FCA should act on 'philanthropy knowledge gulf' holding financial sector back, report says

  • PBE study says philanthropy services in UK are a ‘ragged patchwork’
  • ‘Passive resistance’ among advisers to help wealthy ‘give money away’
  • Advice ‘rationed to super-wealthy’ despite demand from younger generations
  • UK at risk of being left behind by international leaders like Australia
  • Current UK philanthropy offering not in line with Consumer Duty
  • ‘Clear impetus’ for action from FCA to ensure ‘necessary leap forward’ 

Philanthropy services offered by the UK’s financial sector are a “ragged patchwork” often limited to the super-wealthy and failing to meet growing demand, according to new research. 

A new report by Pro Bono Economics (PBE) has called on sector regulator the Financial Conduct Authority (FCA) to take five key steps to bridge a “philanthropy knowledge gulf” in the industry, which means growing demand for quality advice is not being met and the UK is being left behind by other leading countries, such as Australia and Ireland. 

According to the research, which included interviews with around 25 philanthropy experts, leading financial advisers and philanthropists, there is a “passive resistance” among many financial advisers in the UK to the notion of helping their clients to ‘give their money away’ – despite evidence of a growing desire for philanthropy advice among wealthy clients. 

The report notes that, among the high street banks, such as Barclays and HSBC, dedicated philanthropy services are restricted to their private banking arms, but, even then, the services only employ one or two philanthropy specialists. With resources stretched, this inevitably means philanthropy services are limited to the banks’ wealthiest clients. 

Among the leaders in the field, according to the report, are the international wealth management firms with UK bases, such as UBS and JP Morgan, and the most elite private banks, like C. Hoare & Co., which tend to offer some of the most intensive and impactful philanthropy services to clients. 

Describing progress on the issue over the past decade as moving at a “snail’s pace”, the report says there is “clear impetus” for regulation from the FCA to encourage the financial services sector in the UK to take the “necessary leap forward” in its provision of philanthropy services.  

It identifies five proportionate steps for the FCA to take to “accelerate the necessary education” of financial advisers, including requiring the addition of philanthropy to the curricula of relevant financial advice qualifications and adding philanthropy to the continuing professional development (CPD) requirements of retail advisers. 

Making philanthropy services more widely available would benefit clients, firms, the competitiveness of the financial services sector and society at large, according to the report.  

The research notes there is significant demand for advice on philanthropy which needs to be met – with four in 10 (42%) millionaires saying they would like an adviser to help them make the most of their charitable giving, while a similar proportion (41%) say it is important to discuss their charitable giving with their advisers. Failing to meet these needs of clients is in contravention of Consumer Duty requirements, according to the report. 

Previous research in the US has illustrated the benefits to financial firms of offering philanthropy services. A study by Fidelity found that firms which offer their clients charitable planning services have three times the median organic growth of those that do not, as well as 1.3 times the average new money per investor. In the US, 75% of wealth advisers said discussing philanthropy with clients was an excellent way to deepen relationships. 

The research also notes that the benefits for firms of providing philanthropy services is set to grow in the years ahead. With clients increasingly wanting their money to have a positive impact, the next generation of clients – who are set to be the major beneficiaries of the £5.5 trillion ‘great wealth transfer’ – will be actively looking to do business with firms that prioritise purpose, according to the report. 

Furthermore, the report points out that in the last six months both the Irish and Australian governments have identified financial advisers as key players in their national strategies to increase charitable giving. To avoid falling behind these global competitors, the report restates the importance of the UK financial sector growing its philanthropy services, especially through greater use of donor-advised funds (DAFs). 

In 2019-20, charities in the UK received £21.8 billion in individual philanthropy. The report notes that, ultimately, increasing high-quality philanthropy services will benefit society by driving a greater volume of money to be spent more impactfully. 

The new report, titled Ragged patchwork: The need to overcome the philanthropy knowledge gulf, follows a report by PBE last year, as part of the Law Family Commission on Civil Society, identifying the need for greater philanthropy advice. 

Nicole Sykes, Director of Policy and Communications at PBE, said: 

“Over the past decade, the demand for informed philanthropy advice has grown significantly and will continue to grow as new generations of wealth put increasing emphasis on purpose. As it stands, the UK financial sector is failing to meet that growing demand. 

“A gulf in philanthropy knowledge among financial advisers means the sector is missing a huge opportunity to provide services that will benefit clients, firms, the competitiveness of the sector globally and society at large. 

“It is clear the change that is required will simply not happen without action from the regulator. This report recommends five practical, proportionate steps for the FCA to take, which are neither revolutionary nor burdensome, but which could nevertheless make a meaningful difference to an issue that is currently holding the financial services sector back.” 

Read the full report

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