As wealth managers look to differentiate themselves from their competitors in a post-crisis world, firms are increasingly emphasising their provision in areas such as philanthropy to appeal to an ever more discerning client base.
Clients are increasingly sophisticated in what they demand from their wealth managers and this extends to philanthropic services. Speaking to WealthBriefing in an exclusive interview, Rebecca Eastmond, head of Philanthropic Services UK at JP Morgan Private Bank, outlines her view of the current philanthropic landscape and what likely future developments will be.
Eager to both attract new clients and retain existing ones, wealth managers are keen to form as detailed a picture as possible of ultra high net worth individuals’ motivations and behaviour. As philanthropy becomes an increasingly core part of wealth management offerings it is natural then that firms may look to categorise clients in terms of their attitudes towards charitable giving. But while identifying “types” of philanthropists may be a useful exercise, Ms Eastmond cautions that this type of “mapping” can obscure a picture which is actually considerably more complex.
Ms Eastmond says clients vary hugely in terms of their philanthropic behaviour and that it is unwise to apply what may be seen as a reductive system of categorisation. She points out, for example, that there are still a small minority of clients who prefer to bequeath a large amount to their chosen charities in their will, but this approach to giving is becoming rare and was far more common 20 years ago.
The current trend is instead towards “giving while living” so that benefactors can see the results of their donations, and of course feel that they have made a difference. In fact, Ms Eastmond says there have been several cases where extremely prolific philanthropists have opted to give away their entire wealth within their lifetime – a munificent gesture indeed.
The consensus within the wealth management industry seems to be that philanthropic activity remains undimmed by the after-effects of the financial crisis and that charitable giving is far from the first expense clients will trim back when trying to reduce their outgoings. This is certainly JP Morgan Private Bank’s experience, said Ms Eastmond, as many clients regard philanthropy as “a core expense.”
So if philanthropy is booming within wealth management, which causes are benefiting? Echoing recent studies of the philanthropic landscape, Ms Eastmond highlights climate change as an “over-arching theme” among JP Morgan Private Bank’s clients, but there are also many other areas of growth. Internationally the firm has seen increased interest in global healthcare and women’s education, while in the UK, JP Morgan Private Bank’s clients are increasingly giving to causes targeting young people, particularly “early years intervention” to assist society’s most disadvantaged children, along with schemes aimed at preventing offenders from sliding back into crime. According to Ms Eastmond, there is a prevailing feeling that society is heading towards a crisis point and this is driving a lot of the philanthropic activity in these areas.
Ms Eastmond also notes, as have other wealth managers, that philanthropists increasingly want to be involved with the causes they donate to. In her words, “fewer people are happy to write a cheque and walk away” and clients now wish to contribute their expertise and time, as well their money. But while other firms say that this is something seen more with younger donors, JP Morgan Private Bank’s experience is that this desire to get involved can be seen across the generations.
“We see a lot of this from clients in their 50s…it’s more a general trend,” said Ms Eastmond. Moreover, this trend is increasingly making charities more “client service” orientated, she said, meaning that those with transparent financials and a clear plan are most attractive to donors.
Despite these trends, philanthropists are of course individuals with their own take on the most deserving causes, and finding out what clients hold to be important is often the start of JP Morgan Private Bank’s philanthropic service. Sometimes a client simply knows that they want to give something back, and in this case JP Morgan Private Bank aims to find out what a client really cares about and goes from there.
“It’s about having a conversation,” Ms Eastmond said, “a lot of what we do is listen and ask questions.” Another driver for clients to come to the firm’s philanthropic service is that they feel their giving isn’t strategic enough and they want something more focused, she said. Ms Eastmond says that she herself went through the same “journey” from randomness to strategic giving in her capacity as a trustee of a small grant-making foundation – a position she has held for 8 years.
Foundations on the increase
One way of facilitating focused giving is to establish a charitable fund via a “donor-advised fund” and although they are far more common in the US, JP Morgan Private Bank is seeing a lot more use of these entities in the UK due to tax incentives such as Gift Aid. As may be expected from a Wall Street bank, foundations in general are an area of particular expertise for JP Morgan Private Bank and the firm has been offering philanthropic services to its clients globally for over 50 years. In the US, JP Morgan Private Bank will run a foundation for a client in its entirety, from initial research through to managing assets, Ms Eastmond said, and although this service is not quite as developed in the UK – necessitating some outsourcing to third parties – but is a “very exciting area of growth” in her view.
One of the prime advantages of establishing a foundation is that clients’ giving can be strategic from the start and structured for the longer term, said Ms Eastmond, adding, “there is a huge difference between strategic giving and just giving to your friends’ chosen charities.” Causes such as global health programmes, which tackle complex systemic problems, are clearly better served by structured giving rather than one-off, random donations, she said. Ms Eastmond also emphasises the role that establishing a foundation can play in bringing families together, acting as “an anchor” - bringing generations of family members together and providing a practical and forward-looking touch point.
This emphasis on intergenerational involvement can be seen elsewhere at JP Morgan Private Bank in the firm’s NextGen Programme, which educates those in their mid-thirties who are about to take over family businesses. And here philanthropy forms a significant part of the programme, Ms Eastmond said, reflecting once again the embedded approach that JP Morgan Private Bank takes towards philanthropy. While “holistic” wealth management, encompassing areas such as succession and philanthropy, may have formerly been seen as more the preserve of family offices, such provision is increasingly a core part of most firms’ offerings.
In summing up her firm’s approach, Miss Eastmond said that while philanthropy is a small part of JP Morgan Private Bank’s offering, it almost functions as a “unique selling point.” New clients tend to bring up the subject of charitable giving almost straight away, and in this way philanthropy is approached by JP Morgan Private Bank as “a natural part of the conversation,” she said.