multi-million dollar fundraising campaigns - I’ve seen it all: the good, the bad and the ugly of philanthropy. Here I share my Top Tips for philanthropy newbies who wish to spark that flame and see it burn brightly…
Why give?
There are many reasons, ranging from wealth and tax planning, to brand building, to much more personal motivations, that people may decide to get involved in philanthropy.
Philanthropy is now in vogue, widely celebrated, and adopted as a worthy lifestyle choice amongst the wealthy. We know that philanthropy is on the rise, too. According to the Coutts Million Dollar Donors Report $56bn donations of more than $1m were made in 2015 — a significant rise from the previous year.
Giving can be a hugely rewarding experience. Getting to know the dynamic individuals and organisations working on the frontline of social change is enriching and humbling. And such engagement can cut across different aspects of your life — from involving the family and even the children in planning and choosing donations, to engaging companies and their employees.
One of the best reasons to give is that the world needs it. Philanthropy has often played a hugely important role in the development of just, democratic societies. Now more than ever — with such global and complex challenges as global under-nutrition, gender inequality, climate change and the refugee crisis — philanthropy has a very important role to play.
What are some of the challenges donors face?
Whilst the journey of a philanthropist is a privileged and rewarding one, it’s not easy to be effective. Here are some of the key pitfalls:
Feeling overwhelmed by need — The sheer scale of today’s social challenges can be overwhelming. It is said, for example, that the global economy will lose $12tn if greenhouse gases are not tackled, and that US$3.5 trillion is lost every year due to global under-nutrition. These are staggering figures, but we mustn’t be disheartened. Private wealth has resources to contribute to this challenge, but they need to be allocated wisely. The great news is that with strategic thinking, even a £20,000 donation could have a catalytic effect in a chosen field.
Defining purpose and value-add — We live in an age of information overload and there will be competing demands for a donor’s attention. The challenge for any donor is how to focus their involvement — this takes a good filtering system and often some solid support. Defining your own purpose and value-add within your chosen field is the true challenge and opportunity of every philanthropist.
Finding great opportunities — The causes that shout the loudest are not necessarily the most effective. Unlike the corporate world, assessing organisations and causes is not straightforward as there is no single bottom line to be compared. There is no stock market for charitable causes. It often takes expertise and/or time and immersion into particular cause areas to find fantastic causes that resonate with your purpose and goals.
Regulatory and risk issues — Donors do not often realise the myriad risk, legal and tax considerations in giving. Setting up your own charitable foundation is an appealing option, but comes with its own regulation and governance requirements. The level of transparency that is needed often surprises and frustrates donors, particularly if giving overseas. It is worth taking advice on the right structure for your giving early on.
Power dynamics — Funders need to be aware that they can influence entire sectors of work (not always positively) by how and what they choose to fund. It’s easy for new donors to wade into subjects with hubris, particularly if they’ve been successful businessmen or women. Unequal power dynamics between funder and recipient do not help to create an honest relationship. Trying to solve a social problem (which is really what this is all about) can take many years, often decades — think of the abolition of slavery, for example, which was pushed forward by a strong civil society movement backed by philanthropic support. It takes patience, focus, and — critically — collaboration across sectors.
Top tips for new philanthropists:
Understand the change you want to see — try to think strategically. Understand what change you want to see in the world and work backwards from there. Philanthropy can be catalytic when targeted carefully but should be informed by a good mix of passion and evidence in order to be really effective.
Avoid duplication — there are already 160,000 charities in the UK, so be brutally honest about whether you have something new to offer by setting up a new initiative or charitable foundation. A good example is Warren Buffet, who has pledged to give 99% of his substantial wealth to philanthropic causes, the majority of which will go to the Bill & Melinda Gates Foundation. Buffet recognises the critical importance of both leverage and avoiding duplication. Sometimes it is worth funding someone else’s initiative rather than reinventing the wheel.
Acknowledge what you don’t know — get informed. Meet people and organisations. Understand the issues in which you are interested. And don’t expect to go it alone. We know that donors give more when they seek and receive good advice — be it from other, experienced philanthropists, or professionals. Support can help you to filter information, find and assess great causes, and ensure you are meeting all legal requirements. It will enable you to focus on the fun and rewarding parts of philanthropy whilst ensuring you see the fruits of your contribution much more quickly.
Just make a start! — have a go in one area of interest. Make smaller and simpler contributions initially until you are more comfortable with the process. If there’s one thing I’ve witnessed in my years of working in this space, it’s that donors learn best by doing and by acting on their passion. So go ahead — ignite that flame and have fun with it!
Adapted from original publication as a White Paper for Cavendish Family Office (19th July 2017).
