So you have decided to become a philanthropist-even though the word, with its patrician overtones, may stick in your throat and you have no great desire to be feted at some black-tie gala dinner. But you have made more money than you ever dreamt of and you want to use your fortune to help others. Above all, you want your money to make a difference.

And there's the rub. Giving money away is easy, especially now that your means have swollen to the point where your bank manager will no longer try to talk you out of parting with it. Giving the stuff away to good effect is another matter entirely. Millions of pounds have been wasted over the years by donors who failed to watch over their donations.

In business you succeed through rigor, creativity and hard-nosed decisions, rather than wishful thinking-and you would like to take that approach to philanthropy too. But that may not be enough. Warren Buffett observed last year, when he gave away his vast fortune, that philanthropy is a "tougher game" than business. Commerce sets about the easy problems, whereas the hopeless, intractable cases are left to philanthropists. Who can help?

That was the question two London-based partners of Goldman Sachs, Gavyn Davies and Peter Wheeler, found themselves asking after having made their fortunes when the investment bank listed its shares in 1999. They wanted advice on how to give away some of their new riches, but there was nobody to ask. So they created New Philanthropy Capital, a non-profit organisation, to provide a research and consultancy to philanthropists. "Peter came into the office with a thought," recalls Mr Davies. "In financial markets in the late 1990s there was an enormous industry dedicated to putting capital to use where it gets the highest returns. So why couldn't the same be true of philanthropy?"

Six years after it was founded in 2001 NPC has a staff of 40 and is a main source of professional advice to Europe's rapidly expanding regiment of philanthropists. One of its early clients was Absolute Return for Kids, a foundation set up by a group of hedge-fund managers, led by Arpad Busson, which makes headlines by raising millions at its annual auction of treats such as a dance with Richard Gere or dinner with Mikhail Gorbachev.

Many of NPC's other clients have made their pile in finance, especially in hedge funds and private equity. The money-men and -women seem to like the way NPC chews over data such as the rate of return on getting a persistent truant to attend school regularly (1,160%). Indeed, NPC goes out of its way to apply the City approach to outfits likely to think that a coupon is for saving money on a jar of coffee.

A typical client is Ramez Sousou, of TowerBrook, a London-based private-equity firm that had once been owned by George Soros, a billionaire philanthropist. Sousou was inspired by his former boss and he and his partners decided to give away some of the fees and part of their share of the profits from the business. They turned to NPC to help them work out how. The TowerBrook Foundation matches any charitable gift by its employees with ?3 for every ?1 given, as well as supporting various charities helping children. "We wanted everyone in the firm to be involved in giving," he says, "and children emerged as a cause everyone believed in."

Sousou called in NPC again in 2006, when 30 firms launched the Private Equity Foundation (PEF). NPC "can't tell you what you care about, but they helped us figure out our values, agree on our strategy, evaluate our options, do our due diligence and monitor the impact of our money," Sousou says.

It is sometimes hard for you to know how to convert the philanthropic urge into a concrete plan. NPC helps donors to choose what kind of charity to give to and advises them on how to measure the effect of their gift. This sort of expertise has long been available in America, where the business of giving is much larger and has a history that dates back to the great 19th-century philanthropists and beyond-something that faded in Europe when the state took it upon itself to be the chief source of welfare.

NPC is alone in publishing the charitable equivalent of the investment banks' sectoral research, which in the world of the needy means domestic violence, say, or youth at risk. Like so many City scribblers, its analysts assign charities the equivalent of a "buy" or "sell" recommendation. Not even in America do givers get that sort of service-which is one reason why NPC is thinking of publishing research there, too. As at an investment bank, the research is given away to potential "investors". Indeed, the dissemination of research is part of NPC's mission to improve the efficiency of charities, even though it admits this "screws up our business model". The firm covers only a quarter of its costs with fees from clients.

NPC usually encourages its clients to focus on an issue-and then to support several different organisations or projects within that area. For instance, a philanthropist who wants to help disadvantaged teenagers might combine giving money to a few start-up charities (which risk failing as organisations) with a gift to a new scheme by a well-established charity (the project risks failing, but the organisation does not). It also advises you to give money to charities dedicated to changing policies as well as those that get on with helping people directly.

In business that would be called a synergy, and it appeals to the commercial brain. "This portfolio approach has given us broad sector expertise, which means we can really add value," says one philanthropist who supports, among other things, various charities helping refugees, and has taken NPC's advice.

Perhaps because of its City roots, NPC often takes the position that "if you can't measure it, then it is not worth supporting," says another client from the world of finance, who thinks that this can be simplistic when a charity is trying something broad and general, such as changing the tenor of a political debate.

That client is delighted with NPC, nonetheless, as is the philanthropist who supports refugee groups: "I wanted to start making strategic grants very quickly", says the hedge-funder, "without having to get up the learning curve fast myself or to hire my own staff to do it. Using NPC enabled the foundation to double the size of its giving in the UK."

It may be no coincidence that NPC also "has a bias against big charities," says one client. "NPC wants to recommend charities that are efficient, and it says that big charities just aren't efficient." Smaller charities are also far easier to analyse, as they tend to be more focused. A big charity, such as Barnardo's, "does about 200 different things, all of which you need to understand to rate it," says Martin Brookes, head of research at NPC. Even so, Nigel Harris, NPC's chief executive, says that the firm will soon "start to publish nuanced reports on some of the bigger organisations". It will also start to publish on international charities, because that is what its clients want.

But the similarities with an investment bank go only so far. NPC has so far avoided publishing negative "sell" recommendations about a charity, which makes the notoriously rose-tinted research arms of investment banks seem almost cruel. One of the satisfied clients says that "to remain credible, NPC needs to show that its working with a named charity. It could do a lot of good by being seen to help badly run organisations to get better-being negative and positive at the same time."

Moreover, says the NPC client, "It's not clear that charities actually understand the principles of working with intermediaries such as NPC, or what it means to be transparent. Charities must start to act more professionally." Ultimately, NPC's recommendations are only as good as the information it's given. Unfortunately, the charitable sector is notorious for its opaque, stale statistics.

But charities are more likely to do the right thing when donors are methodical. NPC is making it easier for them-for you-to do that. Your money works better and your endorsement of outfits like NPC sends the message that charities must spend every penny wisely, because they are being watched.