Next generation of ultra-rich to spur take-up of donor-advised funds: Citi

[SINGAPORE] The next generation of ultra-high-net-worth (UHNW) individuals will likely boost the uptake of donor-advised funds (DAFs) to meet their philanthropic needs.

Karen Kardos, head of philanthropic advisory at Citi Private Bank, noted that younger family members may not always have the same interests as their parents or grandparents.

This is where DAFs can be a tool for them to begin making an impact in their own passions and interests.

“The younger generation is going to probably embrace more of that sort of outsourced solutions as they start to dip their toes in the water,” Kardos said.

In March, the private banking arm of Citi launched new philanthropy advisory solutions in Asia, beginning with Singapore, amid rising client demand for such services.

These new offerings let Citi’s UHNW clients establish DAFs or fund donations through its charity partners – the Community Foundation of Singapore (CFS) and AVPN – on top of the bank’s existing wealth management and philanthropy advisory products and services.

DAFs are fund accounts opened by individuals or organisations for charitable donations, and they are managed by a sponsor, such as CFS or AVPN.

According to AVPN’s philanthropy handbook, DAFs give donors more active oversight in how their funds are used, compared to charitable donations to an established organisation.

Speaking at a media roundtable on Wednesday (Apr 2), Kardos noted that DAFs are already popular in the US, with over US$250 billion in assets, and are increasingly popular in Europe.

In Asia, these funds are also seeing a demand uptick, likely because they are simple to use, and provide features such as legacy and succession planning, and anonymity.

These funds are especially popular among family offices who may not have expertise in philanthropy, she said.

“(The DAF) almost acts as the outsourced team that has the programmatic experience to implement the founders’ vision,” Kardos said.

While UHNW individuals nowadays typically give donations on an ad hoc basis, DAFs allows clients to be more strategic and forward-looking with their giving, she added.

When asked about the difference between Citi’s US and Asian clients, Kardos noted little differences in their philanthropy habits, although she noted that it was more common in the US for younger generations to “hit the ground running”.

“Younger people in the US are sort of taking the bull by the horns, and starting organisations or beginning to engage more in the non-profit sector – but I think that’s coming to Asia as well,” she said.

People remain generous worldwide, Kardos said.

Lee Lung Nien, Asia South chairman of Citi Private Bank, added that Singapore “is perfect in terms of infrastructure” to support philanthropic efforts by individuals, with its rule of law, policies, governance, guardrails and government support.

For Citi, it is likely too soon to gauge demand for the DAFs among its clients, given that the bank just launched the offering in Asia, said Patricia Lee, director at Citi Private Bank.

But she noted “a lot of inbound inquiries”, even though she expects the need for more education, given that DAFs are not a mature concept in Asia.

Lee, the Asia South chairman, added: “There is a lot of back and forth (with clients) and education.”

“I can’t give you a number now, but I think we will be surprised on the upside.”