50. How to spot a charity that's a red flag (and how to give smarter) | John Spiers

0:00Welcome to All About Business with me, James Reed, the podcast that covers everything about business, management and leadership.

0:16How do we know that charitable giving really makes a difference? And what does it take to build businesses that don't just generate profit for private shareholders, but also create measurable impact for people and communities? Joining me today on All About Business is John Spears, entrepreneur, philanthropist, and founder of EQ Investors, one of the UK's leading B corporations. John has built a career proving that profit and purpose really go hand in hand. And in this episode, he shares practical insights on what makes philanthropy effective, how entrepreneurs can spot opportunities in inefficient sectors, and why AI may transform the way we all work and give.

0:57well today on all about business i couldn't be more delighted than to welcome john spears john is an entrepreneur and philanthropist of note and he originally set up a business called best invest back in the 1980s which he sold very successfully to 3i and he's currently the chair of eq investors john has also established a charity platform called giving is great which is a fantastic resource for charities. He's a classic car enthusiast, doesn't mind me telling you that, and a champion croquet player, which must mean he has a mean streak. So John, thank you for coming in. And let's begin at the beginning.

1:36What is EQ Investors and why is it called that? EQ is a wealth management business. I spent most of my adult life working in that sector. And after I'd sold Best Invest and was no longer involved at all with it, then I still had a hankering to involved in that sector. And I think it's one of the few sectors that I feel that I've got some competence in. So I bought a fairly small business and I renamed it EQ because the emotional quotient, you know, being a measure of people's emotional intelligence, got to some of the heart of what I wanted to do because I wanted to run the business in the way I'd originally run Best invest and which private equity don't always, which was to be thinking of the client first and letting the bottom line look after itself if you'd done the proper things correctly.

2:29Whereas what I was seeing was people would start with a spreadsheet and then try to manipulate the business to achieve that result. And in my view, that's not likely to be successful in the long run. So EQ has an interesting structure. It's what I call a philanthropy company. And you're my first guest who's actually involved with a chairing a philanthropy company, which is exciting. So will you just tell us what that structure is so that our listeners know and we can explore what you like and maybe don't like about it? Well, the EQ Foundation is a registered charity that we set up soon after we bought the business.

3:07and I gifted some of my shares to it. So it now owns roughly a quarter of the company. And there are various reasons for doing that. But one was I felt that this would give some comfort to our clients and to our staff, that there would be some stability and that the culture of the way we're to run the business would be that we are trying to do the right thing. so so the other shareholders now your foundation owns a quarter yourself and people who work in the business is that right yeah so they're you and they have three quarters and and has that turned out to be the case has it given it some stability has it been have you how long ago did you do this now just over 10 years so you've got 10 years running yeah in this way i think it has but i do you know i think i think there are disadvantages to it too i think the trouble with having a charity as a major shareholder is, first of all, that charity is unlikely to have any expertise or anything else that it can bring to the party to make the business more successful.

4:14It's likely to be a passive shareholder. Secondly, its predominant interest will be in receiving an income. So it will be keen to see a regular and consistent stream of dividends. And finally, it's unlikely to have the capacity to support a capital injection if the business is in a high growth phase and needs to raise money. So I think in some businesses, it can work extremely well. I don't think it would be an appropriate structure for an early stage business that was going to be capital intensive. So you've been doing it for 10 years. Has it been a good message to customers? Do your clients like it?

4:55I mean, you're called EQ, you have a Charity Foundation owning a quarter of the business. That's a definite distinct position in the market in wealth management, I imagine. I think so. I think wealth management is a business where it's absolutely essential that your clients have complete confidence and trust in you. And it takes a long time to build up trust. You can lose it very quickly, but it takes a long time to gain it. So anything you can do that helps to boost the chances of people reaching a level of confidence that they're prepared to transact with you is good for business. And you feel the foundation is part of that, that helps with that?

