By Sarah Murray
Published: January 26 2008 02:25 Last updated: January 26 2008 02:25
The often-quoted words of Andrew Carnegie are gaining renewed relevance for today’s wealthy individuals, as lifetime giving becomes more popular. “Surplus wealth is a sacred trust, to be administered during life by its possessor for the best good of his fellow men,” he told the audience assembled at the Carnegie Library in November 1895. The celebrated philanthropist went on to predict the dawn of a day when “the man who dies possessed of available millions which were free and in his hands to distribute, will die disgraced”
EDITOR’S CHOICEFoundations listen for feedback - Jan-26United in philanthropy - Jan-19‘Presidents’ with thin promises - Jan-19Charity no longer a cottage industry - Jan-12Non-profit change on the menu - Jan-05The philanthropists’ maestro - Dec-15Carnegie’s philosophy is being taken to heart by a growing number of donors, as a generation of self-made wealthy individuals seeks to engage in philanthropic activities, rather than simply leaving their money to a charity or to their family in a will. Philanthropy UK, an independent resource for donors, has noticed the trend. One of the key findings of a report the organisation published in September 2007 was that more people are giving during their lifetimes, as opposed to making legacy bequests. “They want to see the impact of their contribution and to experience the joy and rewards of giving,” the report’s authors wrote. Wealth advisers and private banks are also seeing a change in donor attitudes. “Philanthropy remains a vital part of estate planning,” says Lisa Philp, managing director and head of philanthropic services at JPMorgan Private Bank. “But what’s keeping us busy is an increasing number of clients who want to start their giving much earlier, in the peak years of their life.”
Part of the reason behind the increasing desire of donors to distribute their wealth to good causes during their lifetimes is a shift in the source of the wealth itself. Fifteen years ago, 75 per cent of the individuals on the Sunday Times Rich List had inherited their wealth, while 25 per cent were self-made, according to Philanthropy UK. Today, that ratio has been reversed.
“In the past, the money was inherited,” says Heather Maizels, a director at Barclays Wealth. “If wealth was inherited, there was a feeling it wasn’t owned – and legally sometimes it wasn’t – and people were stewards for the next generation.”
Instead, she says, the new philanthropists have largely made their money themselves, through earnings and bonuses or perhaps by selling a business or stock options. And because this gives them a greater sense of ownership, they are keen to become more involved in the charities they decide to fund. As a result, many want to have a hand in designing the programmes they fund, to monitor their progress and to take stock of the results.
In doing so, they can turn to a growing number of advisers and consultants, from private banks to organisations such as the Charities Aid Foundation, which offers a range of services that make donating easier and more tax-efficient and help donors track the effectiveness of their gifts. New Philanthropy Capital in the UK conducts extensive research for donors and recommends specific charities.
Another reason for the increase in lifetime giving is a concern by wealthy individuals not to ruin their children’s lives. Wealth managers and private banks talk of clients whose main concern is ascertaining the appropriate amount of money that they should pass on to their offspring.
“You have a generation of self-created men and women, who have children and don’t want to burden them with massive amounts of wealth,” says Salvatore LaSpada, chief executive of the UK-based Institute for Philanthropy. “They know the adrenalin rush and personal satisfaction of building a business and want their children to have the same.”
Creating a private foundation or a donor-advised fund can bring relatives together on a project or issue of personal significance to the family and help educate children in the management of money and running an organisation. At the same time, donors are becoming more aware – either through the media or through global travel – of social and environmental problems.
“In the modern world, many more people are exposed to different issues,” says Philp. “Multinational business leaders see inequality in the world and want to do something about it with their wealth – and they want to start now.”
Changing demographics are also having an impact. Many people are creating their wealth earlier in their lifetime and retiring at a younger age but wanting to remain active. Lifetime giving provides a focus for their energies.
Wally Olins, a branding expert who is chairman of Saffron Brand Consultants, sees a further reason behind the trend towards lifetime giving: self-expression. Olins says that because of the growing numbers of rich individuals, large houses and flashy cars are no longer a sufficient demonstration of wealth. “It is becoming clear that part of the way you manifest your identity is by your giving,” he says. “Giving is the new buying – and part of how you express who you are is what you donate to.
”Copyright The Financial Times Limited 2008
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