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Chris Davis

ANNOUNCEMENTS BY Hong Kong entrepreneur Li Ka-shing that he intends to channel a third of his fortune into worthy causes have brought Asian philanthropy into the limelight.

'Hong Kong's wealthy individuals and families have a long tradition of philanthropy, but often money is donated privately without any fanfare,' HSBC Private Bank philanthropy adviser Cynthia D'Anjou-Brown said.

Ms D'Anjou-Brown said that while Mr Li's high-profile announcement might prompt other philanthropic individuals and families to be more candid about their benevolent activities, the three pillars of successful philanthropy remained the same.

These comprise having a clear focus on philanthropic objectives, putting in place criteria or standards to screen requests for support, and initiating methods to measure results and impact.

'The broad difference between philanthropy and charity is the expectation of results. Charity is usually a one-off donation while philanthropy is a purposeful course of action with the expectation of results,' Ms D'Anjou-Brown said.

'Philanthropy calls for many long-lasting considerations such as the best way to approach issues and encouraging family involvement.'

Helping families and individuals set up a charitable structure involves establishing a framework that allows wishes and objectives to be clearly set out and achieved. Sometimes, the legal requirements of charitable trusts contain rigid restraints that may inhibit philanthropic goals or future intentions. Therefore, having a short-term and long-term plan, similar to a business plan, can help ensure that the trust achieves its purpose.

'There are general trends, but there is no 'one size fits all' solution. Every charitable trust will have its own unique character,' Ms D'Anjou-Brown said.

The real issue is how the foundation can put the money to its best uses.

'A well run foundation distributes its money strategically and monitors how effectively it is used. In many cases it is not so much about the amount of money allocated to a project but more about the way the money is spent,' Ms D'Anjou-Brown said.

Often, a trust most efficiently brings about benefit when it has a narrow focus.  For example, a favourite channel for Hong Kong philanthropy is education on the mainland.

'Rather than simply build schools, beneficial alternatives might include teacher upgrade programmes, building libraries and introducing programmes that utilise new teaching ideas,' Ms D'Anjou-Brown said.

HSBC Private Bank helps philanthropic individuals and families sharpen their focus and make informed decisions.

'We help philanthropists to look at best practices, what has been done before in other places and identify areas where they could make a significant difference. We also help them to be more organised and more rigorous about how they achieve wishes without putting them at odds with their overall objectives,' Ms D'Anjou-Brown said.

She said the way in which a charitable trust selected grant recipients depended on many factors, including the level of family involvement, available administrative time and resources.

Some families choose their own beneficiaries, whereas others with access to administrative resources choose to receive applications. They distribute information about their funding preferences to grant seekers, who can then decide for themselves whether to apply.

HSBC is involved in the administration of more than 100 private charitable foundations that donate more than HK$200 million per year. Trustees can be a trustee company, or family members, or a company limited by guarantee. Trustees are responsible for their investment decisions and for ensuring that income is distributed in line with the stated purposes of the trust deed.

Christian Stewart, head of the Asia-Pacific wealth advisory group at JPMorgan Private Banking, said philanthropy was on the rise.

'There has always been a strong tradition of charitable foundations supporting worthy causes and this is noticeably on the increase,' he said.

Mr Stewart said booming Asian economies could be partly responsible for the trend. Also, wealthy patriarchs might have in mind the Chinese saying that riches did not survive past three generations.

'We are seeing lots of opportunities where we can work with families to help them achieve their philanthropic aspirations,' he said.

While family members may not necessarily be involved in the family business, having an active charitable structure could help family members strengthen their relationships. It also allows the family to collectively make substantial differences within their communities.

Mr Stewart said thorough performance metrics could help a family charitable foundation measure the impact of its involvement in projects and achieve the outcome it wanted to see.

Terry Farris,  Asia-Pacific head of philanthropy services at UBS Wealth Management, said the first priority of setting up a family charitable structure was to help the family firmly establish its expectations and goals.

'We spend time talking to family members to understand what they want to achieve and to help them form a consensus. Without a consensus it is difficult to develop a clear philanthropic focus that can allow the family to make a greater impact in society,' Mr Farris said.

Mr Farris said philanthropy was  about having a direction and the desire to make a measurable difference.  'By working together, families become engaged and develop a passion which is part of the reward of making a difference,' Mr Farris said.

In Hong Kong there are three types of philanthropists: the 'greenfield' philanthropist is someone who is just starting out and is looking for an overview of existing options in philanthropy; the established philanthropist wants to continue improving the giving process and the corporate philanthropist seeks to channel giving through the company.

The philanthropists' motivations can include the wish to create legacy that will have a lasting benefit. But unlike in the United States or Taiwan, where philanthropy can reduce tax exposure, in Hong Kong the tax benefits are negligible.

Philippe Legrand, Hong Kong deputy chief executive  of BNP Paribas Private Bank, said giving advice on philanthropy and setting up charitable foundations were an important part of the wide range of services BNP Paribas Private Bank offered to its high net worth clients.

He said philanthropy was not about giving in a one-off sense but making a continuing difference through establishing a social legacy. 'Successful philanthropy involves defining what a family stands for and how it wants to achieve its goals,' Mr Legrand said.

BNP Paribas Private Bank helps high net worth families achieve their philanthropic ambitions by helping them establish clearly defined intentions in terms of what they expect to see in the form of results. The bank also helps philanthropists select the appropriate channels to achieve effective results.

'How, where and in what manner a family approaches philanthropy can form an important part of its lasting social legacy,' Mr Legrand said.

Before a trust or foundation can be set up, the most important issue is to help philanthropists or philanthropic families clearly establish the areas in which they want to make a difference and what they expect in terms of results. This can be straightforward or complicated, depending on the family's expectations. When the direction and expectations have been decided, the framework and structure of the trust can be established to achieve defined results. 'It is like running a business. Well planned execution makes a big difference,' Mr Legrand said.

Philanthropic activities can also help individual family members work together on social causes where they can collectively make a difference. He said it was important that everyone involved shared a common interest in the results.

'In the same manner that businesses have investment and return goals, it is important that philanthropists have ways of assessing accountability and the effectiveness of how their money is being used,' said Mr Legrand.



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