5:31They trust you more because of it, do you think? I think it's part of it, but I think it's one piece of the jigsaw. Yeah. But you were very deliberate in making that decision to set it up like that. I was. When I was contemplating the structure, I originally had the idea that we, rather than being a shareholder, that we would gift a certain proportion of profits to charities each year. and there was some test marketing of that and actually they got some kind of surprisingly bad responses from it. Who are you testing that with? Customers? Potential customers, yeah. Right, and why? What was the response?

6:10When something's new and people don't understand it, we're in a world where people often tend to think, well, there's something, you know, this sounds a bit weird, it's probably not good and they thought, well, you must be making too much money if you can do that. If you can give it away. You must be charging me too much. this kind of thing. So we sort of played it down a lot after that. And then it took a year or two before we made this big share transfer. And that's been fine. But that was your generosity. I mean, personally. And that was me. So you decided you wanted to give it away. No one's going to say, why should you do that?

6:43That's your business, isn't it? It was my money. So it didn't affect you. So you should be applauded for doing that as an entrepreneur. And no customer complained. Not as far as I know. They should know. Why would they? Because the company has shareholding. And I think because we, and then with the EQ Foundation, we have some knowledge and expertise in trying to find good charities ourselves to support with our money. That is of interest to some of our clients, that we can try and help them as well. and there's a big move going on within the financial services sector that some people believe it should be a compulsory activity for financial advisors to be able to give advice on philanthropy as well.

7:23I don't personally think that would be appropriate but I do think first of all I think anybody who's thinking of making philanthropic donations is likely to be in a similar situation to I was when I first realized I had more than enough money for myself which is I didn't know what to do. I just didn't know how to find the right charities. It's not like finding good businesses. There isn't a bottom line that you can look at and give you an indication this charity is doing really good work. So it's one of the most difficult things that I've come across in my life is how to find really effective charities from the 200 ,000 that are registered in the UK.

8:05Yeah, I'm just thinking that that must be the case. I mean, what are your sort of top learnings, I suppose? If you want to look for a really great charity, what should you be looking for? Well, the fundamental thing you're trying to look for is what's their real impact? What are they achieving? You know, what you definitely don't want to ask is how much they're spending on overheads, how much the CEO get paid. Evidence to show that that at best gives you no reliable answer and at worst gives you the wrong answer. Far better the charity spends a lot of money employing the best person available in the sector than saves money and gets somebody who's great.

8:44So that's a very important message. So looking for impact is critical, but of course it's very hard to measure, very hard to judge it. What I started doing a while back as a sort of shortcut, if you like, to sort of get my short list down to something manageable, I thought, well, my background, as you know, is in the investment world. And I was thinking one night, if I didn't have the expertise or the time to find investments myself, then the shortcut is I can look and see, well, what are the top guys out there doing? What's Terry Smith buying? What are a few more people like that? And if I see, oh, they're all buying the same stock there, I might think, well, there's something interesting happening here.

9:24And I realized that we could begin to do that in the charitable sector. so if I can find a small charity in the cause area that might interest me and we're all got our own very personal beliefs about that which you know can't be interfered with but if I find one in my preferred sector and it's already being backed by say Comic Relief and Esme Feb and a few other top grant making charities well that's going to give me some encouragement you know I know that they will have done a lot of research before they did that. So it means that I probably should take a look at that one. What if hiring could be completely free?

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10:45Areas that really interest me are early years. So the first thousand days after you're conceived. If you're conceived, that's interesting. Because while you're in the womb, if you're unfortunate enough to be in a hostile environment, there might be domestic violence going on, there might be abuse, there might be drugs, all sorts of things, then that's likely to have a very severe impact on the development of your brain. And if you experience what are called adverse childhood experiences, ACEs, these do have a lasting impact. So you're sort of talking up to the age of three in my arithmetic. At the age of three.

11:22You know, there's a potential rewiring opportunity maybe during puberty. But, you know, if you've been in the wrong place at three, chances are, you know, you're going to struggle to settle in school, settle into family or whatever, no matter what is provided for you. So getting involved at that point, anticipating where there may be problems, is likely to pay huge dividends. And you said that there's some rewiring potentially possible at puberty. Do you get involved in that stage as well? Yeah, absolutely. You support charities of that space. Yeah, because you're going to miss people early on.

