Philanthropy Consulting - How to avoid mistakes and find the right offer

“Philanthropy advising” sounds great at first - for the philanthropy advisors: you get paid by rich people to tell them how to better donate their money. A dream job, right? But it's not that simple. Philanthropy advising is part of a business of generosity that often has very different motives. A recent article in the “Chronicle of Philanthropy” called the whole sector a “Wild West”. My article sheds light on the offerings in Germany based on my many years of experience.

📚 Table of contents

1. Philanthropy advising: The actors and their incentives

2. Good advice starts with the client's interests

3. Impact investing is also coming into focus - the role of family offices

4. Particularly effective: peer networks

5. My checklist for choosing a philanthropy advisor

Philanthropy advising: The actors and their incentives

Philanthropy advisor: not a protected term

Anyone can call themselves a philanthropy advisor. But not everyone has the same incentives. The vast majority are actually lawyers or tax advisors who organise the foundation on the side or offer a donation tip. Of course, this has nothing to do with advising; at best, it is legally sound.

It is similar when the advice comes from a bank or other wealth manager. The higher the return on the assets, the better. Giving away assets on a larger scale or investing them with an impact focus at lower returns or higher risks does not really fit in with that initially.

The strategy of major banks: first advice, then wealth management

Major banks with a focus on wealth management, such as Deutsche Bank, Commerzbank or UBS in Switzerland, as well as private banks like Metzler or Hauck&Aufhäuser, are present in the scene as sponsors of relevant events and publications. They do not make money from philanthropy advising, but from comprehensive services for high-net-worth individuals. Events are often luxurious, invitation-only, and representatives from non-profit organisations come to introduce themselves. This can be useful, but ultimately it is driven by the interest of managing as large a share of the assets as possible. It is to be viewed critically when banks then present their own foundations and want to convince their clients to also stick a bank logo on their philanthropy.

Supporting their own major donors: also a question of independence

Advising provided by fundraising organisations themselves is also tricky. Some large ones offer personal support, exclusive network meetings or even the creation and management of (trustee) foundations or endowment funds for major donors. However, these are usually designed to direct all funds to the organisation - after deducting corresponding administration costs. Of course, this has nothing to do with independent advice, and one should only do something like this if one is prepared to give all the money to the respective organisation anyway.

💫 Good advice starts with the client's interests

In fact, like any good consulting, philanthropy advising should be guided solely by the client's interests. The simplest models are therefore those of consultants who do nothing else.

A (still) small advisory scene in Germany

There is only a small scene for this in Germany, because clients' willingness to pay for donation consulting is not particularly pronounced. Alongside Active Philanthropy, which focuses on climate change, or Wider Sense, which specialises in corporate giving, there are consultancies like Value for Good as well as smaller ones specialising in work in the Global South. Phineo has the broadest range of topics due to its impact analysis of hundreds of organizations in Germany (frequently dating far back, however).

Internationally established players

Internationally, the scene is much larger, and consulting firms like Bridgespan or Rockefeller Philanthropy Advisors have hundreds of consultants working for foundations, corporations and major private donors. They are only sporadically active in the smaller and fragmented German market.

Impact investing is also coming into focus - the role of family offices

Increasingly, philanthropy advising involves not only donating, but also impact investing, thereby putting higher demands on the financial expertise of advisors. This is why the rise of family offices and multi-family offices has been one of the most important developments in wealth management in recent years. Often they manage philanthropic engagements on the side. However, they usually share the same incentives as banks: the first steps of some family offices such as Aurum (Goldbeck family) to come forward with units specialized in impact are all the more welcome. There are also some that are currently opening up to manage the funds of several families with an impact focus.

Particularly effective: peer networks

The most effective advising often takes place in peer networks because they do not just share knowledge, but enable collective learning, promote collaboration and build trust. In Germany, the Ashoka Support Network has existed for a long time, and with filia.die frauenstiftung and the heiress network pecunia there are offerings for wealthy women.

Community foundations like the Bewegungsstiftung or the small network surrounding the Guerrilla Foundation in the activist spectrum are also part of this. In recent years, networks such as brafe space or the Together Foundation have also built up a network that meets for deeper and personal workshops.

And finally, the academic scene has caught up with the US, and in Zurich, for example, the CSP led by Prof. Falko Paetzold has built up a large, international network for next-generation wealth owners, where training and peer networks intertwine. Founders Pledge has also built up a relevant network in Germany and supports successful founders in fulfilling their pledge to donate.

My checklist for choosing a philanthropy advisor:

1. Does the advisor have an independent view of as many potential recipients as possible and expertise in the subject matter?

2. Can the advisor involve legal and tax expertise?

3. Does the advisor not actually make money from something other than advising?

4. Does the advisor also understand impact investing?

5. Is there a connection with peers?

👉🏼 If you have at least four “yeses”, the advisor is worth considering and should be paid fairly, because an ineffective or poorly sustained strategy is ultimately much more expensive.

Fees range between 500-1,500 euros per day depending on the advisor's experience. Caution is advised regarding hidden costs, such as hourly billed fees from foundation managers who also earn a percentage of the assets under management or distributions.

bcause does not offer philanthropy advising.

💡With the Club Neues Geben, bcause now makes it easy to find the right provider or network for philanthropy advising. Selected ecosystem partners offer webinars as well as initial consulting for club members free of charge. Anyone interested in the offer can obtain information from Katharina Bauch at katharina.bauch@bcause.com.