Philanthropy and good investment management - Milford Asset

Philanthropy and good investment management

Richard Pilley

Authorised Financial Adviser

Richard joined Milford in 2017 and has over 20 years experience in the wealth management industry in Europe and NZ. After helping to build the presence of a major Scandinavian bank in London, he went on to gain experience in their asset management division in Stockholm. On returning to London he worked at a senior level with a number of leading European wealth managers including Credit Suisse and Julius Baer. Richard and his family moved to NZ in 2008 and he joins Milford from ANZ where he was Associate Director in the ANZ Private Bank. Richard holds a Diploma in Business Studies from the UK and he is an Authorised Financial Adviser.

Recently I was fortunate enough to attend the Kea World Class New Zealand Awards and I was impressed by the some of the stories of great New Zealanders doing good work around the world. The winners of the Supreme Award, Neal and Annette Plowman, usually keep a low profile but they wanted to accept the award and highlight some of their philanthropic activities to show what can be done by families with wealth who have a vision and take steps to implement that vision.

I wrote a blog about philanthropy a few months ago (found here) where I touched on the beneficial effects of philanthropy for wealthy families and I thought it was worth re-visiting this topic.

The Plowman family are a good example of how high net worth families can use their wealth to help good causes, but for many wealthy families, knowing where to start is a daunting process. Often the decisions around how to structure their giving and what causes to support are just too hard and their philanthropic ambitions get pushed to the bottom of a long “to-do list”.

As I mentioned in my previous blog there are organisations that can help with this process, such as The Auckland Foundation and The Gift Trust .

A simple solution

One way a high net worth individual or family could structure a lasting legacy to benefit good causes for many years to come is to carve off a part of their wealth and set this aside in a separate fund to distribute to their chosen causes from time to time. This does not need to be a complex process and often there is no need to form a complex charitable trust fund. It can be as simple as establishing a “gift account” via one of the organisations mentioned above.  This involves “donating” the funds to the organisation setting up the gift account, but the donor retains control over where the fund is distributed and how the fund is invested.

Prudent investment management

There is a temptation for donors to be ultra-cautious with these funds and to simply place them in cash accounts or term deposits while distributions are made over the years.  However, depending on the overall objectives for this fund and the time frame over which it is to be distributed, these low return options may not represent the most prudent strategy. It is still important for these funds to be managed professionally, to grow and to generate a return that is in line with the objectives and expectations of the donors. This is where investment advisers and investment managers can help. A good investment adviser can help the donor to decide on the most appropriate strategy for these funds and put together a portfolio that suits the risk profile, investment horizon and the amount and frequency of distributions.

A gift account can be opened with the donors preferred investment manager and funds transferred from the donor to be managed in accordance with an agreed strategy. These so called “donor advised accounts” are becoming increasingly popular overseas (particularly in the US) although they are still relatively unchartered territory in New Zealand.

The benefits of this approach are clear in terms of the simplicity and ease of set up. Additionally, the following advantages stand out in terms of the investment of the funds;

  • The ability to retain the donors existing investment advisers with whom they have a good relationship and who they trust to achieve the investment goals and objectives of the fund.
  • The opportunity for the donor to have continuous involvement in decisions relating to both the charitable giving and the investment strategy of the fund.

Clearly, not everyone has the means of the ultra-wealth to establish large charitable trusts. But hopefully this article demonstrates that it is not necessarily a complex process to set up a fund for your charitable giving and that fund can continue to benefit from good investment management.

A disclosure statement is available on request and free of charge.

Disclaimer: This is intended to provide general information only. It does not take into account your investment needs or personal circumstances. It is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser. Past performance is not a guarantee of future performance.