Philanthropy is set to transform the wealth management industry.
The marked rise in philanthropy among high net worth Australians, combined with the need for an improved non-profit sector to replace government funding in areas like aged care and social welfare, means philanthropy is set to transform the wealth management industry, according to Koda Capital.
In an interview with financialobserver, Koda Capital chief executive and partner Paul Heath said that in a similar way to the rise of self-managed superannuation funds, philanthropy was a key trend that private wealth advice businesses should tap into as the sector would surge over the next decade.
“From a strategy point of view, if you think about the impact that self-managed superannuation has had on the wealth management business in the last 20 years, if you didn’t understand that opportunity and get your business organised around that, you’ve missed one of the great structural shifts in wealth advice,” Heath said.
“With the rise of personal philanthropy and the role that non-profits are going to have in delivering outputs in the social sector because of government budget deficits, we see phenomenal growth in the sector over the next 10 years, and Koda is about being early to say let’s support [philanthropists and non-profits] in that.”
Koda head of philanthropy and social capital David Knowles said advisers had gradually warmed over the past few years to initiating philanthropy conversations with clients, but still lacked confidence in understanding the sector as a whole and the structure of charitable foundations.
“The one thing advisers are afraid of is being shown up for not knowing what they’re talking about – it’s a bit like if you’re in Paris and even if you know how to ask directions to the train station in French, you won’t do it because you know you won’t be able to understand the information if it comes back in French,” he said.
“But what has happened over the past three years is that we have had a big public growth in philanthropy, and advisers have gone from being reluctant to talk about it at all to saying, ‘I may not understand it, but I need it in my kitbag from a business perspective’.”
According to Koda’s Giving Snapshot report, private philanthropy rose 11.7 per cent in 2015, with those who earned $500,000 a year and above giving on average three times as much as a percentage of their income as the average worker, while women gave a higher percentage than men of their income to charitable causes.
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