The business of philanthropy

A forthcoming research report from New Philanthropy Capital (NPC), which offers analysis and advice to charities and funders, explores the state of the underdeveloped philanthropy advice marketplace, offers recommendations on the next steps and invites input from interested parties. Here Plum Lomax gives a preview of some of NPC’s findings.

The UK philanthropy advice marketplace, while growing, is still under-developed. In a research report to be published in the autumn, NPC will explore the state of the market as it stands, and in particular the role the private client industry plays in its growth. The report will also provide concrete recommendations for fuelling the market’s development.

The report is prompted by conversations NPC has had with private client advisors across Europe on their experiences of providing philanthropy advice to clients. While there is increasing interest and activity among private client advisors in offering philanthropy services, it is clear from these conversations that the rhetoric generally exceeds reality. Advisors and their parent institutions, on the whole, are offering very little philanthropy advice to clients, and when it is offered, the quality is somewhat questionable. NPC believes private client advisors are missing a significant opportunity.

The private client industry plays a crucial part in building the philanthropy advice market. Wealth advisors of all types – from private bankers to accountants to family offices to lawyers – are seen as ‘trusted advisors’ and nurture close  relationships with their clients. They are therefore a natural first port of call for a client wanting help with many aspects of their lives, including their giving. Many private client advisors already provide assistance to clients in the form of tax advice and structuring of foundations or trusts. But they could be doing so much more.

There is increasing demand from donors willing to pay for advice on how to achieve more impact through their philanthropy, but there is currently not enough supply from wealth advisors to meet these levels of demand. And this demand is still less than it could be. Both the scale and size of the market could be grown substantially - simultaneously boosting both demand and supply.

But what is holding back the demand for, and supply of, philanthropy advice? There are a number of barriers, which NPC believes are hampering the growth of the philanthropy advice market. These include, on the demand side, the economic climate and donors showing little interest in the impact of their philanthropy. On the supply side, there are a number of factors, but primarily advisors still need to establish the business benefits from offering philanthropy advice, develop their knowledge, share information about best practices and innovate with the products and services offered to clients. Only once these barriers are overcome will philanthropy advice start to be a mainstream offering to clients on a significant scale.

The report also draws on lessons from the development of other markets to see how the philanthropy advice market should develop. One of these looks at the propagation of innovations. The literature on innovations suggests supply can generate its own demand, the iPod being a good example. NPC argues that philanthropy advice should also be seen as an innovation, where supply need not wait for demand. While this, of course, carries extra risks for private client advisors, we believe it is a risk worth bearing, as a more developed market would add value to private client relationships and make good business sense.

Another insight from how other markets develop is the importance of leadership to shape the market, and the need for collaboration and cooperation to share information, encourage the spread of knowledge and build a ‘community of practice’.

Relating these lessons to the philanthropy advice market, the report provides concrete recommendations to spur development of the market to the benefit of all participants.

NPC sees itself as helping to shape the market for philanthropy advice, but on its own NPC does not have sufficient reach, capacity or resources to alter the landscape. Instead we are encouraging others to play a bigger role, and this report is part of that process. Specifically we will be looking to bring together interested parties to start the process of implementing the recommendations included in the report.

If anyone within the private client industry is keen to participate in, or discuss, this collaboration, please contact Plum Lomax on +44 (0)207 785 6316.

Plum Lomax works with intermediaries, including private banks, lawyers and family offices. She is also responsible for developing new tools and approaches to disseminate our research widely. Plum previously worked in the City at Merrill Lynch, where she was Head of European Equity Strategy. www.philanthropycapital.org