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March 26, 2010updated 04 Apr 2017 3:54pm

Raising the bar in philanthropy services

Senior private bankers, lawyers and philanthropy professionals are joining forces to speed the development of the market for philanthropic advice Many private banks have an offering in this area, but opinion remains divided on the best way to provide the service. Wealth management professionals from Barclays Wealth, Coutts, Hoare & Co, HSBC, JP Morgan and Sand Aire have been named on an influential steering group for delivering philanthropy services.

By PBI Editorial

Senior private bankers, lawyers and philanthropy professionals are joining forces to speed the development of the market for philanthropic advice. Many private banks have an offering in this area, but opinion remains divided on the best way to provide the service.

Wealth management professionals from Barclays Wealth, Coutts, Hoare & Co, HSBC, JP Morgan and Sand Aire have been named on an influential steering group for delivering philanthropy services.

The group, chaired by Dame Stephanie Shirley, the government’s ambassador for philanthropy, will attempt to develop the market for philanthropy advice through quarterly meetings and the sharing of best practice. It also includes high profile lawyers, accountants and family offices.

The steering group has been assembled by New Philanthropy Capital (NPC), a consultancy which offers training services and gives advice on effective donations. It was set up after research conducted by NPC’s Plum Lomax, a former Merrill Lynch private banker, which showed collaboration, leadership and government involvement were required to develop the market for philanthropy advice in the UK.

“There is a fantastic opportunity being missed by many banks, law firms and family offices,” said Lomax, senior consultant at NPC.

“Clients are now coming to expect their advisers to help them with their philanthropy, yet very few advisers have worked out how to do it well. Those who are supporting their clients’ giving are beginning to reap the benefits, increasing their revenue and deepening client relationships.”

Research from wealth consultancy Scorpio (see chart) showed private clients displayed an increasing preference for philanthropy advice provided by wealth managers between 2005 and 2007. Private banks responded to this by improving their propositions, in particular through establishing in-house teams which specialise on advising clients on charitable donations and setting up foundations.

Most wealth managers continue to use third-party providers for part of the process, particularly for due diligence and analysis on charities clients are interested in. While philanthropic donations have not been significantly affected by the global recession – £2.6 billion was donated in 2009 in the UK, compared to £2.4 billion in 2008 – the NPC report said it had forced some private banks to reduce investment in the area in recent years.

Mario Marconi, head of philanthropy services at UBS, which was one of the first to establish an in-house proposition in 2004, said he saw a “clear and positive trend of increasing money coming into the philanthropy sector in general” in Private Banker International’s recent report on the subject.

“The way we see 2009 is that it is a short-term stop, if at all, but I expect it to continue growing in the coming year and beyond,” he added.

The main benefits private banks gain from offering the services are improved client servicing, the deepening of client relationships and improved client retention.

However, because of the difficulty of measuring these concepts, it can be hard to establish a business case for investment in the service, and part of the steering group’s remit is to address these barriers to the provision of advice.

Most private banks do not charge clients for philanthropy services, so there is no direct revenue gain for them. Lawyers, who also advise clients on philanthropy but have a business model based around charging fees, have a clearer revenue stream, and are also likely to benefit from working with clients on areas like setting up foundations.

The report gives the example of how UK-based Coutts & Co, which has a dedicated philanthropy team and is considered one of the market leaders in this area, addressed the issue. It appointed an independent consultant to measure the impact of its offering on improving client trust and loyalty, differentiation from other private banks and increasing its share of wallet among client assets. This helped quantify the effectiveness of its service, and establish a stronger case for it within the bank.

There may be lessons private banks can take from family offices, according to a case study in the report. It shows how an unnamed multi-family office managed to convert 16 of 24 client enquiries into philanthropic services into fee-paying services.

A dedicated philanthropy expert at the business collaborated with relationship managers across the business, helping them become more confident in talking to clients about the issue.

“The relationship managers have become more knowledgeable at screening their clients’ requests, so those with the greatest need, and therefore the likelihood of conversion to fee-paying work, are introduced to the philanthropy team,” said the report.

The NPC also stressed no information that would compromise any elements of client confidentiality or weaken the competitive advantage of the different businesses involved in the group.

Senior wealth managers on the steering committee included: Emma Turner, Barclays Wealth; Diviya Gosrani, C Hoare & Co; Bob Loft, C Hoare & Co; Mark Evans, Coutts & Co; Maya Prabhu, Coutts & Co; Lord Janvrin, HSBC Private Bank; Rebecca Eastmond, JP Morgan Private Bank; Paul Knox, JP Morgan Private Bank; Alexander Scott, Sand Aire.

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