FCA Urged to Improve Advice on Philanthropy in Financial Services Sector
The Financial Conduct Authority (FCA) should make philanthropy advice training mandatory for financial advisors and introduce regulation to ensure it is discussed with clients, according to a new report.
The call to action from the Law Family Commission on Civil Society, carried out by Pro Bono Economics, recommends that the FCA to acts to improve “the quality and the quantity of financial advice and guidance on philanthropy” in the UK, making four key recommendations.
The proposals in the report call on the FCA to review the market for financial advice and guidance on philanthropy. It also says the FCA should demonstrate to the financial services sector the important role that philanthropy can play in unlocking public benefit. Other recommendations include mandating education and training on philanthropy for relevant financial advisors. Finally, it also suggests introducing sustainability requirements into suitability assessment, with an emphasis on philanthropy’s role in contributing to sustainability efforts.
The Commission, which is chaired by former Cabinet Secretary Lord Gus O’Donnell, found that if every individual in the top 1% of earners who is currently donating below 1% of their income raised their giving to that level, it could generate up to £1.4bn a year for charities.
The new report, titled Giving advice: The case for the FCA to act on philanthropy, notes that aside from a handful of leaders in the field, such as Coutts and C. Hoare and Co., provision of high-quality philanthropy advice to all clients is not widespread. The report puts this down to several factors, including “lack of incentive”, “traditional mindsets and culture” and a “lack of regulatory clarity and leadership”.
Dominic Duru, Co-Founder of DKK Partners comments:
“The FCA can and should do more to advise firms about how best to engage philanthropic and charitable initiatives. With the cost of living crisis making life increasingly difficult for millions of people, our industry needs to step up and set an example, thinking of new ways to help the most vulnerable in society.”
Data shows that philanthropy in the UK is worth close to £20 billion annually, but there is an opportunity to grow this significantly. Last year, research for the Commission found that the top 1% of earners cut their typical charity donation by a fifth between 2011-12 and 2018-19, despite incomes increasing. Greater action by financial advisors could help turn that decline around.
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