Joining the social capital alpha club

Scan your eyes over the daily business pages and it’s easy to see that the funds management industry is enjoying unprecedented levels of growth.

As individual wealth grows and prosperous baby boomers age and start thinking about leaving behind a legacy, the disposition to promote the wellbeing of others is becoming more important.

More and more financial planners are recognising this and are beginning to offer a philanthropic component in the advice they give many of their clients.

Indeed, the Financial Planning Association should be applauded for displaying the initiative when earlier this year it announced the launch of its own charitable foundation, Future2, which brings existing initiatives and new projects undertaken by FPA members under a single structure.

However, not all individual investors have the financial capacity to make the establishment of a Prescribed Private Fund economically feasible, let alone their own charitable foundation, which leaves many individual investors unsure of how to achieve their charitable goals.

For those looking for a philanthropic component to their financial plans, and for philanthropic foundations looking to invest their corpus ethically, a philanthropic investment model may offer a simple solution.

The philanthropic investor model is as simple in its structure as it is effective in its outcome.

In short, it captures the quantum raised from a fund manager’s after-expense profits and channels it into community programs designed to help the voiceless and dispossessed, the most marginalised in our community. Some refer to the process colloquially as a “giant community dividend reinvestment plan”. The more financially literate call it social capital alpha.

Whichever label is used, it can be an effective way for the financial planner to manage their clients’ wealth while at the same time addressing their philanthropic aspirations.

In our case, our business is part of a church’s financial structure and the after-expense profits we generate from managing client funds go to support the work the church does to alleviate human suffering and to contribute to the struggle for social justice.

And we ensure that investors’ funds are placed in suitable mission-aligned ethical investments. (After all, it would be a bitter irony indeed if funds that went to help homeless people were derived from investments in gambling or alcohol.)

One example of the philanthropic investment model in action is the financial support our investors have been able to provide to the Hotham Mission Asylum Seeker Project in inner Melbourne.

Together with donations from individuals and philanthropic foundations this internationally recognised humanitarian project is able to meet the needs of asylum seekers in the community as they lawfully await the often drawn-out process of their refugee or humanitarian claim.

Meantime they are denied the right to work, welfare payments or Medicare benefits.

Ongoing issues such as homelessness, health, nutrition, isolation and depression are all major concerns for asylum seekers in the community. And the project makes a dollar go a long way too.

Caz Coleman, co-ordinator of the Asylum Seeker Project, said it costs all up less than $50 per week to house, support and feed an asylum seeker in the community. This is against the estimated $150 per day it costs the Government to keep an asylum seeker in detention.

We live in a world that is increasingly obsessed with money. For good reason. It’s important to nurture money. To see it grow. To provide for the future (witness Future Fund no less).

However, not all members of the community have access to enough money to get through each day, far less the opportunities to create wealth. For them, simply finding sufficient food, shelter and clothing to survive can be a daily struggle.

The philanthropic investor model recognises this fundamental reality: its customers like to feel that they’re helping make the world a better place, but equally, they all want to see their investments grow. Indeed, as their money grows, so too does their philanthropic contribution — that’s 360 degree ethical investing.

Peter Thompson is marketing consultant with UCA Funds Management (http://www.ucafunds.com.au ).