Calls made to strengthen financial advice around philanthropy

Training on offering philanthropy advice should be mandatory for all financial advisors, research is recommending.

The Law Family Commission on Civil Society, think tank Pro Bono Economics’ inquiry into the charity sector, has called for the mandatory requirement to boost philanthropic giving.

It also calls for regulation to be introduced to ensure philanthropy is discussed with clients.

The Financial Conduct Authority (FCA) is being called on to bring in the requirements for advisors.

The Commission’s report Giving advice: The Case for the FCA to act on philanthropy details how while philanthropy is worth almost £20bn annually, “there is an opportunity to grow this significantly”.

It is concerned by figures showing that the top 1% of earners cut their typical charity donation by a fifth between 2011 and 2019, despite incomes increasing over this period.

An extra £1.4bn could be generated through philanthropy in the UK if every top earner who is currently donating below 1% of their income raised their giving to this level, said the think tank.

Barriers to offering philanthropy advice include a lack of incentive, “traditional mindsets and culture” and a “lack of regulatory clarity and leadership”, states the Commission’s report.

It says that only a handful of financial advisors currently offer such advice in contrast with the US, where the practice is commonplace.

According to the Commission a strong argument for philanthropy among companies is it enables them to “deepen their relationships with clients, meaning they provide better services, and puts them in a more competitive position for attracting new business from younger clients”.

“Philanthropy is a major source of finance for charities in the UK, contributing £20 billion each year. But there is a real opportunity to grow this,” said Pro Bono Economics policy and communications director Nicole Sykes.

“With the country's highest earners shown to be giving less to charity with each year, financial advisors have a huge role to play in turning this around, as the people who the wealthiest talk to about their money.

“As demonstrated in the US, widespread specialist philanthropy advice reaps enormous benefits for society and financial services firms alike, and we need to see the same in the UK.

“This requires leadership and stewardship from the FCA, which has the tools and influence required to help unlock far more of the true potential of philanthropy in the UK.”