Many wealthy people – whether they’re high net worth individuals (HNWIs) or ultra-high (UNHWIs) – have always directed some of their wealth to philanthropic causes. But big shifts are now underway in how, where and when they donate, and in the outcomes they’re looking for from those investments.
These changes bring major implications both for the private banks and wealth managers looking to help (U)HNWIs manage their assets, and also for the not-for-profit organizations seeking to attract their donations of time and money. As (U)HNWIs’ philanthropic vision, goals and expectations change, these organizations must also adapt and refine their approach to them to keep pace and remain relevant.
BoardEx can help. Our network’s extensive individual information and relationship mapping on corporate board members, senior leadership of the world’s top firms and institutions and their philanthropic activities – as well as on trustees and board members on charities – makes it possible to connect these individuals or potential donors to specific causes and charitable initiatives they are passionate about. This in turn helps banks, wealth managers and not-for-profits (NFPs) nurture and capitalize more effectively on existing relationships and forge new ones.
The power of the BoardEx network to achieve this is all the greater since the (U)HNWI community is so closely interconnected. A number of private banks have set up philanthropic arms to advise clients and connect them to relevant NFPs, which benefit by accessing donors and finding trustees through those relationships. This trend is just one sign of the growing convergence between banks, NFPs and (U)HNWIs into a connected community: BoardEx data shows that among retail and corporate banks listed on the FTSE 100 and S&P 500, 356 individual board members hold 460 club and not-for-profit roles between them.
Another sign of this convergence is the increasing networking and sharing of ideas between UHNWI philanthropists, often organized and enabled by their private banks. We’re also seeing the emergence of ecosystems bringing together private banks, wealth managers and not-for-profits. One example is The Big Exchange, co-founded by The Big Issue – a charitable foundation that began life as a magazine sold by the homeless in the UK – with a diverse coalition of partners including Aberdeen Standard Investments, Columbia Threadneedle, Nordea, Pictet, and many more.
To date, it’s been mainly larger private banks that have established philanthropic arms, with the aim of strengthening their client offerings and relationships while also benefiting good causes. Similarly, it’s mostly larger banks whose board members are trustees of not-for-profits. But smaller and mid-sized banks have opportunities to do the same, and tap into network effects to reap equally strong returns in terms of relationships and revenues. BoardEx is a useful tool for this – especially since, at a time when face-to-face interactions are limited, our data and relationship mapping can help banks tailor the way they approach each individual to ensure “warm” introductions are well-received.
Navigating the New Landscape of Philanthropy
These opportunities are increasing against a background of profound shifts in how (U)HNWIs pursue their philanthropic goals. The traditional idea of wealthy individuals setting up foundations towards the end of their working lives, in preparation for their retirement, is now increasingly outdated. Instead, (U)HNWIs are tending to start earlier and be more selective in their philanthropic contributions, with a focus on achieving specific impacts and generating measurable results during their lifetime. As BoardEx data shows, they are also becoming board members and trustees of NFPs, devoting their time – often a more valuable resource than their money.
These trends reflect wider changes in society, as people look more closely at where their money is invested. We’re also seeing the rise of new ways of giving – such as impact investing and venture philanthropy – alongside closely-targeted investments made at high speed, like the recent donations by (U)HNWI and celebrities towards the development of COVID-19 vaccines. As the ways of engaging in philanthropy proliferate, this in turn increases (U)HNWIs’ need for advice from their private banks and wealth managers. While the advice may end up by focusing on technical structuring, it needs to start from a deep understanding of the client’s backstory and philanthropic goals and vision – all areas where BoardEx can support productive conversations.
A further reason to invest time and effort in understanding and supporting (U)HNWIs’ philanthropic goals is the imminent transition to the next generation. Evidence shows that the younger generation is already focused on responsible investment. In the coming decade, a vast amount of family wealth will cascade down to heirs, who – as a generational grouping – are likely to be far more committed than the preceding generation to making a positive difference to the world. For private banks to retain and grow these family relationships, they need to start talking to this rising generation about their philanthropic vision as soon as possible, and certainly well before the transfer of wealth actually happens. Then, when the next generation finally inherit, the bank will be well-placed to help turn that vision into reality. Again, the right data and insights into relationships and connections are key to driving productive conversations.
Meanwhile, many not-for-profits have strong relationships with banks and wealth managers, and have been using the BoardEx network for years to nurture these links. Today, as they move to keep pace with the changes in philanthropy, we’re seeing growing numbers of not-for-profits use BoardEx to discover donors, corporate partners and sponsors, and to strengthen existing relationships – helping them to raise funds and boost donations, thereby improving the outcomes they deliver for communities and the world at large. Charities’ prospect research teams are using BoardEx relationship mapping to release the full value of their networks of donors and trustees, while their corporate teams are using it to map out second-degree connections from their corporate partners’ boards to (U)HNWIs across the external market. Many are amplifying these benefits by integrating BoardEx data direct into their CRM systems, with the more tech-savvy not-for-profits using APIs to do this.
Doing Well by Doing Good
For private banks, wealth managers and not-for-profits alike, adapting to the evolving landscape of HNWI philanthropy is key to achieving their long-term goals. Put simply, by helping HNWIs do good, they help themselves to do well. And BoardEx is supporting them at every step.