One of my friends from The Asylum is a real priest, though having taken a vow of poverty, he is always casting about for ways to make ends meet. I was able to borrow him a blue blazer and grey slacks, to disguise him as a Secular Priest, and was able to hook him up with a Family of Wealth for a Values-Planning Retreat, but he starting spouting Greek and Latin, saying prayers, offering to hear confession, or perform an exorcism, and was soon exposed as a pious fraud. "Hey, what is this? A real priest?" I had to give the family their money back and we may still face damages. From here on I am only going to employ Secular Priests with no background in ethics, theology, or any other discipline, other than sales, finance, law, say, or self-promotion. The harm a real priest can do to client's self-esteem cannot easily be rectified. We need some kind of Secular Priest qualifying exam to make sure any would-be Priest holds his or her beliefs lightly, and is not judgmental. The client should be free to choose his or her Values from a list provided. And the list is not meant to be comprehensive.
With the help of my esteemed colleagues, Father Brennan, Missy Proctor, and Dr. Amrit Chadwallah, I am developing a Values Exercise for Multi-generational Family Philanthropy for our Private Clients in Wealthbondage4Good, based on Dante's Divine Comedy. What is your Lasting Legacy? What circle of Hell will you be in on your current plan? Now place your family members. And your Most Trusted Advisor. We will have a Wall Map. Little push pins colored coded to family members. Then we will do the Family Mission statement as to their journey, when properly planned and led by us, from Hell, through Purgatory, to Paradise. To escort the whole family of wealth on a Journey from Hell to Heaven has to be worth a few dollars - computed as a big percentage of the total. I mean they can't take it with them. Philanthropic Travel is a lucrative niche, but this could be a hell of a lot bigger. We may be hiring Tour Guides if this all works out. How well do you know the Way to Heaven? Straight is gate, but we have a bulldozer, and your bags will be carried by Sherpas.
I apologize if I am being indelicate. The prevailing tone for this kind of Wealth and Wisdom work is that of the Undertaker at the Funeral, or the Pallbearers. Or the Ushers passing the basket. Nothing is more serious than Family Values. The photos of the dearly departed. The Guest Book. The overpowering scent of flowers. The heirs waiting for the reading of the Last Will and Testament. With or without a guide, we are all going to take that final ride. Wouldn't you rather be in good company?
Each day I read a paragraph from a 1953 classic text on Swift by Martin Price, under whom I studied for several years to no practical effect at that time. I re-read it now to learn how Jack Ketch, the famous hangman, and public moralist, broke or severed (as his loving wife said), the neck of the malefactor, "so sweetly." In those days, they probably had a real priest officiate, but if the budget were cut, Jack could have doubled as a Secular Priest, at no extra charge, taking off the headman's black hood, and leather cape, replacing them with a blue blazer. Or, actually, I guess, the blue blazer part comes first, to set a high moral tone, then the hood and cape, for the real action, then some kind of post-mortem in the blue blazer with closing prayer, and exhortation to the crowd to go in peace and sin no more. They say that condemned nobles would tip Jack a pretty penny to do the job with one stroke, so at least there is a proven business model, even if the moralizing is free.
"At its core, the metrics discussion is a myth because while everyone talks about it, professes to have seen it and debates its importance, impact metrics remain ephemeral, a force living in some deep wood, visions of which are obscured by branches, brush and bullshit." Jed Emerson
As one who loves the work of Oscar Wilde (in particular The Decay of Lying and The Importance of Being Earnest), I consider literal truth to be a debasement of the human spirit and a well-crafted lie to be the highest form of human achievement (myth, religion, art). But for sophistry to rise to the level of art is satire, not confession. For a confession to be valid you must a) confess your own sins, not someone else's, unless you happen to have committed the exact same sins you confess for them; b) you have to sincerely intend to reform, and c) the confession has to be made to a valid priest, not leaked out on the internet, presented as an article, or just told to a therapist, or some stranger you meet on the street. Speaking for myself, I don't mind confessing some generic sins against the holy ghost, or garden variety sacrileges, like making a false confession, bearing false witness, or passing off a profitable myth as truth, which I have committed like everyone else to make a buck, but I have no intention of reforming just when the whole Social Impact Investment for Measurable Social Return thing is going Global. So, I will stick to satire.
