The rewards of advice

Having the fortune to be involved in a spectrum of philanthropy can add to the relationships with clients and allow the adviser to adopt the role of someone who is not only giving advice, but is also a party to what is a very personal aspect of anyone's life; giving something back in a charitable way.

Two examples jump to mind of instances where there were a range of allied benefits from simply knowing the client better to the resultant work and fees generated, whether directly or indirectly through referrals.

Mighty oaks

A client I had been acting for asked me if I could help her review her application to register a small charity, which had a principal goal of bringing meaningful time for arts and crafts back into state schools. We'd reviewed her current and anticipated financial circumstances; a substantial and imminent inheritance was looming, as well as her child's likely needs relative to the anticipated net estate. One of the related reasons for philanthropy can be a concern about the effect of leaving too much wealth to the next generation.

The state school focused charity was, it transpired, the tip of the client's aspirations. There was a clear and resolute desire to make an immediate impact rather than establish a trust that runs for decades, spending income as it arises and preserving capital for another time. The client had timetabled a strict level of funding for each year, mirroring spend-out foundations where there can be an intense schedule of spending to strike at the perceived nub of a problem.

Clients often relish the ability to use existing skills in a project or even more so to develop new skills and meet interesting people. As the adviser, it is a pleasure to share the intoxicating excitement which is generated.

We are now at the stage with a new charity in the throes of being registered with a generous range of ethical and humanitarian objects, where I am one of the trustees, with an estimated £4-5m starting fund.

An enduring family legacy

Another of my clients held public company shares pregnant with gains, and was advised of an opportunity to wash out those capital gains, make a significant saving on his income tax bill, and at the same time, create a long-anticipated charity which he, a close friend and his wife would administer.

The long-term vision saw the introduction of his three children to be mentored until they were able to take on the trustee role; the aim being that this would continue to the next generation and so on.

Of importance was that the family would be able to directly experience the value of their contribution now, during their lifetimes, rather than through their wills. What better incentive for the next generation to get involved than to witness the fruits of their parents' hard work, and considered decision making?

In fact, this charity planned to feed other charities to take advantage of their efficient infrastructures to maximise the funds. The charities were selected through strategic giving and due diligence. Through my involvement, I entered a world which presented me with an immense wealth of information and experience, through giving circles and funding networks - for the cynical among us, all very much the types of clients any private client team would be happy to act for.

What struck me was that the greatest rewards appeared to emanate from the elements of the charitable works where the donors had a connection and naturally became animated and passionate. This was invaluable when understanding the client's next move; an insight that enabled advice to be as bespoke, timely and relevant.

When looking at a professional business model, one of the goals should be to attract and retain clients where a long-term relationship has been established, extending to their family and friends, who value legal and practical input into their personal and business lives; philanthropy undoubtedly falls squarely within this goal. 

Rod Smith is a partner at Stone King

Copyright & permissions