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February 2008

Making Money Off Donor Advised Funds

Registered Rep Magazine provides the down low on donor advised funds. Money goes in easy and comes out slow.

Where DAFs really shine in comparison to just forking over funds to a particular charity is the flexibility inherent in the questions related to “when” and “how much” must be siphoned off the fund to a qualified organization.

Unlike private foundations, there is no IRS requirement that a minimum amount of money be distributed from an individual donor-advised fund in a particular time period.

So your client can make a tax-deductible donation this year of say, $100,000 to a DAF. But she might only choose to only peel off a few thousand of that amount to a favorite charity now, and leave the rest to multiply for future benevolent endeavors.

Of course you still have to get paid on the assets under management. But how when Community Foundations don't compensate you? Well, read the last section, "Getting Your True Reward," to find out. Clearly, in the minds of the rep, Community Foundations are asset managing competitors, unless some way to pay the rep has been found.

Concierge Medical Care for Winners

Private Wealth Management on Concierge Medical Groups:

The fees charged by these firms vary widely, depending on the level and type of service. MDVIP, a popular concierge medical practice in Florida, for instance, gives patient’s greater access to a doctor for an annual fee of about $1,500. More full-service firms, like Healthcare Navigation and PinnacleCare, not only review coverage and appeal denied claims but actually accompany patients on doctor visits, for $10,000 to $50,000 a year. At the high-end, firms deal not only with a patient’s healthcare but with their wellness, aging and beauty. Some throw in perks like driving patients to the doctor in a limousine and giving them monogrammed robes made of plush Egyptian cotton to wear in the doctor’s office. Elite Personal Physician Services in Beverly Hills, for instance, has packages that range from $10,000 to $150,000. The Miami Institute for Age Management and Intervention in Florida has an annual package that costs $250,000.

Still, "Laughter is the best medicine," saith the Fool. For 50 cents I will make you a better person. (No takers, of course.) How about for free? If I give my dirty bathrobe for the privilege? But the limos come and go, outside the hospital, and not one taker for a Morals Tutorial. I follow the limos from hospital to grave side service and listen in as the Priest reads the prayer for the dead. "Ashes to ashes." Then comes the reading of the will, and the all night bash for the heirs at Triple Seven.

UT Southwestern and the $30,000 Velvet Creme Popcorn Donor Recognition Gifts

Scandal or nonprofit business as usual?

In one of the more unusual expense items found by CBS 11, Wildenthal [the President of the University of Texas Southwestern Medical Center in Dallas] spent more than $30,000 in donor's money to mail order gifts from the Velvet Crème Popcorn Company in Kansas. Wildenthal described his last two annual popcorn orders on expense reports as "seasonal donor recognition gifts".

UT Southwestern replies:

All of the expenditures questioned by CBS 11 and its “experts,” without exception, are totally legal, ethical, appropriate and in conformance with UT Southwestern, UT System and State of Texas policies and regulations.

Prisons as Mission Aligned Social Investment

For Philanthropically Inclined Investment Bankers, Drug Lords, and Other Double Bottom Line Social Investors Looking to Do Good and Do Well While Advancing Ordered Liberty, Property Rights, and The Justice System in the Ownership Society With Rising GNP and Personal Accountability for the Lower Social Orders and Rising Net Worth, Influence and Power for those upon whom Fortune and the Market Smile.

BBC: "A new study of US prisons has found that numbers of people in jail are at an all-time high, with more than 1% of the adult population behind bars." Helpful info here for those who would like to invest in prisons and so address a growing social need. 

Digby has more. Also see Catherine Austin Fitts, a former investment banker, for the back story on how the investors and investment bankers get  a "pop" from every prisoner consigned to a for profit facility. Raise high the champaign glasses every time the police roust the crack house. Each guest in a for profit facility will make investors a fortune. Shall we call the Governor? A little campaign contribution here, a little grease there, and the big wheels keep on turning. From the profits made on prisons, why not donate a few bucks to the Crystal Charity Ball? A great place to make friends with those who matter.