Mindfulness is a spiritual practice. It has great worth. As such it is for sale in Wealth Bondage. Or, we have alcohol, Ambien, Prozac, gambling, pornography, addiction recovery, leadership classes, self flagellation, mentoring programs, secular priests, family historians, butlers, jailers, bodyguards, taxi dancers, or whatever else you may desire at a price.
Mindfulness is inside and outside our bondage to this world.
Philanthropy and AUM
Often investment advisors are held back in serving the client's philanthropy by the fear, partly justified, that the gifts to charity, if significant, will come at the expense of assets under management. As discussed in a prior post, however, we are on the cusp of a major historical opportunity to help Boomer business owners in transition from success to significance, and also greatly increase and retain assets under management.
A Case in Point: Todd, A Day Late
Todd (not his real name) came to our wealth transfer firm the day after he sold his business, a C corporation with zero basis, for $100 million. His capital gain was $100 million. Tax due was $20 million. He said, “Help me wipe out my $20 million tax bill.” We helped him some, but the truth is he came to us at least one day too late.
Charitable Planning for noncash assets, particularly for closely held business interests and commercial real estate, is one of the most complex intertwined areas of the tax code. Proper planning requires a team with at least a tax attorney, a CPA, a business valuation expert, an investment advisor, and perhaps an insurance professional.
To see the value of proper planning, consider how Todd might have done better. Assume he sold half his firm inside a Donor Advised Fund and half outside. What would be the effects?
- No capital gain on the half sold inside the DAF
- A charitable deduction up to 30% of Adjusted Gross Income, with five year carry forward, subject to whatever limitations may apply under the phase out of itemized deductions. (Thank the Lord, for CPAs.)
- Half sold outside the DAF, with the gain partly offset by the deduction for the part given to the DAF.
Note the effect on AUM.
- $50 million new dollars under management in the DAF
- $50 million (minus whatever residual tax is due) outside the DAF
Yet, an advisor might fear that the $50 million in the DAF will be headed soon to charity, depriving the advisor of asset management trails sufficient to educate a child, buy a vacation home, and retire in comfort. Fear not! In fact, some well-respected philanthropic advisors will caution against a massive outright gift to charity for an endowed program. Instead, the leading edge idea is "personalized philanthropy," with staged payments.
Lawsuits: What We Can Learn
Robertson vs. Princeton
In a famous case, Princeton settled a lawsuit with a donor family, where the family said the school had drifted from the donor's intent.
$35 million in A&P stock had gone to Princeton in 1961 to create a supporting org. to fund the Woodrow Wilson School of Public and International Affairs for the education of future diplomats. The fund grew to $900 million and was used for Woodrow Wilson School and other items as well.
Advisors increase assets under management as some of the business is sold inside a DAF and some outside.
- Advisors sell life insurance to replace gifted assets.
- Tax and legal mavens do consulting and documentation.
- Valuation firms and business exit strategists do well.
- National gift funds increase assets under management, and so do alert community foundatioss who can compete in this market.
- Local nonprofits who cannot accept closely held C-corp interests, commercial real estate, or S-Corps - who find this whole topic daunting, can and should benefit as funds leave the DAF headed back home to the local community where the business owner lives and leads.
Who loses? And how to find your role in making this work
Local charities lose if they wait around hoping for a grant from a DAF. You have to be in the game pre-exit, if you hope to be in the game post-exit. Your role now is to identify possible prospects for this and convene advisors.
