A higher level of engagement from the financial advice community and regulatory changes have helped the number of public ancillary funds (PuAFs) managed by Australian Philanthropic Services quadruple in four years, the not-for-profit’s chief executive says.
In the 2017 financial year, the number of clients who set up funds with APS grew from 232 to 304. In 2013, the business had 70 clients. A big part of this expansion was the number of sub-funds set up under existing PuAFs, which rose from 67 to 110 in the same period. APS sets up and administers both PuAFs and private ancillary funds (PAFs), along with providing grant-making advice.
Antonia Ruffell, chief executive of APS, says financial advisers are a big part of this growth and a major channel through which individuals reach APS.
“Advisers are really getting better at talking to their clients about philanthropy and increasing awareness,” Ruffell says. “Often, getting a client involved in philanthropy can be a lightbulb moment for the adviser. Once they see how much enjoyment they and the client get from setting up the structure, and how well it works, they become a real advocate.”
This trend should continue, she says, with the expected intergenerational transfer of wealth from baby boomers to their children.
Advisers can still do better
Despite all the growth, advisers have much room to improve at drawing clients into philanthropy. A report, A Study of Professional Advisers in Australia, which the Australian Centre for Philanthropy and Nonprofit Studies published in 2016, revealed that most advisers reported discussing philanthropy with less than 10 per cent of their high-net-worth clients.
“I’m still often disappointed by how many clients come to us directly and report that their adviser has never raised the topic,” Ruffell says. “This is a real shame. If an adviser isn’t alerting their clients to the options available, they’re missing out on an opportunity to deepen and broaden their client relationships.”
This dynamic is changing, she says, as advisers learn more about the options available and become comfortable with the topic. But there is still huge potential for growth. For this reason, APS devotes resources towards coaching and supporting advisers.
“Education and guidance are important, because a big part of promoting philanthropy is making sure the adviser is aware of the opportunities available,” Ruffell explains. “We do countless presentations, training sessions, conferences and professional development days for advisers, to help them talk about it with their client base.”
Philanthropy has also benefitted from recent regulatory change. In 2016, the government introduced portability into the Private Ancillary Guidelines (2009), which meant PAFs, which generally start with a $1 million donation, could transfer funds into a lower-cost PuAF. The benefits here, Ruffell says, are scale and convenience.
“This a popular option for philanthropists who have a more modest PAF balance of, for example, less than $750,000, where a sub-fund in a public ancillary fund is a more cost-effective option than running their own PAF,” she explains. “In other cases, we’ve found that a sub-fund appeals to people whose interest is solely in grant-making and who do not want the administrative responsibility of running a PAF.”
The APS offers its own PuAF, The APS Foundation, which gives philanthropists the option of setting up their own sub-fund for $50,000 or more. The total balance of sub-funds in the APS Foundation increased from $19 million to $35 million in the 2017 financial year. This money is invested by the trustee of the APS foundation, and has returned 12.8 per cent since inception in 2012, an outperformance of the S&P/ASX 300 Accumulation Index (11.6 per cent) over the same period.
PuAFs for private firms
Furthering the rise of APS has been the recent proliferation of separate PuAFs set up by private financial advice firms, allowing an adviser’s clients to establish sub-funds directly with their firm’s trust. APS has facilitated, and continues to administer, 12 PuAFs, with clients including Providence Wealth, Stanford Brown, and Fitzpatricks Private Wealth.
Grant Patterson, managing director at Providence Wealth, tells how APS guided the firm on the path to setting up its own charitable fund.
“Our PuAF was established in 2015,” Patterson says. “When we were first thinking about creating the foundation, we met with APS, which explained all the rules and regulations.
“They were very patient – we had meetings for [more than] two years before we were ready to proceed. When we were finally ready, they established the foundation and now look after all reporting to the Australian Taxation Office and attend board meetings twice yearly.”
