The Financial Conduct Authority (FCA) should make philanthropy advice training mandatory for financial advisers and introduce regulations to ensure it is discussed with clients says Law Family Commission on Civil Society, led by former Cabinet Secretary Lord Gus O’Donnell.
Pro Bono Economics has released new research for the Law Family Commission on Civil Society that urges the FCA to take action to enhance “the quality and the amount of financial advice and assistance on philanthropy” in the UK and makes four major recommendations.
In spite of income growth, the top 1 per cent of earners reduced their typical charitable contribution by a fifth between 2011–12 and 2018–19, according to data conducted for the Commission last year. The report suggests that financial advisers could take more initiative to reverse that loss. According to the Commission, if every member of the top 1 per cent of earners increased their charitable giving to 1 per cent of their income, it could bring in up to £1.4bn annually for nonprofit organisations.
The newly released research, “Giving advice: The case for the FCA to act on philanthropy,” finds that, with the exception of a small number of industry pioneers like Coutts and C. Hoare & Co., it is uncommon for all clients to receive high-quality philanthropy advice. This is attributed, according to the report, to a number of things, such as “lack of incentive,” “traditional mindsets and culture,” and “a lack of regulatory clarity and leadership.”
It also finds that in improving the quality and quantity of philanthropy advice, the FCA would be “fulfilling its duty to ensure that consumers receive the products, services and advice that they are requesting from the sector”, as well as advancing its own ESG ambitions.
The report highlights four key recommendations for the FCA review the market for financial advice and guidance on philanthropy, demonstrate to the financial services sector the important role that philanthropy can play in unlocking public benefit, mandate education and training on philanthropy for relevant financial advisors and introduce sustainability requirements into suitability assessment, with an emphasis on philanthropy’s role in contributing to sustainability efforts.
Pro Bono Economics policy and communications director Nicole Sykes says: “Philanthropy is a major source of finance for charities in the UK, contributing £20bn each year. But there is a real opportunity to grow this.
“With the country’s highest earners shown to be giving less to charity with each year, financial advisors have a huge role to play in turning this around, as the people who the wealthiest talk to about their money.
“As demonstrated in the US, widespread specialist philanthropy advice reaps enormous benefits for society and financial services firms alike, and we need to see the same in the UK.
“This requires leadership and stewardship from the FCA, which has the tools and influence required to help unlock far more of the true potential of philanthropy in the UK.”