As part of our 20th anniversary celebrations, we are sharing 20 interviews with leaders in philanthropy and the nonprofit sector. Here Ben Morton-Wright, Founder, Group CEO and Director, Global Philanthropic Holdings, interviews John Pepin, CEO of Philanthropy Impact.

Recent times have seen a massive jump in the amount of data and insights available. Quality research data is providing powerful and indisputable evidence, none more so in the philanthropic sector than that from Philanthropy Impact.

In this interview John delves in to the sometimes-confusing terminology used in philanthropy, HMRC’s research on giving trends and what philanthropists really expect from their advisors.

Ben Morton-Wright 0:00

I’m absolutely delighted to have John Pepin join us today for the next Global 20 interview, looking at some data and research. I couldn’t think of a better person to talk to about data and research than John, welcome, John. You’ve been the CEO of Philanthropy Impact for some time now and had a huge career in Canada and Europe and across the world, working in the philanthropy space, and a huge amount of experience in the space. So we’re very excited to learn more about current trends and thinking. And thank you, John, for joining us today.

John Pepin 0:34

It’s a pleasure to be here, looking forward to it.

Ben Morton-Wright 0:40

Great. As you know we only have 20 minutes so we’ll try and keep this rapid fire. I just want to start really with the current landscape of philanthropy. Clearly the world is in a strange place but how is philanthropy doing? What’s the landscape? What are you seeing is the outlook for the philanthropic landscape at the moment?

John Pepin 0:58

I think there’s a lot going on and some really interesting things going on. So there’s a movement towards unrestricted funding, which I think is really important. There’s some real issues around power imbalance and those are starting to be addressed in a number of different ways. But I think it’s just scratching the surface so far. So you have something like transformative philanthropy, Ise Bosch out of Germany, wrote a book on it and she’s doing some really interesting things. And there’s some trust and foundations in the UK trying to deal with that but it’s a struggle, because there’s a whole issue about reporting, etc, etc, so it’s a difficult shift. There’s also in terms of giving, I think, the role of professional advisors and I’ll come back to that in a second. In terms of giving, CAF reported that pre Christmas is a high time of giving and there are 4 million fewer people giving during that period than in previous years. And I think that’s tied, to a certain extent, to the recession and the difficulty that we’re facing. If we look at high net worth and ultra high net worth individuals (HNW/UHNW), a few years ago we did a study, and one of the things that came out of it was getting a sense of what the medium gift was. And for this ultra high net worth it was around £500.

Just before Covid hit there was another study, not quite the same, comparison between the two, the samples were a bit different. But they were showing £4000 as the gift so that was really positive. I have not seen anything since then for HNW/UHNW so it’s moving in a positive direction. There is a phenomena that’s taking place where HNW/UHNW individuals, because that’s a lot of what we focus on their professional advisors, are now seeking more advice from their professional advisors. There is a real issue, though, around that in the sense that many advisory firms don’t support their clients on their philanthropic journey. So there’s a big issue around the spectrum of capital and where the changes are taking place. So there’s a client driven approach to this, where millennials, Gen, Z, women of wealth are trying to get their advisors to do more around supporting them on their philanthropic journey. And that’s all tied to the increase in ESG and impact investing and that kind of thing.

There was a really interesting statistic we came across late last year, it was an HMRC self assessment. And I’m not sure what the meaning of this is because I’ve seen all these figures to come out this thing and go in different directions and stuff. So there’s bit of contradiction. But they looked at the self assessment data, and the top 1% of earners average in income of £271,000 and they had an average donation of £48 per month. Now I think we have to take a look at that and understand that many, many very wealthy people don’t bother reporting what they are giving. So they don’t do Gift Aid, they dont report it. So it’s hard to tell with all these figures. I’ve got a feeling when Covid came in that there was a pretty significant growth and involvement and my feeling is that, despite the recession, for wealthy people I think it’ll continue. But there’s some real issues around this whole thing. But tied to it is the strong movement to wealthy people wanting to fulfil their values and in effect for the money for good, whether it’s philanthropy or in impact investing.

Ben Morton-Wright 5:42

John, obviously a lot of UK figures there but the unrestricted giving trend is something we’ve heard around the world, that was a phenomenon that was really unlocked through the pandemic. But I think it’s also interesting, perhaps shocking as well, to think of how little is given, perhaps by different segments of societies. I think that’s possibly true across the world. And something that we’ve talked a lot about, about how to encourage giving and reporting so that we actually foster more philanthropy. So I think that’s fascinating commentary.

