Understanding the mind-set of a philanthropist

Last week I received an invitation to a charity dinner and auction, on the back of the invitation was a list of twenty-five patrons. The tickets were £400 each or £4,000 for a table. Who goes to these dinners and why? Is it to assist the charity, eat a nice dinner, or meet people they may otherwise not get to meet?

Of course, the dinner is about meeting like-minded people.

I have a client Martha, who overnight became unexpectedly very rich. She and her husband, up until that moment, had led quiet lives, in the north of England socialising with people of similar wealth. Now she was able to fly on a private plane to New York for dinner, charter a yacht in the Caribbean and buy real diamonds and furs – but she had no-one to share this good fortune with. None of her friends were able to do what she could do, now she was supremely rich.

She started to go to these dinners, first as a guest of her bank, and then she got to know one or two people on the committee and was invited to become a patron and joined the committee.

Within two years, she had a completely new set of friends. People from whom she could learn, how to invest, what to watch out for, who to engage and how to spend her new found riches.

Charities also understand that there are very few places that the rich can ‘splash their cash’.  Bidding in a charity auction is a good way to display wealth – because it is ‘going to a good cause’.

The charity is also a winner, because it receives money without conditions. It can spend it on its office, website, staff, newsletters, travel, hotels, postage and packing.

Charities between them raise more than £80billion a year and employ more than one million staff. This industry is greater than the car, aerospace, or chemical industries.

There are a total of 195,289 registered charities in England and Wales, and there are probably an additional 200,000 charities which are not registered, because they have income of less than £5,000 a year, or they are a Church of England parish, or part of the armed forces.

They are regulated by the Charity Commission which is woefully underfunded. The commission has a budget of £23.3 million of which it spent £21.2million, roughly half in real terms since 2008, and this budget has been frozen to 2020. Despite the fact that the number of charities continues to increase year on year, last year it reduced its staff by 10% from 317 to 285 in the year to 31st March 2016.

There are 1,939 charities focused on children, 591 looking for a cure for cancer and 354 charities for birds. Two decades ago there were seventy charities operating in Ethiopia, today the figure is close to 5,000.

The sensible thing to do would be to consolidate these charities to get economies of scale and save on office, staff, fundraising and other overheads. But running a charity, like making donations, is in the majority of cases, a right brain activity. It is primarily driven by emotional intelligence – not logical, strategic thinking. For this reason, there is unlikely to be any great consolidation of resources and neither will they be made to do so. The Charity Commission does not have the resources nor political voice to do so.

The most that can be hoped for is for more philanthropists to take a more active interest in the charities they donate to and demand to see a more business-like approach to the running of a charity, before making a donation. Most wealthy people would not dream of investing without a thorough review of the company in which it is investing and yet give scant regard to the charity to which it is making gifts.

If you would like to become a more effective philanthropist, we can assist, and if not we can point you to experts who can. Contact Svetlana on 020 3740 7423 or  svetlana@garnhamfos.com to book an appointment with Caroline or one of her team.

 You can buy Caroline’s book ‘When you are Super Rich who can you Trust?’ from Amazon or direct from Svetlana.