If you were a drug lord, or an investment professional working for same, would a for profit prison going up in some good clean town be a good mission aligned investment, as you send in your team of dealers? Then maybe you can buy the real estate cheap. Then maybe you can buy out the tottering local bank. With your own CDs in that bank, FDIC insured, and the investments backing them gone, you can collect from the government. Then maybe you can pull the dealers out, let the police clean things up, and get another pop off the real estate, and another pop off the bank as the town comes back to life, and a big pop from the for profit prison. The law and order Govenor will be in your pocket too. And you may be feted for your philanthropy, setting up a double bottom line bakery, to employ the recently released prisoners at low wages, to make artisanal breads for your friends. What percentage, I wonder, of our economy, whether above ground or underground, circulates through such double bottom line social ventures, criminal enterprises, investment banking deals, campaign contributions, a legal system in the witting/unwitting service of crime, the legislatures, and philanthropy?  Actually, I would rather not know. Dashiell Hammett could have written a fine novel on such themes.

As the Emperor Vespasian said of the toilet tax, "Pecunia non olet," money has no smell. If we did not let the social capital markets work, and money and favors and philanthropy circulate freely, the whole system would explode, with stench everywhere.

Planned Giving Design Center Revamped

The Planned Giving Design Center has been updated and relaunched. is a key resource for any professional working with wealthy clients or donors on planned gifts. Also, the site is useful to fundraisers as a window into the world, mind set, assumptions, and blindspots of professional wealth, tax, and legal advisors. You will quickly see that from within this world giving is all about tools, techniques, tax, finance, and legal fine points. It would make no sense in such a context to talk about donor psychology, ideals, aspirations, or about social impact. These "touchy feely"considerations are best left to the donor's Rabbi, or the Dumpster Dwelling moral philosophers who infest the highways and byways of The Ownership Society, practicing their liberal arts by stealth and dark of night. A better world has lower taxes for our clients. Now beat it! We are doing serious planning here, not vaporizing about social justice, health and welfare, the arts , or the environment.

Mission Aligned 1,000% Social Investment Return

Poor people, through their own profligacy, often need short term loans. Interest on payday loans in TX ranges from 400% to 1,000 per cent per year. Why shouldn't Community Foundations align their mission and their money by investing in these loans? They could do well and do good right here in TX. Collections can be handled by poor people hired to reposses the borrower's furniture or break the debtor's legs. Thus, the good spirals, particularly if the legs broken are those of undocumented Mexicans, thus discouraging others from imposing their social cost on our Ownership Society. 

Gift as Expressive Action

Might we ask donors such questions as these?

  • What stories are told about your parents and grandparents?
  • What stories would you like told about you?

A narrative of heroism, identity formation, challenge and achievement - isn't that a context of philanthropy? How does the gift (that possibly magnificent gesture) fit in the story of a life? A heroic act? Propitiation? Remembrance? Wily act of self advancement? Magnanimous act in keeping with a certain station in life? Strategic intervention as a community or cause hangs in the balance? Each gift, no less than any other dramatic gesture, is a plot point and an action expressive of character. Anyone who says otherwise ("No! gifts are or should be efficient market-style transactions! A gift is a businesslike tactic!") is writing his or her own story, though blind to how it might be read. To consider the gift as a tactic in a market context is to paint the giver's portrait in oils: Sensible business person, standing with one hand on his computer in a well appointed office with a view of the city as seen from a high window.  Such a symbolic portrait ("The Benefactor as Social Investor") already tells the story of a life, an ethos, a world, an era. (Doomed.)

The State of Corporate Philanthropy

McKinsey Global Survey released February 2008:

In addition to social goals, the vast majority of companies—nearly 90 percent—now seek business benefits from their philanthropy programs as well. When respondents were asked what business goals they try to reach through philanthropy, they most often say their goals include enhancing the corporate reputation or brand (Exhibit 1). And some 80 percent of respondents say finding new business opportunities should have at least some role in determining which philanthropic programs to fund, compared with only 14 percent who say finding new business opportunities should have no weight.

It is notable, however, that some 30 percent of the responses to the question asking about business goals indicate that some companies are trying to reach very concrete goals, such as building knowledge about potential new markets and informing areas of innovation. Respondents from companies with these goals are likelier than others to say business concerns should play a role in determining funding for philanthropic programs. Also, their philanthropic programs are much more likely to address at least some of the social and political issues relevant to their businesses; nearly two-thirds say they currently do, compared with just under half of all respondents.

Survey is well worth reading. You can register to read it at no cost.