In terms of definitions for people that are new to it, you’ve been very involved, I know, in terms of leading the whole issue around impact investing and looking at different dimensions of philanthropy. Maybe you could talk through it for people that find it difficult sometimes to get their head around the various different definitions. We had Steve Shirley on the last Global 20, (I don’t know if you had a chance to see it), but she talked about her work and it being venture philanthropy. That’s how she described it, which I think was very interesting. I just wondered if you could give us a sense of the different terminology and how we ought to use this terminology because I think it often gets quite confused in the marketplace in terms of advisors and doers in philanthropy. Maybe you could run through the key terms and how you see them evolving.

John Pepin 7:02

I think that’s an understatement because you could be holding a conversation with one person, and you’re using certain words, and the others are using completely different. So even amongst advisors or wealthy people, there’s a tendency to use different words. So we try to help with this whole thing around communication. If you can’t talk to each other, then it’s pretty hard to support people on their donor journey, for example. So we work with a spectrum of capital investment and return continuum. So if you think in terms of very traditional at one end of the continuum, you have traditional investment, at the other end you have philanthropy. And then in between, you have philanthropy which is giving away your money and no financial return, venture philanthropy which is doing the same but also bringing expertise to the table.

Venture philanthropy is interesting, because that’s growing. Now you have others starting off in the US and here and growing. There’s the European Venture Philanthropy Association, the same thing in Asia, the same thing in Africa. There’s movement in South America. And there’s now an international association, a trade association around the whole thing. So it’s really quite a growing phenomenon because people want to get involved in their giving in many cases.

I think with charities, can I just make a comment? I’ve been involved in major donor campaigns. I’ve tried to get them to look at this from a perspective of just not an emotive ask, but also a business case because many, many people are looking at this as an investment, even though they don’t want a financial return. Okay, so we have philanthropy and venture philanthropy. Next to that is social investment. So that’s similar to philanthropy and venture philanthropy where you are trying to achieve a societal end of some kind. But with social investment there’s some financial return, so in effect, a recirculation of funds. The problem is that social investment is what wholesaler in the UK, they say capital and there’s a lot of intermediaries. But there’s been difficulty accessing mainstream capital. And there’s been a breakthrough there so if we’re looking at trends, that’s potentially another trend where one of the intermediaries has access through customer capital, mainstream investment, so if that can grow that opens up a lot more money in that area.

The problem is that the focus is on doing good, not on making profits. So if you put your money in there, you’re not always expecting to get the same return as you would in the marketplace. So it’s an interesting breakthrough, we need to see what happens. From there, you go to ESG / impact investing. And there’s a variety of different problems with definition around that. ESG is really growing. There’s been some interesting changes in FCA regulations, a regulation called Consumer Duty, which has similar aspects to MiFID, but it is different. And that’s going to even push more, I think, impact investing, providing an opportunity for people, because advisors will have to talk to them about their values, motivations or ambitions, and then have set priorities in terms of their investment through that discussion.

So you have that, and there’s now what’s sometimes called Sustainable Investment. I haven’t used that term that’s often used as well, I can use all kinds of terms and and so if you look at the impact, that ESG investing, the strategic purpose, really varies, so at one end, you have avoiding harm. So it’s negative screening. And people are moving away from that. You have groups like Tonic, who are groups of wealthy people in North America and Europe, and others who are moving all of their investments into some form of impact investing. There is a shift taking place amongst wealthy people. And then you have within that, once you move beyond just avoiding harm or negative screening, you have the sustainable investments. And there’s a variety of different sub definitions within that from everything, but from paths of trying to achieve impact, right through the very act of trying to achieve impact investing and stuff. One of the issues is that many firms don’t have all the product along that continuum. And there’s also another thing that’s happening, where you have a lot of very young people again, the millennials, Gen Z, women of wealth, who are starting to contextualise their giving within SDGs. And so there’s a need to grow within that. So it’s sort of complex and confusing, and nothing gives you a headache.

