Financial PlanningInvestment

Why you should include philanthropy in your financial planning process

By: Citadel

Once thought of as the preserve of the very wealthy, philanthropy is now a mainstream financial activity and includes giving at a community level as well as supporting non-governmental organisations and non-profits.

  • Everyone – not just the wealthy – needs to consider philanthropic giving in order to grow and develop the social fabric in South Africa
  • Such giving should be well structured to maximise its impact
  • By bringing this into your financial planning you can create your best legacy for the future

Everyone needs to take philanthropy into account in looking at their financial planning and even when discussing finance with your children, it is something that you ought to be guiding them to do as well.

And South Africa needs philanthropic giving now more than ever. With Covid-19 having sent the country into lockdown and the economy into a tailspin, businesses are closing down around us and potential job losses are estimated at between three and seven million.

“Philanthropic money can’t replace government funding and we don’t believe that it should,” says Andrew Möller, Citadel Chief Executive Officer. “We view the two elements as complementary. But there is an important role for individuals to play, no matter the size of their contribution.

“Philanthropy in South Africa used to be the preserve of corporates or the very wealthy, and then only in bull markets,” adds Möller. “Corporates often pull back in bear markets, sadly the time when charities need the funding the most.”

For this reason, Citadel has developed its donor-advised fund option which enables clients to participate in the discussion around philanthropy during their lifetime, and allows them to create a lasting legacy through giving money and targeting investments that will make a real difference.

“Importantly, we see that philanthropy can grow and develop the social fabric in South Africa,” explains Möller. An example comes in the form of a R1 million donation which Citadel made to PinkDrive through the Kolisi Foundation to provide Covid-19 testing in identified hotspots around South Africa. “By being part of this effort, this is a journey that none of us, nor our loved ones, will need to walk alone. The donation to PinkDrive is aimed at assisting with testing, particularly in vulnerable communities, and it is our hope that these funds will go a long way.”

Philanthropy has become significantly more professional. “We view giving in a strategic light,” explains Jean de Villiers, Citadel Head of Philanthropy. “We ensure that the funds are professionally managed, that the maximum charitable impact is achieved, and that this is appropriately included in your financial planning to ensure the best tax structure possible.”

By playing your role as a citizen, by doing good and contributing to a better South Africa, we can achieve more. As rugby captain Siya Kolisi said on winning the Rugby World Cup in November last year, “If we work together and strive to be better, each and every day, we can achieve anything.” In other words, by pulling in the same direction we can achieve more and create cohesive communities.

Not only that, but by donating money to organisations which are meaningful to you, you are able to direct your tax rands towards your preferred causes: as long as you are donating to a qualifying public-benefit organisation (PBO) and receive a section 18(a) tax certificate, your donation is tax deductible.

In this way, you are able to assist government in directing tax spend towards those organisations and beneficiaries that you would like to aid, rather than hoping for the state to be the only entity spending in that particular field.

“We are also able to apply business principles to the non-profit space. This means the advisors work out a structured and thoughtful plan for giving and investing in order to make every rand go further,” adds De Villiers. “As you know, with investing there are no guarantees – which is why it’s important to establish a plan and decide right from the outset what you want to achieve with your philanthropy, and then make decisions that are aligned to that.”

The Citadel Philanthropy Foundation (CPF) currently supports some 65 beneficiaries, including the Food Forward which redistributes food that cannot be sold and provides meals to old age homes and orphanages.

Donors are able to give to any of the CPF’s own list of trusted charities, whose focus lie on the four pillars of education, health, entrepreneurship and the environment. Alternatively, donors can  select other programmes that they feel individually passionate about.

“Ultimately, philanthropy needs to be undertaken in a sustainable, structured way in order to make the most meaningful difference,” concludes Möller. “By formalising this and bringing it into your financial planning, you will be able to make the greatest impact in the most efficient way and create your own legacy for the future.”

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