- Advisors lose if they wait around to hear about this a year from now, after the donor has exited, and has the money all locked up in a fund the advisor cannot manage. Your role today is to learn more, talk to your clients and prospects, and network with local nonprofits who are in dire need of your expertise.
- Attorneys lose if they fail to see that, given where the estate tax thresholds are today, the legacy game has changed from saving estate tax and maximizing net to heirs, to creating a successful and thriving life in which the business family does wonderful things for not only themselves, but also for the community. That is the new legacy planning. If you call that "soft," your own head is getting soft. This is among the most technical and multi-dimensional planning there is. Estate planning, business exit planning, retirement planning, investment planning, family dynamics planning, and planning for social impact. The rest of us, those of us who are not JDs, need you in this conversation. We cannot do it without you.
I am speaking on this topic often to Partnership for Philanthropic Planning Councils, advisor associations, and national networks. For once, making good money and doing the right thing for our business owning families, and their communities, are well-aligned. A leader in all this is Bryan Clontz, CLU, CFP, AEP, CAP. I have been working with him, as well as Tim Belber, JD, and Dr. Steven Meyers, VP of The Center for Personalized Philanthropy at The American Committee for The Weizmann Institution of Science, to evolve the ideas, the teaching, and the practice. Here is a link to videos from Bryan to give you a taste.
When the soldier, on orders, burns the convoy, finds the charred corpses of children, and gets a medal for valor, based on racking up a higher than expected body count, the soul is injured. When we say results are what nonprofits are for, we use the language we share with business and war. And the damage done to the abused souls who become abusers in their turn..... We hangmen hang each other on command. Harlow's monkeys clinging to a wire mother, chew through their own arms. We each need love (not earned, given; not metered but unstinting) to form a self and thrive. Nonprofits (some) are an extension of the family, of brotherhood and sisterhood. The results of fellowship, like the results of a house built from blocks by a child, or the results of a meal cooked by a mother, or of a bedtime story told, or sermon preached to a few souls nodding off in the pews, are nebulous. We only think, we in Wealth Bondage, that it is all about results, measured and managed, because we are the abused, who have become abusers in our turn. "Shark Tank Philanthropy," staged by the Devil for his own delight. Not for results - but for the sheer diabolical fun of watching beings created in God's own image debase themselves and each other. Results are a pretext. Satan's goal is the injured soul. The most injured rise to the top because they are without compunction...... Hush, Tutor, please. The walls have ears. You know Candidia, our Superior and Generous Patron, she who rules us all, thinks the world of you. You have broken more men and women for her in Wealth Bondage than the Marquis de Sade. And they love you for it and return for more. Many you broke, now break others. Your minions have minions. Don't buy it all back now. Break three more this week and you get a coupon for lunch.
If good, healthy-minded people see what they call "evil" as the exception, an aberration, something to be penalized or cured, a mere stain on their naturally pure soul, as on the fleece of a lamb, and if the evil people see all that the good people do and more - namely that the good are innocents who can be coopted, managed, used, and expended, lambs who can be led, fleeced and butchered, with impunity since lambs don't bite, where will the balance of power lie in markets, management, war, politics - all the things that govern our debased realities? Then there is, say, literature and philosophy - the same balance there, with the advantage to the Paul de Man or the Nietzsche or the Faulkner to whom mendacity, horrors, the perverse, the willfully cruel, are legible and manageable, readily included in the fabric of the text, if only in the knots, and the underside? And what of religion? Can we be sure the Devil had no say in The Book of Job? That his hand was not the one raised over Isaac on the altar? That he had no say in the Flood, or in the second coming when blood and fire cover the earth, in some neurotic's vision of revenge? Or, do we flip these texts and say that, no surely, the Father who takes his son's blood in recompense for an imaginary crime, involving an apple, is a moral exemplar, we just don't understand how, because Goodness so exceeds our dim capacity to appreciate it in all its glory? Yes, the sublime - like Nero fiddling as Rome burns, or Hitler in his bunker as Berlin burns. So Christianity and Islam meet in a shared mutually agreeable apocalypse, following their leaders, texts, and flags. In that is it the hand of God you see? So, I hear my Tutor, muttering in his half-sleep. The damn books, again. For a pillow, German Autumn, and for a mattress The Collected Works of Dostoyevsky, Conrad, and Faulkner. If I don't get him back to Oscar Wilde, soon, he may never emerge from this depression. Of course God is good. The nuns said so. Jesus Christ, why make problems where there are none? Family is good. Giving is good. Religion, literature. It is all good.
