Six ways your clients can use their wealth for good

Understanding the different giving vehicles available leads to better conversations with your clients about how they can use their wealth for good. Here we explain six of the most common.

Some questions this article can help answer:

• What are the different philanthropic giving options available to my clients?
• What are the differences between a charitable foundation and donor advised fund?

1. Charitable foundations

Trusts and foundations (the terms "trust" and "foundation" are often used interchangeably) are usually created via a single primary donation from an individual or a business. They are registered with the Charity Commission and require legal structures and constitutions that dictate how they are run.

A private foundation gives clients complete control over granting and investment decisions. It can be funded with, and continue to hold, most any kind of asset, including private equity, tangible assets, real estate, and intangible personal property.

The Sainsbury Family Charitable Trusts, The Wolfson Foundation and the Garfield Weston Foundation are three of the largest examples in the UK.

2. Donor advised funds

A donor advised fund is an alternative to a client having their own (or family) standalone charitable foundation. Instead of registering a charitable foundation with the Charity Commission, they can set up a fund such as a Charitable Trust with a DAF provider.

DAFs offer several advantages over charitable foundations, namely cost savings, tax-efficiency, flexibility, and ease of administrative, fiduciary, and reporting requirements.

Clients can fund a DAF with a variety of assets including cash, shares, non-cash assets and third party entities which the client is connected to. While the gifts are irrevocable and become the assets of the DAF provider, the individual will advise on where they would like the money to go.

Clients can invest the assets in a DAF for the long-term. They can bring in their investment advisor or financial planner to help design an investment strategy that works for their philanthropic plans.

The due diligence to confirm the charitable purpose of grants made by a donor sits with the DAF provider, or their delegated authorities. Once that has been completed, the grant is then made by the DAF on behalf of the client.

3. Donor advised gift

A donor advised gift is a giving vehicle that lets the client give occasional, large gifts to charity.

It’s designed for one-off giving and allows donors the flexibility to give whenever their financial circumstances and tax affairs dictate.

Clients can gift cash, shares or other assets into a Donor Advised Gift account before requesting these to be granted on to the charitable organisation of their choice.

4. Social Investment

Social investment is the use of repayable finance to help an organisation achieve a social purpose. Clients can make a social investment loan into a fund which is then used to make flexible, affordable loans (and sometimes blended finance grants) to social enterprises and charities.

Social enterprises and charities have a greater need for capital than ever before. Social investment loans and blended finance packages are a source of affordable flexible finance to help organisations continue their charitable activities, stabilise, and plan for future growth.

5. Impact Investing

Impact investing is an investment strategy that aims to generate specific beneficial social or environmental effects in addition to financial gains. Impact investments may take the form of numerous asset classes and may result in many specific outcomes. The point of impact investing is to use money and investment capital for positive social results.

6. Collaboration

Place-based giving, giving circles and networks such as the Maverick Collective are examples of collective approaches to giving. They bring together groups of individuals who donate their own money or time to a pooled fund, decide together where to give these away to charity or community projects and, in doing so, seek to increase their awareness of and engagement in the issues covered by the charity or community project.

Client conversation resource