Ben Morton-Wright 13:02

I think my observation as well, advising people around the world as you go around the world, it’s even more complex, because people have different views about what is their philanthropy? Where does it fit? How do they get a return? Don’t they get a return? How involved would they be? So I think maybe we’ve overcomplicated things slightly, and philanthropy is philanthropy in many ways, and what we’re trying to do is keep the flows going. And we need more of it! Back to your statistics. On your point about the next wave of generations coming through (and I’m mindful that I don’t want to use the wrong terminology. We have to be careful about terminology). But for the next generation, let’s say in the broadest sense, coming through what’s your sense, and we have touched on this on previous Global 20 discussions, about what’s in store for us. You know, are we’re gonna be out of business, or are we going to be really in business? Or is it somewhere between the two? And what’s your sense of what you’re seeing with those families that we advise, but also, you’re advising the next generations coming through? And what are they saying and what are they thinking and what can we look out for?

John Pepin 14:06

Okay, it’s interesting, just to take a little sidetrack for a second. Your point about the wrong terminology. I’m not sure. There’s the other trend, a movement and growth of donor advised funds. And you’re getting now some trusts and foundations, very large ones, who are informally considering closing down and moving into a donor advised fund. Or you’ll have some wealthy people who will have their own foundations but also take an account out in a donor advised fund. Part of it is because there’s a lack of transparency. So there’s a good side and bad side in terms of that concept. So this whole issue of language and wokeness or culture, whatever, is, I think, potentially going to make a shift. I don’t think if people strategize through doing donor advised funds, for example, then I don’t think it’ll have an impact on giving. But if people get attacked for giving and charities get attacked for receiving certain types of funds, then it’s bound to have some implications around giving.

Ben Morton-Wright 15:27 J

ohn, on that, one of the things we were talking about recently at a conference, and we’re talking about the, what I call the “co-everything”, co-funding, co-existence, and donor funds are kind of an expression of that, of doing things together. I think it’s interesting that the scrutiny now for philanthropists has led now to anonymous giving, co-giving, donor advisory funds. And in many ways the complexity about that is how you connect with the donor, because often you’re not knowing where the money’s coming from. So anyway, that’s the part of that, but I completely get that. So is that one of the trends that’s coming out of the next generation? Or is that just a general shift?

John Pepin 16:04

I think that’s a general thing around this whole cultural issue. No, I think what’s coming out of Gen Z, millennials and women of wealth, is a strong focus on a new kinds of wealth management. And it’s all around investing for good transactions and relationships, there’s a shift in that. So if you look at having a relationship as a charity with a wealthy person, or a professional advisor with a client, there’s a strong emphasis on having relationships, as opposed to just transactions. And that’s, I think, a shift that’s taking place. I’ll read you a quote from someone, if that’s okay with you? So this is from a millennial, a very, very wealthy young woman. “As a next gen woman of wealth, seeking to engage in values, aligned, impact investing, and philanthropy, the role of my advisors is absolutely essential to enable me to achieve my economic and social goals”. So it’s all around goals, and social goals. “My aim is to use my personal wealth as a force for good and to have a systemic change in key areas that I’m really interested in”. And that I think reflects a lot of the young people, wealthy young people, that we’re dealing with. And of course, if you think in terms of women of wealth, they control about 50% of liquid assets in the US. And I think that’s reflected in different parts of the world. And it’s expected in two generations, that will be 70%. The studies have shown that their personal goals, based on their values, is really key. And if their advisors, for example, aren’t helping them to meet those, they’re, being fired, no matter how long they’ve been in the family, etc, etc. So it’s really pretty significant. So they’ll switch advisors. And transparency is really important. And trust, trusting relationships, is key. For millennials and Gen Z, I’m stereotyping here to a certain extent, but as a quick summary of this, it’s more complex than what I’m saying, but there’s a belief and interest in social entrepreneurship. So the social enterprise side of this whole thing. And also tied to that impact investing. And environmental issues, societal issues, governance issues, are really important.

Ben Morton-Wright 18:58

But on that, John, just thinking back over the Global 20, we’re about halfway through this whole issue about purpose and change. I think Lady Edwina Grosvenor, who kicked off the whole Global 20, that interview was remarkable about how she’s intervening in terms of as a philanthropist, in terms of women’s prisons and change. And then obviously, we have Griff Green’s interview about cryptocurrency as well, which is maybe another point of reference, which we also did that a few months back. But I think very interesting observations. In terms of drawing to the end because we only got 20 minutes, the role of professional advisors, obviously, we’ve all been involved. You’ve been involved extensively, but our firm also has been involved in advising philanthropists. So what are your thoughts about how we grow and develop the sector and what else needs to happen, because clearly we need to encourage growth, don’t we?