The guttural voice of the group id. Yik Yak, the anonymous gossip app. Masquerade. Life as a cabaret vs. the world of polite power, played with pious faces. The "carnivalesque." The Lord of Misrule. Channeling violence and obscenity, at times for a higher purpose, anonymous for good reason, and sometimes just harassment or mob rule, like a lynching. On our best behavior not much can be said to overturn stifling decorum, which itself blocks self knowledge, and social change. Oscar Wilde said, "Man is least himself when he speaks in his own person. Give a man a mask, and he will tell you the truth." The otherwise untold truth, certainly, and much else too that is best, like human nature, hidden beneath skirts, britches, and ecclesiastical robes. "None does offend, none," cries Lear mad, stripping himself in the cold rain. Yet what could be more offensive on the public stage than the king's shriveled genitals? In the presence of human truth, we avert our eyes out of respect for humanity. Laughter comes closer, the split second recognition, before we say, "Excuse me," as I often do, to no avail. For satire there is simply no excuse, not even the classics. "The truth will set you free, but not before its finished with you," wrote David Foster Wallace, author of Infinite Jest, before his untimely death by hanging, self-inflicted.
"The paths of glory lead but to the grave," the poet writes.
Lost myself, on the Journey from Success to Significance, having found neither, I crossed paths with Mnemosyne. In her dotage she had lost her memory and her mind. I asked her name, next of kin, her home address, and all she could mutter were a few clichés. Sic transit Gloria. God help us all. She died intestate. Her intellectual property was distributed to Marketing, Avarice, Mendacity, Cunning, and Folly. Their mentor, Wisdom, turned Slattern, draws her fees from corpus. The assets dwindle, but the heirs thrive.
Interesting article on Jay Hughes from a publication in China. Jay uses proverbial wisdom to help dynastic wealth and power retain its privileges for as long as possible, in the face of entropy, corruption, enervation, despair, fortune's ever-turning wheel, familial infighting, pathology, social unrest and justice. For this shtick to be plausible as a moral position requires a selective reading of the Tao and the Gospels, Virgil, Dante, and Chaucer, and an audience largely post-literate, but tends to attract the interest of those who find in Wealth a lodestar. The role of Advisor who Deems Himself Wise, as a player within the play, nets another reading of Dante, Shakespeare, and the Gospels. I am not sure of the Tao. Wisdom has feet of clay, and knows it, which is why she wears clogs. It is also why Wisdom, in polite company is kept outside with the dogs. Well, that may just be me. Collar and chain like a dog. Bark like a dog, sit up and beg like a dog. And still no doggy treats. I wish to God I had never heard the damn Gospels.
After thankless decades toiling in Wealth Bondage, for slave wages under the heel of my immediate superior, and generous patron, the Goddess of the Free Market, she who rules us all, Mistress Candidia, the self-made billionaire, with, as she says, "a fucking Harvard, MBA," I was delighted to see others being thrown to the sharks for once. If we losers cannot make the case for our own survival, we deserve to perish. Nature and Markets are cruel. Philanthropy is love, but love of a certain sort - many kneel, one gloats. If you feel there is no Market for that, you are really out of touch. Whether you glory in your power, or tremble in your submission - honestly, don't you enjoy it, and aren't you glad to have a big audience? Some may call this exhibition, this theater of cruelty, coarse, debased, crass, crude - but it sells and what sells is good. What other standard would you apply?
