Philanthropy plays an important role in defining purpose
Years of working with clients and families has taught us that defining a philanthropic strategy is one of the best ways for a family to outline a purpose for their wealth. Yet, while our 2018 research paper (Four Pillars of Capital – the Next Chapter) highlighted the increasing importance families are putting on philanthropy, most are still not implementing one.
Our most recent research, (Four Pillars of Capital – A time for reflection, 2020), shows that despite the groundswell of interest in supporting causes associated with the Covid-19 pandemic, of those who have, only 20% of families have a formal process for doing so. So, why are so many families still neglecting philanthropy as a strategic planning tool?
While 31% of survey respondents said they are actively contributing more to the community and wider society, overall the picture shows that philanthropy is often ad hoc and not considered as part of a central strategy. “Making a contribution to the community is certainly on our philosophical check-list but has to date been undertaken at an individual rather than group level”, commented one respondent.
Perhaps the reason for not formalising philanthropy is to do with the perception that many families believe they are too ‘small’ for it to be of relevance to them. Certainly, when you think of philanthropy in the 2020s, you tend to think of the vast charitable foundations like the Bill and Melinda Gates Foundation, focused on tackling the great global challenges of our time. However, philanthropy takes many forms, including local giving.
The pandemic has been effective in turning many of our clients’ attention to the inequalities closer to home, prompting an uptick in local giving initiatives. Throughout our global office network, clients have come to us for help in setting up charitable trusts. There is every reason for these initiatives to form part of a formal strategy.
In the South African market, the pandemic has prompted much philanthropic activity. What is notable across the board is that those families with a plan already in place were at a huge advantage. In order to be agile and have the desired impact as quickly as possible, an existing philanthropy strategy proved to be essential.
It is not only this ability to move quickly and deftly when a crisis strikes that makes a strategy so important. It is also an effective succession-planning tool. Our Four Pillars research series has emphasised that all pillars of capital – financial, intellectual, cultural and social – stand on the foundation stone of purpose. Defining that purpose is the starting point of any succession plan. It is also, however, one of the things families find most difficult.
Speaking at the last Stonehage Fleming Next Generation course in the UK, Myriam Vander Elst, talked about how philanthropy had helped her find purpose, following the sale of a family business. Today, Myriam is Managing Director of Epic Foundation, a global non-profit start-up that fights to change the lives of disadvantaged youth. She spoke of philanthropy as a powerful tool in bringing families together. "It gives people a common purpose that can be built around the values of the family - transcending business interests”.
This is mirrored by our own experience of working with families. By putting philanthropy at the centre of any discussion about purpose, a family automatically engages a broader cohort of people – not only the next generation, but also those family members who are not necessarily financially oriented and who may have been overlooked for leadership roles in the past. In this way, defining a philanthropy strategy can unlock new potential within a family, enabling different perspectives to be considered and engaging people focused on the other three pillars of capital.
43% of survey respondents said that the Covid-19 pandemic had not altered the way their family thinks about or acts when it comes to contributing to the community and wider society, although they say they have always been aware of their social capital. This seems strange given how much people have learned about each other and how others live since the pandemic broke out. Now is the time to harness the practical wisdom garnered over the last year or so to seriously consider the part that a philanthropy strategy can play in uniting a family and helping them find a purpose for wealth.
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