Subscribers | Charities Management magazine | No. 118 New Year 2018 | Page 5
The magazine for charity managers and trustees

Making use of investor donation schemes

The charity sector has been subject to criticism from some quarters focused on a failure to modernise. A standard refrain has been a perceived lack of technological savvy: the Charity Digital Skills Report highlighted some 61% of charities rate their digital fundraising skills as fair to low, and calls for improvement are common and loud.

Developing these digital fundraising skills is certainly important. But improved digital skills are a means to an end, the end being cost effective fundraising. And fundraising overall is complicated by a limited number of fundraising channels. It is typically done via TV, phone call, text messages, social media, direct mail, email, door-to-door and on the street – and these methods are treated as the only dependable sources of donations. But what if there are other channels that haven’t been explored?

Some 42% of the UK adult population has a minimum of £30,000 of investable wealth at their disposal; better yet, there’s a lot of demographic overlap between charitable/socially responsible donors and retail investors. It’s an audience with more to give, and more inclination to do so.

So how can charities mine this audience?

An unappreciated channel

The UK is one of the world’s foremost financial centres – and the largest retail investment market in Europe. Charities, however, haven’t traditionally thought to turn this market to their advantage in relation to their fundraising efforts.

Maybe charities simply don’t know where to start in this respect. The older generation, for example, remains a huge source of potential donations: a survey of UK financial advisers revealed that 20%-50% of their clients are 70 or over – and 8% claim that this demographic comprises over 50% of their client base.

Targeting a more senior cohort is likely a smart move: those over 45 are more likely to give monthly monetary charitable donations according to the Charities Aid Foundation. At some wealth management firms, the average client age is 40 – and approximately half of all clients are in their 40s, 50s, 60s, and 70s.

There is therefore a natural demographic alignment between those most likely to have money under management and those most likely to give money to charity.

How do you get started if you’re a charity keen to explore this channel? STEP ONE: partner with an asset management firm that is able to embed your charity within an investor donation scheme. Such a scheme would offer investors a variety of charities to donate to.

The process is relatively simple. Here’s a quick example of how it works in practice. Let’s say Mrs. Johnson has a portfolio valued at £100,000 at the beginning of the year. She wants to give 10% of her annual gain to a charity and her investment manager has a scheme to facilitate this.

If at the end of the year her portfolio is worth £105,000, the donation then amounts to £500, and can be boosted to £625 by Gift Aid (higher rate tax payers may be eligible to reclaim tax against this). Not an insignificant amount, especially when you consider how much your donors have invested. The key, obviously, is to ensure your charity features as one of the choices in the scheme.

Augmenting the charitable choice

Asset management providers offering these charitable schemes will often pledge a percentage of their fees to the total annual donations – augmenting it further. What’s more, these donations are received without any involvement from the giver. There’s no need for them to sign up for monthly or quarterly payments, or actively remember to make their contribution at all. All they do is select the charity they want to support in the first instance.

And partnering with a firm that offers a charitable giving scheme embedded in an online “non-advised” service for investors provides an even more scalable opportunity.

STEP TWO: focus on ethical and sustainable investments. Donors are naturally imbued with a strong sense of principle – in a recent CAF report, when asked, “How strongly would you say the following has influenced your desire to give to charity?”, 96% responded – “My own sense of morality/ethics”. Donors are not going to be best pleased if their charity get into bed with a wealth management partner which peddles portfolios full of firearms and tobacco companies.

Anyway, there’s every reason for charities to work with partners offering ethical products – they perform well. In the investment world, the popularity of passive Environmental, Social and Governance (ESG) strategies is notable, with significant inflows, and assets increasing by more than 18% in 2016.

In fact, if you compare the returns of the FTSE All Share Index of UK companies against the returns of the FTSE4Good UK Benchmark of companies demonstrating strong ESG practices, we can see that over a five year time horizon, the FTSE4Good UK Benchmark returned 29.3%, while the FTSE All Share returned 26.4%.

A modern donating approach

Exploring wealth management links to trigger donations is naturally beneficial for charities, but it also reflects the changing preferences of modern donors. It’s less intrusive; it doesn’t require them to sacrifice any of their available resources, and if all goes well, they still make money.

Indeed, the connection between charity and wealth management is a natural one: some 62% of UK investors say they want to support companies that make a positive contribution to society and the environment. At the same time, 51% have never been given the opportunity to invest in socially responsible organisations.

Arguably, if your charity is focused on religion, hospitals/hospices, or disability, then reasons to explore this fundraising channel are even more pronounced, as these charities are more popular with older age groups more likely to have money invested.

Wealth management is an unexploited fundraising channel, but one with clear potential. Make the connection. Donors who simultaneously want to and can help are a rare commodity – and the investment community has plenty of both.


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