Louisa Mitchell: Building a culture of philanthropy in the financial services industry
Louisa Mitchell, Research Director at Policy Exchange and a former City professional, explains her report on encouraging a new generation of Victorian-style philanthropists in the financial industry.
City professionals have the wealth and expertise to make them leaders in the development of a national culture of philanthropy. In Britain we are willing to put our hands in our pockets when asked, but we do not tend to think about giving in a structured way. Changing from a reactive culture of charity to a more strategic culture of philanthropy is an important task which requires leadership. The State cannot do everything, nor should it; non-state providers can often do things better but they need capital and they need skills. Financial services professionals can provide both.
Supported by Citi Private Bank and others, we researched attitudes to philanthropy amongst City professionals to understand what motivates them to engage in philanthropy and what barriers stand in their way. The critical step is getting people started. Entrepreneur Chris Mathias said:
"If you allow yourself to engage then the philanthropy journey begins and it is virtually unstoppable....once you start it takes a really hard-hearted or brutal human being to stop."
Our report recognises some outstanding examples of City professionals deploying their financial and social capital to create and distribute wealth to philanthropy. For example Nicola Horlick, founder of Bramdean Asset Management said:
"What I tend to do is give away about 25% of my income per annum, plus the occasional big expense."
Leading hedge fund, The Children’s Investment Fund, diverts a proportion of its management fee and profits to its own foundation which supports children in the developing world.
We use case studies as motivational tools throughout the report. However, our interviewees unanimously agreed that giving in the City has not developed apace with earnings. Harvey McGrath, former chairman of Man Group and now chairman of London First observed:
"There is substantial wealth being generated by financial services in the UK, but I am not sure that the growth in wealth in the hands of the individuals is reflected in the levels of giving."
British individuals only give 0.73 per cent of GDP to charity compared to 1.67 per cent in the US.
To address this, we make a series of practical recommendations to get more individuals started. We encourage ‘career philanthropy’ where employees embark on a philanthropic journey that runs alongside their professional career. Companies have a huge role to play here. City professionals work hard and their place of employment is an influential environment. Scott Mead, former partner of Goldman Sachs felt that the "level of facilitation and moral persuasion" for promoting philanthropy there is unique amongst its peers.
We recommend that companies issue all employees with charitable bank accounts when they join, but they must also provide the emotional encounter that motivates employees to write the cheques. To ease administration, we propose that HM Revenue and Customs allows individuals to empower account providers to implement the personal tax reliefs on gifts on their behalf. From a bank account it is a natural step up to a trust or foundation, and companies should provide access to such vehicles and advice.
Awareness about philanthropy is low, so we propose that a neutral group should develop as a go-to website for financially literate individuals to learn about philanthropy. This should be connected to company intranets. The City’s professional associations should introduce a gold standard initiative for financial advisers that include philanthropy in their advice and there should be a targeted campaign explaining the attractive tax incentives for gifts of shares.
Attempting to effect a cultural change is a daunting prospect and will not happen overnight. We have not found a silver bullet and our recommendations need to be considered as a package for change. Our focus on the City reflects our belief that our new wealthy financiers can be the new Victorians and lead a national cultural shift in philanthropy.