12:01So have a second chance. I know you've been a very supportive champion of the Big Give. That's a charity I chair over many years now. And thank you for that. But I think you've also shown interest in green and environmental causes as well. Yes, that's right. I think that is the biggest challenge probably facing humanity. Yes. So to ignore it, I think, feels wrong to me. I mean, the challenges are so great that it can be a little overwhelming. But more recently, we've been backing some very early stage science in conjunction with Cambridge University to try and improve the process for extracting carbon dioxide from the atmosphere.

12:47It's very high risk. It might come to nothing, but it could be transformative. Yeah, it's worth a go. Well, that sounds exciting. So with Big Give, we're creating Earth Rays, which is going to be an even bigger appeal for environmental charities next year. And I'm hoping we'll find a media partner and a sponsor for that. So anyone listening wants to get involved. I mean, if you're from Netflix, we'd love to hear from you. But yeah, I completely concur with what you say, John. It's the biggest challenge facing us all. And we should seek to do something about it. So I want to go back to this Philco, quarter of the business owned by charity.

13:26You said that you didn't think that charity could be a very engaged, I suppose, shareholder. But is it possible that the way a charity supports a business is somewhat different through being a charity? It brings a different ethos to the company, to what might be a purely capitalist type run business. And maybe that's more supportive than we first realized. It could be. And I think it's going to depend a lot on what is the structure of that charity. I mean, the EQ Foundation is a foundation that I created and I run. And therefore, in some ways, it's a sort of extension of me. And so it probably doesn't add as much as, whereas if you had, say, Esme Fairbairn or something, let's say, as a shareholder and with access to all of the resources that they would have.

14:25So there are other ways of doing it. There are other ways of doing it, yeah. I suppose one of the great examples was the Wellcome Foundation. And that worked out very well indeed, but equally they realized the time had come when they needed to divest. Yeah, yeah. And so this capital raising point. How big a constraint is that on the sort of... It hasn't been for us because we're not a capital intensive business. And, you know, unfortunately we haven't been growing all that fast. But even if we had been, I think that would have been manageable. But I think, you know, clearly there are some businesses that are very capital intensive and then it would be difficult.

15:03So those reservations you expressed then, they haven't been experiences that you've felt directly but they're they're sort of reflections that you've sort of come to looking around the business world thinking that this do you think more companies should be philanthropy companies i think i think more companies should be aware of the opportunity i think each business should make its own mind up in the light of its own circumstances yeah definitely i think there's a it's a well as it was in your case a personal decision very personal decision whether you want to give that away or not yeah and usually it does come out of some you know it's some something to do with the founder you know charities aren't generally in the business of putting you know putting money into companies as venture capital and then seeing how well it does there are a few a few are but by and large they're not in that space well we had a very interesting conversation with phil conningham from raspberry pi obviously done really well and that started out as a charity so sort of the other way around so then it's still a substantial shareholder and but have built a very valuable business which has been good for the business and the charity yeah so so i i think well i suppose i should declare my hand i've written a book called karma capitalism supporting the idea of philanthropy companies and trying to encourage other people to think about it but as you said it's a business by business decision but part of our research shows that these companies last longer, they're more successful, and people like working in them.

16:34And so for those reasons, I think that's good for business as well as from the philanthropic side of things. Yeah, I think it's likely, isn't it, if a charity is at or close to the heart of a business, that there's a strong culture throughout of not being a me, me, me type environment. And And that's likely more conducive to pleasurable working and long-term success. Yeah, and I think these days especially, I think people buy into, they want to work for an organization that has a purpose. I think so. I mean, we certainly, you know, we're glad that we have a very strong connection and staff feel, you know, pleased to be part of the business with low staff turnover as a result.

17:18And, you know, it's increasingly hard to find, I think, these days. Yeah, yeah. Despite that, you know, we were one of the first B corporations in the UK. And, you know, and I think that's a great movement. But, you know, sadly, you know, it just takes time. It's still a relatively small number of companies that are in that group. But you've found that to be a positive thing from your point of view to do that as well. Very much. I mean, their certification process has certainly become considerably more taxing. But then that kind of pushes you, you know, So that was actually, that's what led us to me to transfer part of my shareholding to the foundation.

