Wealth managers learn altruism

High net-worth clients are privy to a number of special services from private banks that use their expertise to invest and manage wealth not just for one client's lifetime, but for future generations as well. Increasingly, such clients are looking for services that can help them realize philanthropic goals and manage those projects. Major U.S. banks all offer some form of philanthropic services, whether through in-house staff or cooperation with an outside expert.

The trend, and demand, is inevitably reaching the Czech Republic and the CEE region, said Claire Costello, a lawyer and National Foundation executive for philanthropic management at Bank of America Merrill Lynch. The Nadace Via foundation, a Czech nonprofit that supports the development of NGOs, has close ties to the U.S. Embassy and recently invited Costello to Prague in conjunction with the PricewaterhouseCoopers Business Community Center in Prague to speak to representatives of private wealth branches of Czech banks about bringing together their clients and philanthropy services. Costello sat down with The Prague Post before her seminar to speak about the growing trend.

The Prague Post: Who will you be meeting with in Prague, and what will you be communicating to them about the role of philanthropy in private wealth management?

Claire Costello: I'm meeting with several different banks' private bank divisions, which are really catering to high net-worth individuals. I'll also be speaking to consultants, advisers and lawyers who are not necessarily affiliated with banks but who have the same opportunities and vantage point as private bankers. It's really anyone who can help facilitate the giving of those who are inclined to do so. It's clearly not as pronounced as it is in the United States, but I think the concept still rings true. Philanthropy has been mainstreamed enough.

What people used to do was give what was left: You save for retirement, put your kids through school and take care of your needs first, and then if there's some left, you consider giving that away. Now, it's something you do while you're living. It's not an end-of-life thing anymore, and it's much more embedded in the wealth-structuring process. It does require expertise, and it's something major banks around the world either all have in-house or have a relationship with an outside service. It's a fact of life, and it's to the point now that a skilled adviser needs to have this ability, and if they don't, they need to know where their comfort level is with it and be able to hand it off to someone trusted who does have that ability. It they don't do it, someone else will. If they're not doing it out of genuine interest or for the goals of their clients, they should be doing it because, if for no other reason, their competitors are doing it.

TPP: This might be oversimplifying it a bit, but why does someone who wants to get involved with philanthropy need this sort of expertise, rather than simply saying, "I'm going to give X amount to my favorite charity"?

CC: That's a common question. There's a curiosity as to what's so hard about it. I think it's first of all a question of terminology, the difference between charity and philanthropy. The notion of philanthropy and deploying these assets has many components. Aristotle has a great quote that says it's easy to give money away, but it's not as easy to give money away well. It's knowing how to assess the goals and doing your due diligence.

I spend a lot of time with clients, and it's surprising how difficult it is to answer what it is they really care about. Once you put it in terms of "what do you want for your children, grandchildren, and what kind of world do you want them to grow up in?" then they can really try the question on for size. No one person is the same. For example, if you give 50 people money to donate to education, they're all going to deploy it in different ways. One person might build schools, one might buy computers, one might create scholarships, or maybe someone wants to take a more systemic approach and touch the unions or curricula. It's not a cookie-cutter process. You have to really find the clients' interest area and work with their skill set, figure out what their benchmarks for impact are and have someone who manages all that.

TPP: How developed is this sector in the United States?

CC: It's quite robust. Speaking from my shop, at Bank of America Merrill Lynch we have a staff of 150 dedicated just to philanthropy, serving both nonprofit institutions and private individuals in families. I'd be challenged to name one financial institution that caters to wealth that doesn't have some sort of philanthropic service, even if it's through an outside vendor.

TPP: Do you anticipate it will reach the same level in other markets?

CC: The purpose of my visit here is to connect what banks are doing in the Czech Republic to this movement and raise consciousness for what this is. Even from a strict wealth-structuring standpoint, this is an important component. It's something you have to be able to weave into someone's profile, and banks need to know what the characteristics are of a skilled adviser. For those who feel uncomfortable or out of their depth, it's important to get over those hurdles if you're afraid to ask your client about that. It's not that hard when you think about the intimacy between bankers and their clients. They deal with prenuptial agreements, wills and other personal matters, so it's arguably less personal to simply ask your clients what they really care about and make them aware of how important this is to their wealth profile.

Claire Compton can be reached at
ccompton@praguepost.com