Approximately 5,000 philanthropic foundations are operating in Australia with combined gifts of around $1 billion per year. Of these, almost 3,000 are private ancillary funds (PAFs) and public ancillary funds (PuAFs), with the remaining 2,000 charitable trusts or foundations administered by trustee companies.
Giving trends over the last few decades has been one of steady increase with a 22% growth in charitable giving since 2010.
We know that the proportion of income given and size of average donation rises significantly after the age of 60. We also know that females give more often and as a higher percentage of income than do males, up to the age of 75, while males – with higher incomes – give more as a total dollar amount 1.
The profile of the 'major donor' today is a professional who is over 55 years of age with investable assets of over $1 million, no beneficiaries and actively involved with a not-for-profit organisation as director, trustee or volunteer. For these individuals, the decision to invest in structured giving and philanthropy is often connected with one or a combination of: a desire for legacy, a sudden financial windfall, a remarkable life event or simply as the 'second phase' of life after a financially successful career.
Advisers play a vital role as influencers of their clients' philanthropic activities. A 2012 study of forty major donors by Queensland University of Technology placed the role of advisers or intermediaries at the top of the list of influencers when it came to creating formal structures for giving. Participants registered concern, however, about the lack of specific expertise available and the report found that "advisory infrastructure is seen as expanding rather than mature in the Australian philanthropic marketplace" 2.
Many clients who recognise the suitability of structures such as the PAF as a channel for reducing their taxable income will be new to philanthropy. This places increased importance on networks, connections and provision of accurate and tailored advice.
Rather than building expertise on everything, advisers can form relationships with trusted partners to augment their offerings and add value to the overall client relationship. We are uniquely positioned to support advisers and their clients through their philanthropic services offering outlined below:
|Philanthropic structure||Tax- deductible donation||Can the trust fundraise?||Minimum advised donation||Term of trust||AET solution|
|Private ancillary fund||Yes||No||>$500k recommended||Perpetuity||Charitable trustee services|
|Sub fund, under a public ancillary fund||Yes||Yes||>$50k||Perpetuity||AET Foundation|
|Charitable trust within a Will||No||No||>$250k||Perpetuity||Estate planning and charitable trustee services|
There are multiple advantages for the adviser in encouraging philanthropy as part of a suite of wealth management options. Establishing structured philanthropic giving sets up a binding relationship between the adviser, client and, where succession planning has been considered, extended family.
Importantly, it allows advisers the opportunity for vicarious giving, motivating them to make an active contribution to their client's philanthropy and underpins a values-based approach to the provision of wealth advice.
1. NAB Charitable Index (2014)
2. Scaife and Smyllie (2012)