"Is it safe to go shopping?" asks a women in a new Porsche, as the hedge fund protesters move through Greenwich, CT. Increasingly, I believe, wealth disparity will be assigned a human face - with protests not in public parks, as with Occupy, but on the doorstep of high profile "job creators" whose job creation has fallen short. As here, too, when 26 were arrested outside Alice Walton's NYC apartment. The photo of a bin chained to her awning pole here, went viral on Twitter, to the delight of labor organizers who consider it a case study in how to get social media buzz.
If one family is worth as much as 1 million low income families how may of that million could show up to pay a personal visit? If even 50 show up, it could be a party, if cake were served. In fact, what a great idea for my Social Enterprise. "WB Caterers: Let them eat cake." What makes it a social venture for the good of humankind is that we will employ the indigent to bake, deliver, and serve the cake at these lawn parties. Maybe a hedge fund manager in Greenwich can put up the start up money. For every trend there is a profitable niche. This, at last, could be mine.
Questions for Boards
- As you have become a higher performing organization, following Mario Marino’s excellent game plan, has your cash flow improved?
- Is your fundraising optimized for raising funds from high capacity people like you (Board members)?
- Can you recommend to your peers the fundraising interviews that your front line people deliver?
- Will you make the fundraising calls yourself – and if not, what has to change to make this a pleasure?
- Boards expect payback for new fundraising initiatives of one-two years. (Via Penelope Burk)
- Improving fund development, for highest capacity donors, requires a multi-year investment in staff, education, and infrastructure
- Fundraisers are increasingly drafted into hardball solicitations because the orgs are starving for funds
- Long term pipelines of highest capacity donors are being neglected even though 81% of the funds come from 1% of the donors over their giving lifetimes. (Via Cooldata)
- Savvy, relationship-based, fundraisers cite lack of understanding of fundraising by Boards, and ED, as the main reason fundraisers leave. (Via Penelope Burk)
- 3.5 years is the median fundraiser tenure, making relationship-based fundraising difficult (Via Penelope Burk)
- Boards, per BoardSource, score themselves as “flunking” fundraising
- Yet Board are intrinsically involved in it.
- 50% of nonprofit revenue across the sector comes from goods and services sold to individuals
- 24% is from goods and services sold to government
- 8% is from grants by government
- 13% is from fundraising (via Urban Institute)
- Donor attrition from year 1-2 is 65%
- Donor attrition over ten years is 90% (via Penelope Burke)
Competitive Death Spiral
- Yes, there are 1 million US public charities, but the competition is from social enterprises too
- Social enterprises compete with nonprofits toe to toe for earned revenue (which is 74% of the funding 'pie')
- Social enterprises are beating out nonprofits in many areas (health care, home health care, daycare) in part because they have better access to capital markets (Via Lester Salamon)
- The trend towards impact investing in social enterprises is accelerating exponentially
- Capgemini 2014 says that the ultra-wealthy rate impact investing as the #1 way to do good –ahead of annual giving, major gifts, planned gifts, or volunteering
- The only competitive advantages vs. social enterprises that nonprofits have are “mission” (ethos), loyal constituents, and fundraising for tax deductible dollars
- Desperate, hardball, short term fundraising alienates the best donors, undermines the brand, causes fundraiser turnover, and can lead to a nonprofit death spiral
The Upward Spiral
- Becoming a higher performing organization (in delivering services) is a necessary but not a sufficient condition of success
- To achieve success (or even long term solvency) brand "ethos" (living the ideals of the organization), and donor-focused fund development, as well as earned revenue, must be optimized
- Boards oversee the above, and are ultimately responsible.
The data points above are not my strength, but pattern recognition is. The data points are clear enough to compel action. Unless Boards do step up their understanding of fundraising, and invest in it, I am afraid the future for the nonprofits we love, lead and support, will be increasingly bleak.