.jpg)
This article, from Jersey, considers how structures enabling philanthropy, often based in that jurisdiction, play an important part for wealthy families seeking to advance causes and make an impact.
With this year marking the 15th anniversary of the Jersey
Foundation – a structure well-used for
philanthropic endeavours – Daniel Channing (pictured),
director at [tagCrestbridge Family Office
Services”>Crestbridge Family Office Services, explores how
international finance centres such as Jersey are continuing to
evolve their proposition to support family philanthropic
aims.
The editors of this news service are pleased to share these
insights; the usual disclaimers apply. Email tom.burroughes@wealthbriefing.com
Over the past three decades, there has undoubtedly been a natural
gravitation towards philanthropic structures as families have
become more and more sophisticated and outward looking with their
wealth.
The global value of philanthropic capital, for instance, is
estimated to stand at more than $2.5 trillion (source:
Philanthropy and the Global Economy, Citi Bank 2022),
with 73 per cent of family offices now managing philanthropic
efforts in some capacity (source: BNY Mellon, February 2022).
Family philanthropic efforts are becoming more professional, more
sophisticated and more targeted – and there are good reasons for
this evolution.
Increasingly, for instance, families are understanding that the
very process of philanthropic professionalisation – from opening
up conversations on philanthropy to developing and implementing
purpose-driven strategies – has the potential to bring multiple
benefits to the family, through better governance, more efficient
structuring and family cohesion.
Jurisdictions that support family wealth structuring have
responded to this drive. Jersey, for example, had the foresight
to establish the Jersey Foundation structure 15 years ago. It
combines aspects of a trust and a company vehicle to provide an
alternative structure for wealth planning – and, since its
introduction, more than 450 Jersey foundations have been
established. Today, around a third of those are being used to
support philanthropic and charitable objectives.
Family values
From an external perspective, the clear need for private capital
to step up and support good causes remains strong. UN figures
show, for instance, that if the Sustainable Development Goals
(SDG) investment needs to 2030 are to be met, some $30 trillion
of additional investment must be found. Private capital,
including through philanthropy, will play a key part of that.
Beyond these external impacts, though, philanthropy is
increasingly being embraced by families to help reinforce family
values and promote family cohesion.
Whilst in the past, philanthropy might have been driven by the
personal values and goals of a patriarch or matriarch, a truly
joined-up family approach to philanthropy can provide a platform
to help bring different voices to the table, engender better
understanding between family members, and create a unified
dynamic that reinforces a family’s values.
A genuinely shared family philanthropic strategy can provide a
good ‘ringfenced’ channel for families to educate the next
generation. Philanthropy can create a training ground for this
generation, providing them with an environment
for developing financial skills to better understand
the environment they operate in, whilst empowering them to apply
themselves to a cause they are passionate about.
Practical outcomes
Building strong family cohesion through philanthropy can be a
powerful process that can also have a number of additional
practical implications.
Roles such as head of philanthropy are increasingly common within
family offices, giving them a more formal organisational model to
help develop and implement bespoke strategies professionally and
with confidence. It can also provide a good opportunity to
revisit governance frameworks and family charters, to ensure that
documentation is clear and aligned with purpose-driven values.
In turn, this is helping families undertake robust reviews
on how they structure their philanthropic activities. Seed
funding or ‘venture philanthropy’ to support startups or higher
risk social benefit projects, for instance, might require very
different structuring options to more straightforward “pure
giving” to a charity.
Meanwhile, co-projects with other families are also becoming more
common as families seek to pool resources where values,
objectives and approaches are complementary, with a view to
achieving greater impact. Families are also integrating
philanthropy more with their wider wealth, business and
investment activities.
Against this backdrop, it is those jurisdictions that can offer a
broad range of vehicles to cater for diverse and bespoke
strategies that aim to integrate philanthropy in different ways.
Jersey has benefited considerably from this trend, thanks to its
well-established fund regime – the Jersey Private Fund for
instance has become a go-to vehicle for families venturing into
new asset classes – as well as its company legislation, all of
which complement the perhaps more familiar trust and foundation
vehicles.
Expertise
It’s telling that although 71 per cent of family offices believe
they have a role to play in alleviating economic inequality, just
41 per cent have a philanthropic strategy in place to do that
(source: Milken Institute, 2021).
In that light, external advisors across the IFC landscape are set
to become increasingly important when it comes to enabling
conversations amongst family members so that they can set out
their visions and agree a way forward.
There’s no doubt that philanthropy continues to evolve at pace,
as families continue to take a fresh, open and coherent approach
to make a real impact. Jurisdictions such as Jersey that have the
right expertise, regulatory frameworks and structuring landscape,
will continue to be at the forefront in enabling families to
realise those ambitions.
