Philanthropy as a customer retention tool 2008 - This brief explores the industry for philanthropy and its viability as a customer retention tool for high net worth Market Overview in dividuals

• Publication date: June 2008
• Report size: 22 pages

Introduction Philanthropy is growing worldwide. This brief presents the extent and characteristics of giving based on several important external studies, and proposes that wealth managers offering strong philanthropy services can retain their existing client base, and the children of those clients. Scope Sets the stage by highlighting the extent of charitable giving in US, Europe and Australia (secondary research). Explores m...

Introduction

Philanthropy is growing worldwide. This brief presents the extent and characteristics of giving based on several important external studies, and proposes that wealth managers offering strong philanthropy services can retain their existing client base, and the children of those clients.

Scope

Sets the stage by highlighting the extent of charitable giving in US, Europe and Australia (secondary research). Explores motivations for philanthropic giving. Summarizes 5 banks' industry ing of philanthropy services.

Key Market Facts

In the United States, charitable giving is on the increase due to the generosity of entrepreneurs. In 2006, charitable giving in the United States amounted to USD 289.5 billion, representing 2.2% of Gross Domestic Product, and an 11% increase on giving in 2005. Smith Barney appeals to emotive reasoning, highlighting mutual benefits: "We all have personal reasons for giving to charity, but many of us give out of a common desire to share our good fortune with others. And while our generosity can certainly improve the communities in which we live and work, it can also help us financially." 37% of European HNWs earned their wealth though entrepreneurship, according to Wealth Management Industry Leaders Survey. The extent to which HNW individuals earned their wealth from business entrepreneurship ranged from 28% in the UK to 43% in Italy.

Why Should You Buy This Report?

Gain an overview of the state of philanthropic giving. Understand the motivations for and changing nature of philanthropic giving. Provides high level advice to banks seeking to use philanthropy as customer retention tool.

Financial Services Industry in the United States

DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Charitable giving is a large and growing industry among the world's wealthy 2
Legal and social frameworks differ between countries and lead to different incentives to give 2
Charitable giving in the US is growing and totaled USD 289 billion in 2006 2
Charitable giving in the UK totaled USD 29 billion in 2006 and there are positive trends emerging within the UK philanthropy segment 6
Philanthropy is increasing in EUR pe, although there is a lack of standardization in reporting requirements 7
Foundations in both EUR pe and the US have increasing budgets for charitable work 8
Australians gave USD 11 billion (USD9.6 billion) to charity in 2004 8
Vehicles for giving used by high net worth households 9
Foundations create a structured process for giving 10
The motives of the new philanthropists are strategic 10
The philanthropic customer base is changing to one where philanthropists are driven by a cause and want to give in their own lifetime 11
The source of wealth of HNW clients has implications for the strategic advice offered by banks 12
The changing philanthropic customer base reflects changes in the motives for giving and results in a different type of giving 13
Traditional motives for giving revolve around recognition of a need to "give back" to society 13
The wealthy give for essentially four reasons 15
Banking institutions aiming to retain high net worth clients clearly link their clients' motives to the provision of services 15
Banking institutions targeting high net worth clients can use philanthropy to retain these valuable clients for generations 16
HNW customer retention is a problem for banks 16
Mixing investment and philanthropy is a valuable way of ensuring that banks retain their HNW clients 16
Intergenerational wealth transfers are increasing 16
There is a generation of young, wealthy people who are contributing to the increase in philanthropy 16
Banks differ in how they are industry ing their philanthropy services on their websites 17
Coutts 17
Smith Barney 17
Private Family Foundations - private family foundations are• legal entities established and funded by individuals to aid charitable causes. Importantly, Smith Barney points out that foundations give donors and their families the maximum ability to control their charitable investments and grant making. 18
Deutsche Bank 18
UBS 18
Goldman Sachs JBWere 19
APPENDIX 21
Four different types of foundation exist 21
Methodology 21
Bibliography 21
Further reading 22
Ask the analyst 22
Datamonitor consulting 22
Disclaimer 22
List of Tables
Data table 1: Allocation of total donations from high income US households, 2005 4
Data table 2: Private charitable donations in the United States, 2005 5
List of Figures
Chart 1: Allocation of total donations from high income US households, 2005, USD billion 3
Chart 2: Private charitable contributions in the United States, by sector, 2005 5
Chart 3: Vehicles used for giving by high net worth households in the US, 2005 10
Chart 4: HNWs whose wealth is take over d through entrepreneurial activity ranges from 28% of HNWs in the UK to 43% of HNWs in Italy 12
Chart 5: Motivations for charitable giving by US high net worth households 14