For this piece, we talk to John Pepin, Chief Executive at Philanthropy Impact. He says that younger people have broad horizons and like to be involved when it comes to their giving.

Please introduce yourself
I have been working in the charity sector all my professional life. I help transform charities and create new ways for them to develop, grow, deliver their services, and generate more funds. Philanthropy Impact is a capacity-building non-profit organisation at the intersection between philanthropy, social investment, ESG and impact investment. We are a membership network creating opportunities to increase and improve philanthropy, social investment and ESG/impact investing. 

As Chief Executive of Philanthropy Impact, I have a specific remit to increase the flow of capital for good by working with professional advisers to help them shape their conversations with wealthy clients and boost their awareness of, and involvement in, philanthropy and impact investing – more and better.

How is the demand for philanthropic advice and activity changing?
Philanthropy Impact’s recent research identified key changes in the way new generations of wealth holders are approaching sustainability and impact. It put forward recommendations for professional advisers on how they should adapt their service offerings to meet the changing needs and expectations of their existing and future clients.

Some of the highlights included:

• The world is changing, and with it, the needs and expectations of wealth holders.
• Wealth holders, particularly younger generations, are increasingly seeking to align their wealth with their values. They expect advisers to provide professional support in numerous, increasingly complex areas related to responsible investing and philanthropy.
• The professional advisory industry is falling short of the expectations of emerging wealth holders. There are warnings that the ongoing wealth transfer could be accompanied by the next generation changing advisers en masse.
• The obstacles to advisers meeting the needs of the young wealth holders and solutions.

In summary, the demographics of giving are changing as a younger generation comes into wealth or, as is also common, creates their own wealth. The younger generation has a very mobile, international dynamic and their horizons are very broad in terms of ethics and geography. This generation also has more confidence in their own ability to identify their causes and match them with suitable opportunities to do good. There is a clear emphasis on solving issues for the long term and active involvement.

Should advisers support their clients on their philanthropic journey?
The answer is definitely yes. Fidelity Charitable Research demonstrated that firms who offer charitable planning to their clients had:

• Six times the median assets of those who do not offer charitable planning,
• Three times organic growth,
• 1.3 times new money,
• higher net promotor scores,
• higher trust levels.

How are advisers getting more involved in conversations with clients about their values?
Advisers are the glue that holds together the older and younger generation and matches both with best-fit solution-wise. There are lots of different facets to giving within the wealth management community. Giving levels can go up or down as a reaction to trends within broader society, the environment, cultural issues, value investing and capital for good, to name a few. At the moment, there is a big conversation about the need, generically, to do better and less harm by not engaging at all in harmful things, as opposed to investing in the best of a bad bunch. If professional advisers support and guide conversations with their clients, that moves the conversation and the thought process on.

What should the result of those conversations be, ideally?
Advisers need to sit with clients and explore their values, motivations and ambitions as a first step in the discussion of applying the spectrum of capital. The needs of the client come first, and they inform what happens next. Then their values and motivations need to be contextualised so that the adviser can fit the giving element into the overall lifecycle of the client. In this way, the adviser extends their remit and becomes the trusted adviser. Finally comes the decision over where and how to give and invest for good. This can have more than one facet to it, and it is, at this point, that generally, the adviser would call upon a philanthropic specialist or an ethical investment specialist to assist in the actual allocation of money.

The idea is for advisers to be able to support clients on their donor and impact investment journey. To do that, they need to make their clients aware of all aspects, such as taxation, suitability, consumer duty and the like. It is really important to have open conversations at the beginning of the process, though, so that the client can fully explore their thoughts and feelings and, from there, put some structure around that and determine where and how to give or invest.

How about ESG and Impact investing?
There has been a shift in values, and ESG/impact investing is now a central goal of a growing number of investors. A recent study, ‘Investing for Global Impact: A Power for Good 2022’, indicated for older generations, there is a growing demand for and satisfaction in, impact investing and that investors are seeking better services from wealth advisers. More than half indicated that sustainable investing is bridging the gap between younger and older generations, and almost 70% reported sustainable investing is being embraced by the generation in charge of the family’s wealth.

It is important to distinguish between ESG, which addresses various characteristics, and impact investing, which is achieving a successful outcome through investing. Impact investing is conceptually popular at the moment as it has required a change in mindset in that it is possible to invest and get a return, as well as have a positive impact. The two are not mutually exclusive. This is a particularly popular concept with younger investors who take an active interest and prefer to make an impact for the long term as opposed to simply giving with no long-term change. It is about building talent and giving people a leg up for the long term.

How should we measure success?
When the client is identifying investment opportunities that will have an impact, there is also a returns element; both are important when measuring success. With straightforward giving, the measure of success is less clearcut. There is a conflict in that there is a real monetary value from returns at the table, and so it is the job of the adviser to be able to decipher what successful giving would look like and what it would not, conversely, look like.

How will things develop?
Going forward, we will see the emergence of governance structures and parameters in much the same way that ESG guidelines and structures are starting to emerge and be usable. More generally, we will see climate change coming to the fore as a prominent cause. Philanthropic endeavour will become more global and transverse borders as younger investors and givers have a much more global and international outlook. The job of the adviser will be to hone the causes and giving methods and align them with actual opportunities for the client.

If you would like to take part in our ‘TWM talks to…’ series, please get in touch with us at office@thewealthmosaic.com