Fewer low to middle-income Australians are donating to good causes, meaning charities are increasingly reliant on high-net-worth individuals.
As the response to the recent bushfires demonstrated, Australians are a generous bunch. But factors such as flat wage growth, more insecure working arrangements and high housing costs mean that fewer average Australians are donating to charities and not-for-profits. Those that are still contributing are donating less, in real terms, than they used to.
That’s the bad news.
The good news is that wealthier Australians are showing a growing interest in philanthropy. What’s more, they are bringing a fresh perspective and innovative approach to tackling environmental, educational, medical and social problems.
If you’ve made enough money to take care of yourself and your loved ones and are now interested in philanthropy, the following insights may useful. Below, Sarah Wickham, the Policy and Research Director of Philanthropy Australia, Andrew Hagger, the CEO of Andrew Forrest’s Minderoo Foundation and Julien Brodie, Senior Banker at the Family Office Group of ANZ Private, provide answers to the questions commonly posed by would-be philanthropists.
What exactly is a philanthropist?
For many, philanthropy conjures up a vision of a captain of industry funding an eponymous university building. Or perhaps their socialite wife hosting an exclusive lunch to raise funds for a children’s hospital. In reality, anybody can be a philanthropist and, at some point, most of us are.
“The research shows there are five reasons people engage in philanthropy,” Wickham says. “They might have had a religious upbringing and be taught it’s a sacred duty to give to others. Or they might have been raised in a non-religious household by humanitarian parents who stressed the importance of contributing to society.”
Even if they weren’t raised by philanthropic parents, many Australians take up charitable giving as a result of life events.
“The classic case of this is a misfortune someone experiences, or sees a loved one experiencing,” Wickham says. “If your sister gets breast cancer, you’re probably going to be more interested in donating to breast-cancer charities than you would otherwise have been. Likewise, when people have a liquidity event – for example, selling a business – they often start thinking about giving back to society. Another reason people are inspired to give money is out of community spirit. This is particularly common if they live in tight-knit communities such as are often found in rural and regional Australia.”
“Andrew and [his wife] Nicola summed up their philosophy when they signed the Giving Pledge in 2013,” Hagger says. “They stated, ‘We feel that if we all do whatever we can with whatever we have, large or small, then each of us will help make our world a more equitable and positive environment for others to thrive in.’”
“Affluent Australians are engaging in a range of philanthropic activities for a variety of reasons,” Brodie observes. “There are donors that choose to be more public about their contributions and provide transparency on their activities. Others keep a low profile and give privately because they believe there is a social obligation to voluntarily redistribute part of their wealth back into the community and support those less fortunate. Some want to leave a legacy of philanthropy or enjoy the kudos that comes with being, for instance, a patron of the arts. Whatever the motivation, the contributions and support from the wealthy assist charitable organisations affect change and make for a better world.”
How do I choose between worthy causes?
Even the most well-resourced of philanthropists can only support, at most, a handful of good causes. So, how does an aspiring donor determine which causes to donate their money – and possibly also their time and expertise – to?
“People’s giving is shaped by their life experiences, values, politics and worldview,” Wickham says. “If you’re a self-made man or woman whose life trajectory was changed by a university scholarship, you’re going to be inclined to support educational institutions and charities. If you believe climate change is an existential threat, you’re going to want to fund environmental groups. People need to think about what issues they see as most pressing and what kind of world they want to live in when choosing between charities.”
“As the world changes, philanthropy changes,” Hagger says. “Minderoo invests in creating parity for Indigenous Australians. But it also seeks to address new challenges. For instance, in 2019 we launched an initiative to develop a workable governance structure around AI.”
“Over recent decades, there has been a growing number of causes and charities, which is great,” Brodie says. “In the old days, if you wanted to donate to, say, an environmental organisation, there was Greenpeace and the World Wildlife Fund. Now there are a multitude of options, which means people can give money in a more targeted fashion that aligns closely with their passions, interests and wider strategy for giving.”
Should I be hands-off or hands-on?
Historically, most Australian donors have been ‘chequebook philanthropists’. That is, they’ve donated to charities, not-for-profits, educational institutions and theatre companies then let these organisations use the money however they see fit.
But, like so many other sectors, the charity/not-for-profit sector has been disrupted in recent decades. Rather than just signing a cheque, well-heeled Australians have been creating their own vehicles for giving.
“Before establishing a structured giving vehicle, such as a Private Ancillary Fund (PAF), one of the things donors should consider is the compliance and administration costs and the expected size of their contributions to determine if there is sufficient scale,” Brodie says. “Furthermore, they need to factor in the level of personal commitment and time to administer the entity or oversee the staff employed to run it. Some people can find that stressful and might prefer to just write a cheque.”
That noted, Brodie says that the more you put into philanthropy, the more you are likely to get out of it. “Many prominent Australians – along with their family members – derive enormous joy and fulfilment out of being involved in a family foundation,” he says.
Hagger agrees. “It’s similar to choosing between putting your money into a managed fund or playing the stock market,” he says. “It’s not that one is better than the other, just that one is likely to be more appropriate to your individual circumstances. The usual trajectory, which is what occurred with the Forrest family, is that individuals start as hands-off philanthropists. They then become more hands-on as they acquire more knowledge and discover how fulfilling philanthropy can be.”
How do I ensure my contribution will make a real difference?
Wickham and Brodie implore aspiring donors to do their due diligence. “The sector is regulated by the Australian Charities and Not-for-profits Commission, so scam charities don’t tend to last long,” Wickham says. “But that doesn’t mean there aren’t plenty of questionable organisations around soliciting donations.”
“I recommend doing your own research and seeking advice from people in your network who have a history of giving,” Brodie says. “For example, many charities run on a low overhead, but some incur large administration and marketing costs that can swallow up contributions. Therefore, it’s prudent to understand an organisation’s financial metrics and how its funds are being deployed.”
While your money may be pocketed by a con artist or swallowed up by a bureaucratic not-for-profit, the greater risk is that it won’t have the impact you hoped it would.
“The obvious example is efforts to close the gap between Indigenous and non-Indigenous Australians,” Wickham says. There’s no magic-bullet solution to solving intractable social problems. But Wickham argues a little humility on the part of donors can go a long way.
“The old-school approach was for a cashed-up individual or organisation to swoop into a community and – without consulting that community – roll out projects,” Wickham says. “The smart operators have now realised that, whether it’s Alice Springs or Addis Ababa, that approach rarely yields lasting results. If they want to have a long-term impact, philanthropists need to work out what issues the community most wants addressed and, ideally, get local community leaders involved in creating programs to address those issues.”
Hagger agrees with Wickham and Brodie about the need for due diligence. But he warns that expecting a 100 per cent success rate in philanthropy is as unrealistic as expecting never-ending triumphs in any other field of human endeavour.
“Andrew and Nicola have always taken the view that a certain percentage of initiatives are not going to deliver the expected outcomes,” Hagger says. “They accept that because they understand that freedom to experiment is essential if innovations are to emerge.”
Where can I go for expert advice about charitable giving?
“Philanthropy Australia’s core mission is to foster “a more giving Australia” so we are happy to speak to anyone who wants to start giving,” Wickham says. “We always recommend aspiring philanthropists talk with their accountant, financial adviser and lawyer before making any donations. Among other things, they will be able to explain the tax implications of different types of charitable contributions.” Brodie echoes that advice and points out that bankers can also often provide assistance to clients wishing to start giving.