John Pepin 19:52

Yeah, we do. But we also have to encourage charities who are receiving these to actually be able to communicate. So data management, business intelligence, measuring impact or outcomes, or whatever terms we want to be using, are really going to be important to communicate that. The other thing is, it’s really interesting, we’ve created a special training programme for high value major donor fundraisers, because quite often, the approach they take turns off wealthy people. So we got a group of wealthy people in a room together, talking about different things about how we can grow philanthropy, and work together on that. There’s always at least one or two who say, “well, I don’t give any more because of the way the charity treated me or didn’t treat me or whatever”. And so the training programme really looks at how a high value major donor fundraiser can be a trusted partner with professional advisors, and support the advisors clients on their donor journey. So you treat the donor not as a donor, but as a client. And if they are clients ,whose need do you meet first? Your clients, not your charities. And so some pretty significant change for a lot and there’s a growing interest in the training from the fundraiser. So in terms of growing, I’ll come back to advisors in a second, but fundraisers can pretty significantly grow. If you think the small amount of money that’s given compared to how much could be given, there’s a big market out there. Gigantic market out there. If they can reach out.

The other thing for them is language. So you do a case for support, which is legitimate and works and it’s a motive. But again, many people, especially younger ones, are focused on giving as a form of investment. And so a business case is a different way. So we do a lot of training about how to do business cases and stuff to complement what other things are doing. So fundraisers can help achieve growth. Professional advisors are really key to this. And we did some research a few years ago, it’s might be a bit out of date, but there’s some really good learnings from it and that’s driven us into the future. What we found is when we looked at the top 383 advisory firms in the UK, we found that only a small percentage were actually supporting clients or their donor journeys. And then we did 503 internet interviews and in those, we asked a whole range of questions. One of them was were they receiving advice and support from their advisors on their donor journey? And the answer was “yes, so-so” (you can tell I’m really research oriented – Yeah. So-so!). And then we asked them to rate it. And across all the different sectors, whether it’s private banks, legal tax or wealth managers, the average rating was 5.9 out of 10. Well, in these firms, if they had ratings like that… I was giving a talk on the research and I had about 70 or 80 advisors in the room and I asked how many would have their jobs the next day if they were rated that way? Put up your hands. Not one hand went up! And I don’t think they’re shy lot!

And then the next question was, do you want support from your advisors? And the answer was, yes. So one of the little statistics that came out of that was that 12% of the UK’s wealthy population, taking advice, account for 58% of the giving for HNW/UHNW. So that’s about 2,3,4 billion in that range. And then some of the cases, for example, that if the advisor supporting client, they tend to give 70 times more, so difference between 235,000 and 19,000. And there’s been other studies since then, which reinforces, so the advisers are really important in this whole area in terms of increasing. They’re not the only means to do that, but it’s an important one. Government has a role to play around this whole thing and so I think it’s a multi-level, multi-partnership kind of thing in order to grow all this.

Ben Morton-Wright 24:41

I think, John, that’s a great way to wrap this up. And the themes of the need for more giving, the themes of more professional advice, the themes of getting qualified individuals to make sure that they’re getting good advice and to make sure that advice has been acted on and the donor journey. All these are very big themes. And luckily, I think we’re in a growth business. So we should be, because the needs are getting so huge now across the world. Let’s hope that we can do more to support the development of the whole sector on the increase that capital flows. So congratulations on all the work you’ve done and continue to do and thank you for sharing your research today and giving us some more insights into definitions and current trends that we’re seeing. So thank you very much, John, for your time today.

John Pepin 25:28

One thought. It’s really important when you look at these different groups within the wealthy sector, that they want a meaningful experience. And I think that’s really important thing. So they want to achieve impact, but they want the full experience achieving that. So thank you for that

Ben Morton-Wright 25:46

That’s what philanthropy is all about, right?!

John Pepin 25:49

Yeah, very much.

Ben Morton-Wright 25:51

Thank you, John. Thank you for today.