John McLeod

Australian children are increasingly driving the philanthropic decisions of their families, the latest JBWere report into giving has found.

With the value of Private Ancillary Funds (PAFs) reaching almost $4billion, children from a young age are learning the social, moral, ethical and compliance obligations associated with charitable donations.

John McLeod, of JBWere’s Philanthropic Services Team, said: “Giving children an opportunity to be part of the philanthropic process provides them with financial experience in a controlled and audited environment.

“For extended and multi-generational families, often it is their philanthropy that provides the formal glue that holds them together over time.”

The report also found that the changing nature of philanthropy has meant a move toward providing support beyond traditional monetary donations.

“Although welfare still dominates as the most popular cause for donations, we are seeing an increasing number of funds make donations that are different to your traditional monetary offer.

“One example of this is by providing the use of property at a low – or no rent – cost,” Mr McLeod said.

The new philanthropic approach comes at a time of record growth in the PAF sector.

Distributions from PAFs are estimated to exceed a cumulative $1.7billion in 2014, with the figure expected to grow to $15billion over the next 20 years.

“We expect to see substantial growth in the PAF sector over the next two decades. That is why it is important for the children of today, who will ultimately be the donors of tomorrow, to be involved from a young age,” Mr McLeod said.

The JBWere Private Ancillary Funds Report outlines the history and growth of PAFs, and more importantly, the contribution they are making to Australia’s charitable sector.

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But rather than focusing solely on one-off gifts, how many of us are thinking about aligning our personal values with our financial goals through structured philanthropy?

This is the question that preoccupies Kevin Bailey, financial planner, Head of Philanthropic Services at Shadforth Financial Group and member of the Council of microfinance organisation, Opportunity International Australia.
“Because donations are tax advantaged, tax time is certainly a good time to consider giving, and of course every contribution helps,” he said. “Nonetheless, I would really like to see the question of structured philanthropy top of mind and on the agenda more regularly for financial planners and their clients.”

Mr Bailey cited the fact that only 7.5% of Australians include charities in their wills[1], and the 2012 Opportunity Donor Survey which revealed that only 2.1% of respondents have a financial planner that offers financial advice around philanthropy.

“It is my belief that as the financial planning profession evolves so too should planners’ knowledge about how to help clients translate their values into financial decisions,” he said.

Mr Bailey then pointed to two of the world’s wealthiest philanthropists, Bill Gates and Warren Buffet, as examples of successful people for whom philanthropy is a central theme in their life.

“They are shining examples of the truth that with power comes responsibility and that financial success brings with it the moral imperative to make a difference for the better in the world,” he explained.

“It doesn’t matter whether you are interested in contributing to your immediate community or supporting a specific charitable organisation, our experience has been that clients who become involved in something beyond their own financial success, who move from success to significance if you like, have more meaningful lives.”

Mr Bailey went on to say that conventional thinking has always been that there are four stages in a financial plan. The first is investment advice, based on a knowledge of capital markets, and an understanding of a client’s financial goals.

The second stage usually involves taxation planning, and the consideration of trusts and other structures to help improve returns. Stage three centres on retirement planning, how much you are likely to need and how best to achieve that, and the fourth has traditionally been estate planning, looking at what you do with your assets when you die.

“I would really like to see philanthropic giving become the fifth and equally important step in the financial planning process,” Mr Bailey explained. 

“With a large portion of the wealth in Australia classified as first generation, the trend has been for individuals to pass all their wealth and assets onto their children, but there are so many effective ways to contribute to charity, for example through private or public ancillary trusts, without neglecting your children.”

“And empowering your children by teaching them about financial planning and charitable giving rather than simply gifting them with money is rewarding for both parties,” he explained.

Mr Bailey concluded by saying that philanthropic giving should not be seen as something that only wealthy people can do. 

“Every one of us has three things to offer,” he said.

“Our time, our talent, and our treasure. Even if you don’t have treasure to offer, you do have talent and time. And these all-important gifts can make every bit as much of a difference as money. To you as well as to those you help.”

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The 2012 RaboDirect National Savings and Debt Barometer reveals Aussies to be a charitable bunch with 20 per cent of Australians across all income brackets giving at least $500 per year to charity.
 
The survey also reveals that Generation Y – who is often given a bad rap for being self-centred, arrogant and financially irresponsible – is in fact ‘Generation Generous’. Of all the generations polled, Gen Y is the most committed to charitable giving. In the low income bracket (<$40k) Gen Y is most likely to donate to charity. They are also the least likely to reduce the amount they give when they suffer from a decline in their income.
 
Greg McAweeney, Executive Manager RaboDirect Australia & NZ said:
“Our survey figures show that Australians have a giving nature and want to help out those in less fortunate situations. While Generation Y can often be subject to negative press, our survey results have proven that they are more giving than Gen X or their Baby Boomer parents, even when they have less to give.
 
“When times are tough, donations are often the first things to suffer. However, there are ways and means to work your charitable giving into a normal savings plan.  Setting aside a small regular amount of money instead of drawing out a large sum is one way to do this. But money isn’t the only way people can help out – donating your time and your skills can be just as much help.
 
“As part of a co-operative bank, it is inbuilt within the RaboDirect culture that we give back to the communities in which we live and work. As well as charitable donations, we believe that there are other opportunities out there to make a difference. For a start, we offer our employees ‘Community Leave’, a program that allows employees to take work days out to volunteer within a charitable organisation of their choice.
 
“We see this as a great opportunity for employers and employees alike to look at putting programs in place within a business that provides people with opportunities to give back to the community and make a difference.”

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