Had lunch today with Cynthia Krause, now with Baylor Medical Center in Planned Giving. She will be delivering the keynote at the annual conference of National Committee on Planned Giving. Her topic is Megatrends in Philanthropy. One such trend is the shift in philanthropy-as-driven-by-fundraisers to philanthropy-as-driven-by-advisors and financial institutions. She interviewed me as she has other advisors on how this trend is playing out and how fundraisers might turn it to advantage. My observations:
- Small dollar sales activity and fundraising are generally transactional. A contact is cultivated; a story is pitched; an ask is made; objections are answered. Small transactions, but frequent, are the most likely result. Both new salespeople and most fundraisers are managed to activity goals and quotas, as a condition of employment, leading to routinized transactional activity which can be experienced by the client or donor as dehumanizing. ("What am I to these people, an ATM?").
- Higher level planning activity, whether by major gift fundraiser or financial advisors is relationship based, time consuming, requires a full understanding of client aspirations, values, vision, goals and finances. Gifts and sales are few and often very large. The money moves from both income and from assets. Sometimes the money moved is a big percentage of net worth. The creation of such gifts or sales is a team sport. Insurance agent, financial planner, JD, CPA, and investment advisor may be involved. A family business consultant or family dynamics consultant may be involved. The process is driven by a Trusted Advisor. Fundraisers seldom participate on such teams, as Cynthia Krause's ongoing research bears out. As a result their major gift ask is often quashed by advisors who say, "Not invented here. If this was a good idea I would have thought of it. Why is this fundraiser trying to upset the apple cart? Why didn't the fundraiser talk to me?"
- What banks and brokerage houses mean by philanthropic planning is not generally a gift to Baylor or some other outright gift to a nonprofit doing good works in the community. What a well managed bottom line oriented financial institution means is, very often, keeping money inside the bank or brokerage firm in a philanthropic holding tank that they control (foundation, charitable remainder trust, donor advised fund). From these accounts at some later date some money may leak out to Baylor or some other nonprofit doing good works. But for the time being, the firm itself (or its philanthropic product line) is the charity, if you want to look at it that way. That is, they set up tools that qualify for a charitable deduction. They steer clients to those tools. And they hold on to the money as long as possible inside those tools. When the money escapes and goes to work at, say, Baylor, the bank is out the money.
- While it is true that advisors and fundraisers have some adverse interests (both want the money under their control; fundraisers want current dollars; advisors want the money in accounts from which grants will be made later). Still, advisors and fundraisers have a common interest in serving the donor. In the end it is the donor's intention, donor's money, donor's life, donor's heirs, and donor's posterity.
- Another point of commonality: If we don't serve the informed donor client, we will lose the informed donor client. Moral for those who care about philanthropic impact on society: Let us educate the donor to be well informed. That is what Tracy Gary and I are trying to do.
- Tip for Fundraisers: Instead of closing for a big gift, ask to be allowed to speak with the client's advisors. Meet with them and ask them how a gift might best be positioned, if the client chooses to make a gift. Such an open question will tend to put the advisor's on the team, and make them more like allies and colleagues.
- Tip for Advisors: Realize that giving is about changing or preserving something in the world. Putting money in a deferred account (Charitable Remainder Trust, Donor Advised Fund, Foundation) may change the world - later. Consider including current grants and gifts in your plan, if that meets the donor's intention. Many donors are quite happy to find that current gifts are feasible for them. (Meaning that they can afford such gifts without it affecting the achievement of their other planning goals.) Nonprofits love such gifts. From current gifts come current referrals. From such gifts come a better world, sooner rather than later.
- Tip for Donors: Yes, we all want to serve you. (Or, at least we are all dreadfully concerned about losing you to our competitors.) But all advisors, even fee only, have their own vision of the world, their own ways to get paid, own biases and blind spots. Think well of advisors. Think well of fundraisers. But do not be passive. You have one non-delegatable responsibility: to be clear what you are trying to accomplish for self, family, and society. When you come to clarity and communicate it clearly, perhaps in writing, you will lead the planning team. You can do that with style, grace, tact and good humor, but only your leadership will produce an inspired result. When you lead, we follow. Please do! Tell us what you want to change or preserve in the world. Tell us when. Tell us how, through what social investment or nonprofit. Ask us to work together for your benefit, both fundraisers and advisors. You can convene us.
- Tip for Nonprofits: One way nonprofits can capitalize on this Megatrend of advisor engagement is to hold events for both donors and advisors teaching them how best to partner. Tracy Gary and I are providing such training to donors, advisors, and nonprofits. The results seem quite promising. One other thing you can do as nonprofit is to refer to and make visible those advisors and firms who are enlightened enough to support current, direct gifts. That incentivizes advisors to think about social impact, not just tax deductions and money under management.
- Tip for Those Who Manage Fundraisers by the Numbers: I agree we must sweat these fundraisers as we do sales people. We manage, as bigshots; they race around town defeating themselves at every turn. We must count what they do each day. Tally it and ask for more, more, more. The result will be what you have now. Donors turning to financial people for advice on giving. Donors keeping fundraisers at bay while they consult their Trusted Advisor. That will not work to your benefit. I would not counsel you to take fundraisers off quotas. However, it might be wise to counsel them to spend 10% of time learning and using a relationship intensive, donor-centered transformational process as pioneered by, say, Charles Collier, Senior Philanthropic Advisor at Harvard. I predict that for wealthier prospects this 10% of time will, within 2 years, account for 50% or more of results.
- Plea to Those Nonprofits who are Mission Aligned with Humanity: Does your nonprofit draw on religious traditions, like tzedakah, the heart of compassion, or caritas? Is your organization devoted to the liberal arts, or the culture of a noble human life? If so, why is your fundraising objectifying your best donors? Why not align your giving programs with your institutional values and treat donors as cherished members of the kingdom of ends (Kant) rather than as means to an end? Get your giving process aligned with your deepest mission as an organization, and I (being a prize Fool) predict that your fundraising will flourish as never before.
We (donors, advisors, and nonprofits) do need one another. We all have a role to play in the dance of philanthropy. Out of that dance will come happier donors, more fulfilled heirs, more effective plans, healthier nonprofits, and a better world.