Insights
By: Jack Henderson
Spotlight on Philanthropy: Families Embracing More Proactive Strategies
Philanthropy Specialist, Jack Henderson, unpacks post-pandemic trends in family giving
At Stonehage Fleming, philanthropy is viewed as an integral part of a family’s overall wealth strategy. As well as requiring collaboration between our core Family Office and Investment teams we hold strategic fiduciary and operational functions for many of our clients. Together, they help to define a purpose, design giving and investment strategies and implement and manage philanthropic plans.
The period since the Covid pandemic has seen the emergence of some interesting client themes. Generally, they reflect a shift from reactive to proactive philanthropy and mark a cultural and strategic evolution in how wealthy families engage with their values and communities.
Philanthropy is moving from a reactive gesture to a proactive, strategic commitment
Cultural Shift
Recent conversations with clients reflect an increasing importance place on philanthropy, now seen as a vital part of how families engage with society. In many ways, there can be no greater tangible deployment of their social capital – the way they want to communicate their values, conduct business and interact with the communities around them. As strategies driven by families’ principles gain traction, philanthropy is moving from a reactive gesture to a proactive, strategic commitment.
During the Covid pandemic, wealthy families came to understand new ways they could make a difference through philanthropy. It wasn’t just in response to the immediate health crisis but the many gaps in education and social care and other sectors that Covid threw a spotlight on. Since then, the trend in giving has matured as a larger proportion of our clients come to us to work on strategies that reflect their new philanthropic ambitions.
Investing in a new era of philanthropy
Several structures and approaches are emerging as firm favourites in helping families act proactively. Though not all, many of these can be used to reduce the administrative burden that may have hampered family giving historically, while all have made it more accessible.
Although not a new thing, donor-advised funds – or DAFs – have increased in popularity over recent years. According to the CAF UK Giving Report, contributions to DAFs totalled £852.6 million in 2023 and grants from donor-advised funds to other charities were £645.4 million, an increase of 16.4 per cent over the prior year (Source: National Philanthropic Trust UK Donor-Advised Fund Report 2024).
They are flexible, tax-efficient vehicles that allow donors to gift assets to a fund managed by a sponsoring charity. The donor can then recommend grants to recognised charitable organisations over time. They are an increasingly popular option among our client base due to their cross-border giving benefits and comparatively modest cost.
Family foundations are another option for our clients as they provide families with direct control over charitable activities and grant-making. Experience shows that the ‘Next Gen’ is increasingly interested in these vehicles. Our recent discussions with clients point towards the fact that younger clients are more comfortable than older family members to attach their names to a cause – a feature, perhaps, of the generational shift towards transparency and impact. The fact that foundations are more publicly visible than other structures may lend themselves to this new openness. Furthermore, they are a useful tool for considering purpose and uniting a group of people (often from several generations) around a common, publicly-stated philosophy.
Though similar to foundations in many ways, charitable trusts are often seen to be a simpler solution. Governance is embedded due to trustee-led oversight and infrastructure. Charitable objectives can be written in to the terms of the trust which may also facilitate tax efficient giving including some inheritance tax benefits.
Having said that many families are seeking simplification through flexible structures, others demonstrate their philanthropic proactivity through seeking greater involvement in the investment strategy for their charitable endowments. For those who want to engage with the commercial ‘story’ of their investments, venture philanthropy may be an attractive option.
Venture philanthropy – applying venture capital principles to social impact initiatives – is gaining popularity as a dynamic approach to supporting start-ups and growth-stage social enterprises. It uses impact investing or public-private partnerships to amplify results, blending investment techniques with positive social outcomes.
Strategy sustainability is a growing focus for philanthropists keen to ensure the enduring impact of their efforts. This can take the form of establishing ‘evergreen’ endowments, which can provide perpetual funding, or considering multi-year support programmes for causes which require strategic coordination between donor and beneficiary.
Ultimately, philanthropy is no longer just about giving back, it is about aligning wealth with purpose and using social capital to make a meaningful difference. As families become more intentional in their approach, considered, long-term strategic advice becomes ever more important.
Jack Henderson is an Associate Director within Stonehage Fleming’s London Family Office team. With over fifteen years’ experience of working with private clients, assisting on a broad range of financial matters and advising on the administration of fiduciary duties, he supports UK-based international clients and has a particular focus on Philanthropy.
Disclaimer: This information is provided for general guidance and does not constitute tax, legal, or financial advice. Individual circumstances vary. You should consult your usual tax adviser to understand how any charitable contribution may affect your personal tax situation.