This Could Be the Philanthropy Breakthrough That Advisors Have Been Waiting For
Charitable giving is good for the recipient — but what if it could also be a boon for advisors? That’s one theory that a private bank and wealth manager hopes to test with the introduction of its Collective Giving project.
Victoria Papworth, a special advisor at UK-based private bank and wealth manager Coutts, says that during the pandemic, the bank noticed that people had a desire to be more philanthropic than usual. As a result, potential clients were giving without the support and advice of wealth managers — which the bank saw as a missed opportunity.
Two potential solutions emerged: Either increase the ratio of clients to advisors from one-to-one to many-to-one — which could result in a less personalized service — or shift advice about giving to a digital service that could reach more people. Neither felt right. Instead, the Coutts Collective was born as a way for interested parties to pool their gifts for more impact on a cause chosen and vetted by the bank every three months. Papworth says the hope is that the service helps Coutts to understand the motivations for giving and to build a supportive pathway that allows donors to become clients of other services at the bank.
Since 2008, charitable giving in the U.S. has been a story of bigger gifts by fewer donors. The trend accelerated in 2017 with the passing of the American Tax Cuts and Jobs Act, which increased the standard deduction from $6,500 to $12,000 for individual filers ($12,550 in 2021, after being indexed for inflation), raising the limit on deductions from 50 percent to 60 percent of adjusted gross income. With these changes, the monetary incentive for charitable gifts was as good as eliminated.
While the tax benefits of smaller donations might be less generous, Papworth says that pooling donations can provide smaller givers with some of the advantages enjoyed by the big donors. Coutts is selecting one organization per quarter to receive the bundled donation. In return, the organization can offer clients of the bank more detailed information about the impact of the money — a level of detail usually only offered to those who give big.
“We know the collective value of mass giving outweighs the value of the mega givers, but those mega givers get a lot of press. This is a way for people to understand how they can be a better giver and have impact without giving the biggest sums,” says Papworth. All that detailed information creates a culture of giving with a charity partner, she adds, and offers a way for family members to start those tricky conversations with one another about how their wealth should — and shouldn’t — be allocated.
For the advisor, a relationship with a client that starts with small charitable donations can grow into something much greater. “As an advisor, you want to make yourself available at an early stage, even if it is just establishing ideas about giving,” says Papworth.
RIA Intel recently spoke with Papworth about the initiative at Coutts and how it might be the start of something bigger for advisors.
What’s your role at Coutts?
Papworth: I’m a specialist philanthropy advisor for Coutts, and my role is to support clients on their philanthropic journey, providing support to ultra-high-net-worth families around their aspirations for giving. There is a team of us at Coutts who work around philanthropy, succession, and the preparation of the next generation for the responsibilities and opportunities of wealth. Having come from a career in the UK charity sector, I have a practitioner perspective on what works for charities and for donors. I was a director of several national grant programs and ran a community enterprise consultancy advising governments and other social enterprises.
What’s the history of philanthropy at Coutts?
Coutts Bank works with some of the most valuable philanthropists in the world. I have a couple of clients with whom I’m building a 20-year strategy. As a professional advisor, you want those opportunities to explore core cost support for organizations, not just project delivery. Coutts has a long history of philanthropy with Angela Burdett-Coutts (granddaughter of former Coutts senior partner Thomas Coutts). She was a fascinating person, one of the greatest philanthropists in the UK. We were the first bank in the UK to have a dedicated philanthropy team, and it’s a core piece of the support which we offer to our clients.
What’s the thinking behind the Coutts Collective?
That Coutts can offer bespoke philanthropy support to many of its clients. We have seen during the recent pandemic and with Ukraine that people giving together can make an enormous difference. By giving with other clients, there’s an opportunity to make a bigger difference with the charities that are part of the program. We wanted to make our philanthropy service more widely available to clients who might not be at the point of establishing their own charitable trusts, for example.
Because of our history, we’re aware of the different points in a client’s wealth cycle where some light-touch thinking might make a real difference. It’s not always about a really intense piece of bespoke support.
When people start charitable giving, it often starts with tactical giving, like giving to national appeals or sponsoring friends and family. My clients often say that they’re conscious of their own luck, as well as their hard work, and they want to build those opportunities for other people. We want to help clients share that sense of opportunity. The support we can offer our clients is helping to understand what a strategy of giving looks like for them.
What organizations are you supporting?
In the first quarter, from October to December 2022, we are working with young entrepreneurs through the Prince’s Trust (a UK charity that helps young people ages 11 to 30 get into jobs, education, and training). At the end of the quarter we’ll present a bundled donation to Prince’s Trust. We’ve done all the due diligence so that our clients can be sure that it’s a reputable organization. With other clients, they might be part of a £100,000 donation that is far more than they could contribute alone. From January to March 2023 we have Future Frontiers, an organization that provides mentoring for children from low-income backgrounds. From April to June, we’re supporting Ocean Generation, a campaigning organization focused on the world’s oceans. For the final quarter, we’re holding a vote early next year with Coutts Collective members to choose a cause.
What do you expect people to give?
It’s difficult to know because it’s the first time, so I’m taking a very open-minded approach. We have suggested a minimum donation of £1,000 and a maximum of £50,000, so that we know we won’t overwhelm the receiving organization with donations of a size they cannot manage. That may sound like a good problem, but it’s not always the easiest way for charities to plan.
How does the project play into current trends for giving?
We’re seeing a shift now to people giving while they are still alive, whereas it used to be the case that people would leave a figure to charity in their will. Now people are engaging with philanthropy as a way to describe a set of family values to their children. If you come from a family of wealth, those conversations can be awkward. People put them off. Philanthropy can be a way of having a proxy discussion about what good giving means to clients, and that can spur trickier but necessary family conversations.
What’s the selling point that will prompt clients to join the project rather than give individually?
With a public donation over a crowdfunding page, your money is sometimes unrestricted, so it might go into the general running costs of the charity. With this donation we’re supporting a specific activity, which is only possible with larger donations. There are good reasons why charities cannot have strong relationships with everyone who makes small donations. But with a collective project like this, the charity can have a deeper relationship, because the funding is more targeted and generous. It’s difficult for charities to say no to prospective funding, so having a strategy that is clear on what it is supporting enables them to really move the dial. For the clients, it offers a supported route for them to give easily and effectively to causes that have been pre-selected and pre-vetted.
Have you seen this model elsewhere?
Having worked for the UK’s network of community foundations, I am very aware of the power of collective giving. The UK has taken inspiration from community foundations in the U.S. that are able to match local donors with local needs. Because the U.S. has this long and strong tradition of philanthropy that we draw inspiration from in the UK, building structures to engage with it feels like the right approach. I always believed in the power of the crowd, and I felt sure that clients would see the value of working together for a bigger impact.
Could this model be replicated by other advisors?
Honestly, I’d love to see every bank have a collective giving project! I’d be very open to sharing what we learn from this pilot.