Compounding crises keep Pictet’s philanthropy unit on its toes

Uncertainty caused by the pandemic, geopolitical crises and climate change mean philanthropists are more in need of advice than ever

Two years after arriving at Pictet to head up the newly-created global philanthropy services unit, Cristoph Courth acknowledges that the task ahead of him is not getting any easier.

“We’re going from one crisis to the next,” says Mr Courth, who joined the Swiss bank in 2020 from rival firm UBS, where he was adviser to wealthy philanthropic families, first in Zurich and then Los Angeles.

“Before the pandemic we were all talking about the climate crisis, it was the ‘Greta Thunberg effect’ and rightly so; then Covid, then inequality, then war in Ukraine, now the cost-of-living crisis. And none of these crises have stopped, they’ve compounded,” says Mr Courth.

Indeed, the uncertainty of the era we are living through has been one of the key reasons why Pictet was persuaded by clients to start offering strategic advice on philanthropic giving. While the process to build internal philanthropy expertise started before the pandemic, the healthcare crisis and the social, geopolitical and environmental tragedies over the past few years proved it was the right choice.

“In this very confusing and frustrating time, philanthropists are seeking advice and guidance,” confirms Mr Courth, who also worked for more than a decade in the non-profit sector across the world, for organisations including Unicef and The Prince’s Charities.

Until two years ago, Pictet clients seeking philanthropic advice were referred to external advisory firms, although the bank’s managing partners, long-term philanthropists, were directly involved in conversations with customers on how to structure their philanthropy, on a peer-to-peer basis. The partners’ own private foundation, the Pictet Group Foundation, established in 2009, is open to their families and employees, but closed to clients to avoid conflicts of interest.

The bank’s need to develop in-house philanthropy expertise was also vocally backed by its advisers. Smart private bankers have quickly realised helping clients with their giving strategy, discussing their values, vision and purpose of wealth, helps deepen the relationship, allowing them to engage other members of their family, including the “elusive next generation”, says Mr Courth. This translates to happier clients and potentially greater assets under management for advisers and the bank, over a longer time horizon.

Collaborative philanthropy

Supported by the broader wealth planning and family advisory teams, Mr Courth and his recently hired Asia head Anthony Gao focus on helping donors understand the end goal of their giving and the best strategy, while making them aware of organisations operating in this space. “A key part of my role is connecting philanthropists to the non-profit world and also to each other, making that collaboration easier,” he explains.

The Covid crisis, he adds, has been a “pivotal time” for philanthropy, forcing actors to react quickly to crises on their doorstep, reassess systems, processes, grant making guidelines and reporting. It has also led towards a more integrated and collaborative approach.

“We used to look at issues such as climate change, biodiversity loss, inequality and health as isolated islands, which we were approaching individually. We now realise they are part of an interconnected ecosystem, too big for any individual, entity, country or approach to tackle.”

As the “ultimate risk capital”, philanthropy money can fail, and can afford a much longer-term time horizon than any other types of investments. This is crucial to tackle global challenges, requiring multigenerational commitment.

However, linking philanthropists, and getting them to work together is “harder in practice than on paper”, admits Mr Courth. Instead of partnering with existing entities, delivery partners or charities working on the ground, philanthropist clients often prefer to start and run their own programmes. Reasons behind this include lack of trust in the non-profit world and, often excessive, confidence in their own ability to run philanthropy initiatives. Many also find it less time consuming to act on their own than finding other donors.

Moreover, the enormous quantity of causes and approaches means philanthropists often disagree on how to proceed. As a result, there is inefficiency in the sector, with many philanthropists and organisations covering the same ground. In Switzerland alone there are 14,000 charitable foundations, 80 per cent of which have under SF5m ($5.2m) in assets.

“The best philanthropists are those that leave their egos at the door and treat it in the same way they would an investment or a business, giving time, consideration and seeking advice,” says Mr Courth, adding that the most effective practitioners have tended to be women, offering a more open and less egocentric approach.

Measuring impact

Another key challenge is impact measurement. While there is an increasing recognition of the need to measure the impact of philanthropic money, this is not as straightforward as calculating business profits or investment returns. In many cases, donations may even generate a negative impact. For example, the shipment of solar panels in aid of the hurricane-hit island nation of Haiti destroyed the local flourishing business. Similarly, clothing donations damaged the textile and garment industry in Kenya.

Plenty of organisations have the expertise and resources to measure the impact of giving and increasingly include it as a budget line in proposals to philanthropists and foundations. If it works, it should be continued or scaled up, if not, it must be discontinued or approached from a different angle, explains Mr Courth.

The problem is that measuring impact is an expensive exercise, clashing with people’s common belief that efficient charities to support have low overheads. The opposite is true, he says.

“If you want to achieve impact, you want the best people running the organisation, but in the non-profit world there is this drive to the bottom, to pay small salaries to cut admin costs, which makes it challenging.”

Charging for philanthropy advice

For financial institutions, managing private assets comes with “tremendous responsibility” to help clients use wealth in the most impactful way, be it through responsible investing or philanthropy. This is why private banks should not charge clients for philanthropy advice, believes Mr Courth. Introducing revenue targets for philanthropy advisers would create a dangerous bias, forcing private banks to compete with large philanthropy advisory firms, such as The Bridgespan Group or Deloitte, which boast greater resources and manpower.

At Pictet, where the partnership structure allows for a long-term view of the business, client satisfaction, rather than business targets, is the only metric used to evaluate philanthropy strategic advice, states Mr Courth.

“These days, with robo-advisers and free trade accounts, why would clients pay a premium to wealth management firms?” he asks. The answer, he says, is a simple one. “The service they offer goes well beyond investments, it is about the relationship with the bank and the private banker, who is there to address client concerns and needs.” Those private banks who are redefining themselves purely as investment managers have been warned.