17:59Was it? Because we could see our score would be improved. Oh, I see. So any B Corp companies listening who want to improve your score become a philanthropy company. Exactly. That's a good message. So, yeah. We're aligned on that. I think we're the highest scoring B Corp in the UK at the moment. And one of the reasons. Fantastic. Well, that's good to know that you get a higher mark if you're a B Corp. Because I've heard it's become a more testing assessment. Well, I guess it's interesting too that B Lab, which is the organization that monitors B Corporations, they do see it as a positive indicator.

18:35And that's why they give the additional score. Interesting. My wife, Nicola's company, which is called Beeble, is appropriately enough a B Corp. So I'll let her know she should also become a Philco. So you've obviously been very generous philanthropically and you've got your own foundation. Tell me about Giving is Great, because this is a great creation of yours that has all sorts of potential benefits for people interested in this space. Well, Giving is Great came out of that same revelation I mentioned a few minutes ago, where I thought that if a charity had attracted support from a good grantmaker, that that would make it more likely that it was going to be of interest because I was trying to find charities myself to support.

19:20And I would go to the charity commission search engine and, for example, say I'm looking for homeless charities. And I would just get a list of names, most of which I'd never heard of before, nothing else about them. And it wasn't even as easy as getting a needle in a haystack. So - You said there are 200 ,000 charities. 200 ,000 to choose from. So I had this idea and I had a really smart guy as my chief technical officer at the time. And on Monday, I said, I've had this idea, you know, get this database of all the charities and I get this database with all the grants, both of which are available for anybody to download.

19:57This might work. And he was the kind of guy that two days later, he said, have a look at this. And he'd gone and built it for me. And so we started using it. And - So what did it tell you at the beginning? What could you see? Well, we immediately started putting, saying, well, you know, show us in some sector, show us some charities that come out of this. And once again, there'd be a list of names that we'd never heard of. But once we then looked at them, we thought, yeah, this is interesting. And the first one I think that we actually supported was City Harvest, which I still rate very highly.

20:33They're one of the leaders of collecting surplus food from supermarkets, manufacturers, distributing it to other charities. It's primarily fresh food, but not exclusively. And then those other charities turn it into a hot meal that can be given for people in need. We never would have found them before. So that was just a start. and then we started to think well what else can we what else can we do with this digital information that is freely available to us that might give us an indication that this charity is uh is interesting well one you know there's obvious things like do they have a have they consistently been filing their accounts late i'm embarrassed enough to say my own charity fell into that trap.

21:25And, you know. But that's a warning flag. Well, to me, yeah. I was being sloppy. You know, it's quite right that I got my wrist slap from giving as great for it because I needed to tighten up, and I did. So giving as great told you. Giving as great told me I'm not running my own charity very well. That's good. So, you know, if you're consistently running deficits or if your income's declining. I mean, these aren't necessarily things that mean you'd never support a charity, but I mean, you need to do a little bit more digging. What's the shape of the board? Is it the same three people who've been on it for 10 years and they look a bit like me?

22:08Well, that would not be a good indicator for me. I want to see, ideally, a broad age range, good gender mix, and fairly frequent recycling of people. So there's new ideas coming in. Again, it doesn't mean to say I'd never back a charity that had three people like me as the trustees. It just means it's a line of inquiry that I want to satisfy myself. Is there a really good reason for that? And giving is great will tell you that. Giving is great does. So we're only as good as the digital information available. Sadly, that is nothing like as good as it could be. You know, I really wish the Charity Commission would put the resources in to make the digital data far, far better.

22:58You know, the reason most commonly given is we can't afford it. There's a simple solution to that. If you run a company, every time you fill in your annual return, you have to pay a modest fee to a company's house. I think it's about 20 pounds. If every charity had to do the same thing, it raised over three million pounds for the charity commission. And why would you object to that? I mean, you're getting the benefit of being regulated. You should pay for it. Have you suggested this? Well, that's probably to the wrong person. Well, if anyone's listening, that sounds like a good idea because I think it would be really helpful if it was probably digital.

