Who do you think of when you hear the word ‘philanthropist’? You wouldn’t be alone if the first names to come to mind are of the likes of Bill Gates, Mark Zuckerberg or Warren Buffett. Ask your clients and they probably think the same, before concluding they’re not that wealthy and therefore philanthropy couldn’t be for them.
The reality in Australia today however, is that philanthropy is no longer just the domain of high profile business people and billionaires. Every day we see people from all walks of life getting involved with giving, and many of them are doing it in a structured and considered way. What’s more, they don’t need millions to get started.
Private and public ancillary funds enable an individual or family to put aside a chunk of money in a trust to support charities over the long term. It is possible to open a named sub-fund within a public ancillary fund, such as the Australian Philanthropic Services Foundation, with as little as $50,000. There’s also the option of setting up your own foundation, known as a private ancillary fund (PAF), which is generally started with around $1 million. The founder gets a tax deduction for any money donated into the structure and there are over 20,000 charities that can be supported.
If you’re not alerting your clients to the options that are available, chances are they’re missing out. Research published earlier this year shows that there is growing demand from clients for advice and guidance on efficient and effective philanthropy, yet few advisers raise the topic. The report, A study of professional advisers in Australia, produced by the Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) at the Queensland University of Technology Business School, revealed that most advisers have discussed philanthropy with just one in 10 or fewer of their high-net-worth clients.
The advantages of philanthropy are manifold with benefits for the client, their adviser and the community. Your client can minimise tax while making a difference to the community over the long term. Many people use their private ancillary fund as a way to engage their family in giving and educate the next generation, and get deep satisfaction from doing so. At the same time, the adviser gets an opportunity to deepen and broaden their client relationships. Through being involved with the PAF, you are likely to engage with other family members, including the spouse, kids and even grandkids. It’s a great way to understand and connect with a client around their values and, by doing so, increase trust and be less likely to lose the client over time. Importantly the community benefits too. PAFs collectively hold assets of around $4 billion and give away over $250 million in grants to charities every year.
Philanthropy, and with it the demand for advice, will increase significantly in coming years with an expected intergenerational transfer of trillions of dollars from baby boomers to their children and grandchildren. Don’t make the mistake of assuming your clients aren’t interested and avoid engaging on the subject. From direct giving to ancillary funds, there are tax effective options to suit everyone. Being a part of your client’s philanthropic journey will give you a deeper insight into your client’s values and what really drives them. This will help you to be even more effective at what you do best – understanding your clients’ needs, engaging meaningfully with them, and managing their financial strategy over the long-term.
Antonia Ruffell is chief exeuctive of Australian Philanthropic Services, an independent not-for-profit organization, founded by Chris Cuffe, which establishes and administers private and public ancillary funds and provides grantmaking advice.
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