The demands of wealthy philanthropists have moved far beyond considerations, such as tax planning, to deep engagement with making change.

High net worth philanthropy has become a great deal more sophisticated over the years and moved far beyond the time when one of the big drivers was to gain a tax break, a prominent figure in the sector argues.

As explained in these pages when discussion comes up about the pros and cons of Donor Advised Funds or foundations (see here), for example, it rapidly becomes clear that tax, while still important (particularly with a new US administration taking office) isn’t really the main game in town for philanthropy today.

“At the start of my career I was a tax attorney and tax planning was a big part of what we did in philanthropy consulting and charitable giving," Steve Prostano, head of family wealth advisors for Bank of the West Wealth Management, catering to ultra-high net worth clients, told this news service recently. San Francisco-headquartered Bank of the West’s French parent, BNP Paribas, is itself a well-established force in the philanthropy world, issuing reports on trends and organizer of an annual awards program for the sector.

“Today, it has gone to another level," Prostano continued. 

There is plenty of reason for why Prostano and colleagues are busy talking about this subject. Almost two in five US high-net-worth investors plan on leaving at least one-third of their fortunes to charity, according to BNP Paribas Individual Philanthropy Index by Forbes Insights (April 2016).

Prostano’s arrival at Bank of The West about two years’ ago from SPI Partners - he was at Silver Bridge for seven years prior to that - was itself a statement of intent about how important philanthropy, and the related area of impact investing, or “purpose investing,” as calls it, is to the bank. 

“This has been a real priority for the bank since I joined it,” Prostano continued. “We are dealing with philanthropy here on a daily basis," he went on. 

“Clients in general and large families [in particular] are thinking beyond charitable giving. It is about having a social impact. It is also beyond a local focus – it is about having a global impact,” he said.

New strategies are catching clients’ eyes and philanthropy planning is a key topic for families, he continued. Philanthropy is overwhelmingly important to clients in their relationships with the bank, he continued.

A great deal of work at Bank of The West goes into discussing philanthropy strategy and goals, and of how these sit alongside other investments, wealth planning objectives and personal goals for clients, he said. Also, Bank of The West helps to educate clients about the challenges - and opportunities in this space, he said.  

Some clients are involved heavily in impact investing – an-area not to be conflated with philanthropy, but closely associated with it. As a way to amplify their impact, “Some people just want to dip a toe in the water at the moment,” Prostano said. 

A strong philanthropy offering is important in retaining clients. It is increasingly important as a value-add proposition by private banks, he said.

Philanthropy is not just an offering of Bank of The West, of course. A number of major wealth management houses, such as Abbot Downing (the UHNW arm of Wells Fargo), JP Morgan Private Bank, UBS, US Trust, Bank of America Merrill Lynch and Citi Private Bank all have philanthropy advisors and teams. With so much inter-generational wealth transfer taking place, and families looking to bind in the younger generation to their values, philanthropy can form an important source of “glue” in terms of client loyalty and attraction. 

Today, views about philanthropy seem to vary depending on whether a person’s wealth is self-made or inherited, a point noted in these pages last year. A study from Kiev School of Economics and Georgetown University, called The Charity of the Extremely Wealthy, show that self-made billionaires are between three and four times more likely to sign the Giving Pledge or be present in the Philanthropy Top 50 list of biggest pledges, compared to those who have inherited their wealth. This is unlikely to be driven by differences in demographic characteristics or in the networks of inherited and self-made billionaires, the study said. Such insights are clearly relevant to wealth management professionals such as Prostano and his colleagues. 

And the differences in views between self-made HNW individuals and inheritors also apply to impact investment. 
 
Impact investing was first conceived by foundations and philanthropists as a way to use their capital to support their charitable objectives alongside their grant-making activities; it has, however, moved beyond that to a form of investing where non-financial, but still concrete effects, or “impacts”, form part of a decision to commit money to a project over a period of time. There are $60 billion of impact investing assets under management, and $12.2 billion of fresh investment expected to be put in place last year, according to the Global Impact Investing Network, a forum for the sector.  One forecast has impact investing AuM topping $3 trillion over the next decade. 

Bank of the West Wealth Management, meanwhile, has been pushing ahead in terms of recruitment. Recently, it appointed Whitney Rohrer, Neil O'Keeffe, and Chuck Wong, as market leaders. And whoever else is brought in by this bank in the months and years ahead, it seems that familiarity with philanthropy advice must be an important part of the skill-set.