23:41Yeah, because we're in a digital age. Of course. And if we just got far better information, because the charity sector is pretty broken. I'm sure you find this too. Why do you feel that? Most people don't know how to give. They lack the confidence. They've read about a few scandals and a very small number of charities. They don't know what to look for. And that holds them back. We know that particularly amongst wealthy people in the UK, the vast majority of them give no significant amount of money to charity. I mean, I just feel terribly upset about that. It's a massively lost opportunity for the charities, even more for those people, because I know the joy that I've had when you've supported a very successful charity and you've seen what they've achieved.

24:35And it's the best feeling you can get. Yeah, yeah. Well, I would agree with you running Big Give. So most wealthy people don't give money to charity. They don't give anything significant. And your sort of assessment of that is they don't know how to or they don't think of it or it's not sold to them properly? What's your view, John? It's going to be a whole collection of things, but for the vast majority, it's too difficult. You know, it's not, you know, investing has been made pretty simple and there have always been plenty of people out there trying to sell you investments. The only person who's trying to sell you philanthropy is a charity that's trying to raise money.

25:14And because we get a lot of that if we're walking down the streets or in our email boxes or whatever, people are asking for money, we've got our defences up. And we feel embarrassed. You know, if a friend comes and asks you for a bit of money, I don't know about you. No one really likes being asked for money. I'm sort of thinking, well, okay, but, you know, is this charity any good what work have you done on it and and this is what again i say with giving is great if someone's asking you to support their favorite charity just check it out on giving us great doesn't mean to say if it's got some negative comments on it that you wouldn't support it but it'll give you a few questions maybe you can then put to them and you can say well why have you been filing your accounts late um so that's very good advice give you a bit of basis but the The most important thing is if you can get some evidence of the good they're doing, you know, if you can see, wow, those people, you've taken them off the scrap heap of life and given them the kind of opportunities.

26:18Because the thing that drove me was, I mean, I've been astonishingly lucky in my life. You know, I was not subject to any adverse childhood experiences as far as I'm aware. You know, I was in a stable home environment. I went to a good school. I went to a great university. I've enjoyed employment through my life whenever I've needed it or wanted it. And I've been moderately healthy. So I've been lucky, but a lot of people aren't. And if you were in the wrong place in those first thousand days that we talked about, it's not your fault that you've ended up on the street. You don't have the capacity.

27:02And it took me a long time to realize this. I thought, why don't they just go and get a job? They can't. There are serious issues deep inside them. It may not be possible to address them at all now. But even if it is, it's going to take time and it takes a dedicated intervention. You're not going to get that from the state. The charitable sector is the only hope for doing something about this. so that so that's a real call for action from the wealthier amongst the population to step forward really because as you say the state can't do it and these charities there are lots of them many of which are really great which you can help people surface now on giving is great they are but as in most walks of life there's a massive difference between the really good ones and the okay ones.

27:57The best charities are achieving more than 100 times the impact. 100 times what other charities are achieving? You know, than an average charity. That's huge, that difference. So it really makes sense to spend a bit of time to try to, you know, because the need is unlimited. Right. So every penny that goes into charitable sector needs to work as hard as possible. And because the normal laws, the Darwinian laws of commerce don't apply, you know, in the commercial world. They're not going to go bust in the same way. In the commercial world, you go bust or you get taken over if you're not very good.

28:38In the charitable world, if you've got a good fundraiser, even if you're rubbish at what you're doing, you're - Your customers aren't going to be - Nobody knows. so rewarding those those charities that are really good is a very important part of my mission and that's what i'm trying to do with giving is great i'm trying to make it easier for the cream to come to the top of the pile um and what we're seeing now is that more and more charities are looking at their score on giving is great so just like i did how can we get my how can we get our score up And that's good. In a small way, I think we're starting to drive a little bit of change, but my, we've got a long way to go still.