A change of gears

As family businesses shift their emphasis from building businesses to building philanthropic networks, Charles Raymond, managing director and philanthropic adviser for Citigroup's Global Wealth Management Group tells Families in Business about the new trends

Families in Business (FIB) Tell me about your background and how you got involved in advising Citigroup's ultra high net worth clients on philanthropy.

Charles Raymond (CR) From 1998 until August of 2005, I was the President of the Citigroup Foundation. The Foundation is the philanthropic arm of Citigroup. In 2005, the Foundation gave over $100 million dollars to 2,400 not for profits and non-governmental organisations (NGOs) in 84 countries. Prior to heading the Foundation, I worked for the Mayor in the City of New York operating departments that dealt with housing, homelessness, mental health and alcoholism. I was also the managing director of the New York City Ballet for five years. Interspersed between these assignments were stints working in the private sector in financial services and manufacturing.
 
My interest in working as an advisor on philanthropy to ultra high net worth clients of Citigroup stemmed from the fact that I had met many individuals and family donors in my role as president of the Foundation. Many do not have the time or desire to wade through annual reports or websites and choose the ones that might be of interest. In the US alone, there are over 1.2 million not for profit organisations. Also there are a number of donors who want to engage with organisations but do not know how to access them. There are a number of individuals that have successful careers and want to redirect their skills and interests to supporting new and innovative philanthropic programmes. And there are a number of donors that want to collaborate, share ideas and pool resources. I see a real growing interest among the wealthy to contribute to the betterment of society.
 
So what I do is take my knowledge, contacts and the relationships I have developed over the past 35 years. To that I add the resources and global reach of Citigroup coupled with some unique products and services that are available in the philanthropic and social investment space. We provide Citigroup's ultra high net worth clients a tailored set of options to choose from. Out of this we have formed an elite service for a select number of our best clients and have named the entity the Philanthropic Alliance.

FIB Many financial services firms have philanthropic advisers. What are some of the different approaches used?

CR Many financial firms do have advisory services. But there are various approaches to providing this service. Some firms use this service as a marketing tool, something the banker or financial advisor can offer that may be of interest to the client. If desired, the client will be exposed to a general overview of philanthropy and usually this is enough to satisfy both the client and the banker or financial advisor. Other firms will offer advise that might culminate in the client either opting to set up a foundation or give through a donor-advised fund or community foundation. At Citigroup, through the Philanthropic Alliance, we try to go the next step, working to engage clients by educating them in what some of the cutting edge philanthropic opportunities might be. We work to expand their worldview and encourage them to look beyond their local communities, have a global perspective and to identify projects and programmes they may want to support.

When it comes to investing their money, wealthy clients generally have an endless array of bankers, advisors and consultants to help them make decisions. Often it is a very different story when it comes to giving your money away. Where do you go, who does one consult with? How do you know your money is being well spent? Someone once said to me that it is harder to give away money then make it. I would agree with that. It is all about resources, engagement, follow up and collaboration.

FIB What are the changes you see in giving patterns among wealthy individuals and Foundations?

CR Many wealthy families and individuals as well as Foundations have long histories of supporting organisations in towns and cities where the donor resides. Support of local arts organisations, youth programmes, alma maters, local hospitals, are all vital to a healthy community and require on-going support from the philanthropic community. Often members of these families take leadership positions on the boards of these institutions and there is a certain recognition that donors get for their efforts. I would say that this kind of giving could be described as traditional philanthropy. What makes this funding even more important is the fact that, in the US, there has been a dramatic reduction of government support to locally based charitable organisations over the past 20 years.

The growth of private wealth around the world over the past ten years has been staggering. In the UK in 2005, the top ten philanthropists gave almost £300 million to NGOs around the world. The Gates' and Warren Buffet have pooled their resources to attack the most difficult health issue, education and microfinance and Sir Tom Hunter has developed an alliance with Bill Clinton to work on poverty alleviation in Africa. The Omidyer Network has given $100 million to Tufts University to support microfinance around the world and Sanford Weill (past chairman and CEO of Citigroup) and his wife Joan have pledged to direct the bulk of their wealth to philanthropic endeavors mainly in health, education and the arts.
 
These are a few examples of a major shift toward philanthropy. Lined up behind these donors and many others like them is a whole new generation of wealthy individuals and families that will begin to shift their emphasis from building their businesses to building philanthropic networks and directing their attention and expertise to solving some of the world's most retractable problems.
 
There are far more philanthropists today that want to get engaged with organisations they support. Many are directing their skills and talents that served them well in building their businesses and in turn their wealth, to working with organisations in the not for profit or NGO world. The industry has labelled this kind of engagement venture philanthropy.
 
FIB Is there a trend or maybe pressure to give globally? Is this a pattern that is evident among foundations and individuals in the EU and the US?

CR There are a number of factors that have influenced a shift from giving locally to giving globally. Global awareness has been heightened by the media bombarding us with up to the minute realities facing those in the Sudan, the Congo or Iraq, by the renewed emphasis on health and poverty in Africa, and by the publicity generated though celebrities and high profile individuals who are promoting global causes. It is interesting to note that one of the European Foundation Centre objectives is to encourage funders in the EU countries to increase to 5% their donations outside Europe.

FIB The Bill and Melinda Gates Foundation has become a force of nature in the philanthropic world. Add to that the fact that Warren Buffet has given over $31 billion to Gates to distribute on his behalf starting in 2009. What is the impact of this extraordinary phenomenon on individual donors and foundations?

CR It is clear that the Gates Foundation has helped awaken many philanthropists to a new paradigm that couples the ability to focus on a limited number of causes, to have a pre- and post-evaluation mechanism to measure success and failures and to have unlimited financial resources. Gates has taken advantage of the business acumen and management skills that helped him build Microsoft. On the other hand, the Foundation has maintained the ability to be innovative, creative and have the freedom to take risks.
 
The reaction to the donor public has been mixed. Some feel that the government might reallocate their funding priorities because Gates has focused on a particular problem. Some also say that donors who might have smaller sums to contribute might look for other causes to support and let Gates go it alone.
 
Donors want to be involved far more then they used to. If you give $10 million to support the eradication of malaria and Gates gives $250 million, how do you get heard? I think it is incumbent on the Gates Foundation to address this issue and work out ways to segment projects, develop collaboration strategies and give smaller donors a voice in the process. This is tough to do but I think it imperative.
 
It is interesting to note that when Warren Buffet was asked by a reporter why he decided to give his fortune to the Gates Foundation, he candidly said that he did not have the expertise or knowledge to give away his money effectively. He also stated that he felt the focus of the Foundation aligned with what he felt were the critical issues facing the world today and lastly he had a relationship with the Gates' based on trust and mutual respect.