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THE FAMILY OFFICE PERSPECTIVE: DEFINING A PHILANTHROPIC VISIONJOHN RHODES – STONEHAGE LAW LIMITED, LONDON

November 2013

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INTRODUCTION

I Comparison with Private Practice

I Differences between Single and Multi Family Offices

I Defining a Philanthropic Vision as part of Family Identity

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REASONS WHY WEALTHY FAMILIES ENGAGE IN PHILANTHROPY

A. Family, Religious or Cultural tradition

B. Time to give something back to society; improve public image

C. Bring business standards to the Charity / NGO sector

D. Educate / broaden outlook of younger members of family

E. Tax Advantages

F. Retain control of family business

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A. FAMILY, RELIGIOUS OR CULTURAL TRADITION

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1. Most civilisations create religions which then encourage Philanthropy

2. Classical Greco-Roman views

3. Mainstream Religious traditions:

(a) Jewish ( b) Islam (c) Buddhist (d) Christian

4. Humanist approach in Western Materialist Society

5. How much merit attaches to making gifts that never threaten your standard of living?

6. How do you balance responsibilities to society and your family?

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A. FAMILY, RELIGIOUS OR CULTURAL TRADITION

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Philanthropy is one of the defining characteristics of our family. My grandfather said to me many times –

“You must learn to give before you receive, I hope future generations will carry on this tradition.”

Hedge Fund Manager Michael Hintze quotes Luke 12:48

“for unto whomsoever much is given, of him shall be much required”

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B. TIME TO GIVE SOMETHING BACK TO SOCIETY

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1. Contributing to the Social Contract

2. Improving the public image of the rich

3. CAF/ Rich List statistics

4. Does it make capitalism more acceptable?

5. A new and fascinating experience for some entrepreneurs

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B. TIME TO GIVE SOMETHING BACK TO SOCIETY

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B. TIME TO GIVE SOMETHING BACK TO SOCIETY

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“I have found that with money the two happiest times are first when you are making it and

second when you are giving it away” David Kirch on giving away £100m

 

Bill and Melinda Gates and Warren Buffett initiate The Giving Pledge in 2009.

 

Now signed by over 100 of the world’s richest people including Richard Branson;

David Sainsbury; Mo Ibrahim; Mark Zukerberg.

 

Warren Buffett : “if you are in the luckiest 1% of humanity, you owe it to the rest to think about

the other 99%”

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C. BRINGING BUSINESS EFFICIENCIES TO THECHARITABLE SECTOR

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1. Efficient investment of resources

2. Efficient deployment of resources may be more difficult

3. Benchmarking and research on projects

4. Focus on sustainability and potential for scaling up

5. Seed corn funding / venture philanthropy

www.kusumatrust.org

www.visionforanation.org

https://vimeo.com/78755105

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VISION FOR A NATION WEBSITE

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VISION FOR A NATION FOUNDATION

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D. ENGAGING THE NEXT GENERATION

1. Introduction to the management of money / investments

2. Create awareness of the "real world"

3. Opportunity to take responsibility for a project

4. Learn about success and failure

5. Focus for Family Meetings, even when no business imperative

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MAPUTO

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E. TAX ADVANTAGES

1. Only relevant where family/ source of funds liable to tax

2. High Tax funding of Welfare State diminishes personal responsibility

3. But complex tax systems usually encourage philanthropy via tax deductions

4. Such deductions return responsibility for spending decisions to individuals

5. Watch cross border issues

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F. MAINTAINING CONTROL OF A FAMILY BUSINESS

1. Not a charitable purpose per se

2. Single asset trust fund always an investment dilemma for any trustees; particularly so for a Charity (notwithstanding indemnities in trust document)

3. J P Morgan study of Forbes List

ExamplesI Baring Foundation I Sir Hugh Wontner’s D’Oyley Carte TrustI Sir Jules Thorn’s Charitable Trust has turned £1m Thorn EMI shares into £110m portfolio over

50 years

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ISSUES TO BE DISCUSSED BEFORE A FAMILY CHARITY ESTABLISHED

1. Is there any need to create a formal vehicle?

2. Is there any need to re-invent the wheel?

3. If a new vehicle is required

a) Decide on funding >> capital endowment or regular income commitment?

b) Select jurisdiction: onshore/offshore?

c) Common law trust/ corporation or Civil law Foundation?

d) Irrevocable commitment to Charity or retain a trapdoor to recover funds in emergency?

e) Regulated / on a public register or not?

f) Who is to control it?

g) Who is to administer it? Can it be done in the FO or by an agency (e.g. CAF)?

h) Determine Spend rate (Spend Out or Endowment)

i) Determine investment strategy

j) Select appropriate independent trustees/ board members

k) Work out charitable objectives and strategy

l) Prepare budget with targets for administrative costs and annual spending potential

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