Went to a Board Meeting today for the North Texas Council on Planned Giving. NCPG is apparently about to rebrand itself as Partners in Philanthropy. They will stress partnering of advisors, donors, and fundraisers. Now, Tracy, why didn't we think of that? Actually, it is great to see that need is now deeply felt and that NCPG like Philanthropic Advisor Network (see for example Seattle Advisor Network) is moving to fill that vacuum. The work of Inspired Legacies may have been early, but was in what seems increasingly to be a recognizedly appropriate direction. By the way check out SPANs Homepage for two familiar faces.
The Questions and Observations below are for donor educators, wealth coaches, and fundraisers. I will assume the donor is a woman, because this is, indeed, a gendered discussion of a gendered field. If we wanted to talk about male givers, I would be talking about "social ventures," "venture investing," "mission aligned investing," "balanced scorecards," "double-bottom line business opportunities," and other macho surrogates for philanthropy. Look for me among the women on this one.
Questions about the Donor
- Whose donor is she? (Yours and who else's?)
- What is her vision of the world she wants?
- How does your organization advance her vision? (And who advances that vision better?)
- When you meet with her, do you tell her story or your organization's? (Hint: it should be yours as an element of hers, a plot point in her life story and vision of an evolving world.)
- What is her overall wealth? (Held by her or for her by others).
- How much wealth (cash flow and assets) does she and her vision control (and how much is controlled by father, brother, trust officer, husband?)
- Is the donor's philanthropic budget from income or assets or both?
- Can she give away principal if she wishes?
- Who determines the size of the total philanthropic budget (she herself, husband, trust officer, foundation grant making committee of which she is one member, family counsel, family office?)
- To increase the philanthropic budget for the donor the fundraiser may have to talk with others in the family system and to their advisors. These family members may not share the donor's social views, or sense of urgency about our collective future.
- The donor maybe on a "philanthropic allowance." The philanthropic budget may in fact be kiss off money to keep the little woman, or disempowered heir, productively engaged and out of the serious money issues.
- The donor may seek out a therapist or wealth coach to address her money issues. Those issues may be as much about family dynamics as they are about money. These dynamics may be intractable until the coach or someone else gets all the stakeholders into the same room for a family meeting.
- In many wealthy families, the ultimate estate plan will be driven not by "the donor," alas, but by those family members and their advisors committed to preserving and growing principal, as well as the power and influence of the family.
- To get the donor's vision leveraged across all the family money, not just the kiss off money, is a noble goal.
- When all stakeholders work out the ultimate estate plan in concert with one another, the process may be lively, but the results can be outstanding.
- The Wealth Coach or Donor Educator is doing a service when he or she helps the donor not only articulate and defend a vision for all the money, but also to enter into a dialogue with the other stakeholders, as a visionary and family and community leader in her own right.
- We will have a better world when these wise women prevail. (And yes, of course the donor can be male, and the gifts can be an expression of shared vision for a couple or an entire family. That cohesion and shared purpose is much to be desired and achieved as the flinty eyed family members are inspired by their donor-leader.)
"A Letter to my Stockbroker." Could we be seeing the beginning of a client revolt against traditional financial services firms? There is a saying in sales training, "In every interview a sale is made; either you sell the prospect or the prospect sells you." Another goes, "Control the interview!" I see the beginnings of an emerging market to train clients to control the planning process in order to direct money to places that are good for the client, or for society, but on which advisors do not get paid. Examples:
- Make a direct gift to charity.
- Give with others in a giving circle to build social ties and expertise
- Buy farm land
- Buy land and add a carwash to pay the taxes while the land appreciates
- Buy a franchise
- Reduce expenses and protect against inflation and economic chaos by drilling a well, adding attic insulation, putting up a windmill, starting a vegetable garden, adding solar panels.
- Lend money to family and friends at rates lower than the bank charges borrowers, but higher than the interest banks pay on deposits.
- Deposit money in a locally controlled credit union.
- Start a co-op to raise and distribute locally grown food.
- Go back to school to learn a trade useful if all hell breaks out; e.g., prison guard, midwife, bank dick, strolling minstrel, undertaker, or grave robber.
Some of those attempting the rebalancing of the client/advisor power dynamic are life coaches turned Wealth Coach. Others are coming at it from philanthropic consulting. C.A. Fitts is a Wall Street insider turned potent client educator. Those firms and advisors who partner with clients will take bread from their less cooperative peer's table as clients move to those who serve them best. Advisors, in these increasingly dire times, who fight the megatrend and seek to control the client, the process, and the profit points, may increasingly find themselves puzzling over letters like the one linked above.
Thursday through Saturday of last week I was in Houston for a workshop with Tracy Gary and about 30 nonprofit professionals and a handful of financial advisors. We discussed how to uplift the philanthropic ecosystem by getting donors, nonprofit and advisors to work together more effectively. We agreed that good planning begins for a donor or a client from the donor/client's vision and values. We also agree that clients need good plans. Where nonprofit people and advisors differ, I think, is the scope of the plan controlled by the donor's vision. This is a hugely important point; let me make it clear with a real world (now fictionalized) example.
Max Smith, age 70, sells commercial real estate. Last year he netted $14 million. He has zero interest in philanthropy, but is increasingly interested in doing something new. He feels he has one more big project in him and is casting about for what that might be. His net worth is $100 million. Max is married to Lorraine. He gives her a $30,000 a year charitable budget. He and Lorraine have 2 children in their 40's. Both children have one child. All is well with the kids and grandkids. But Max and Lorraine are concerned about "how much is enough for the kids." Lorraine is concerned too about the health of society. What kind of world will these children and grandchildren inherit? What whirlwind will they reap?
Maxine is a "major donor" to Women's Foundation of Anytown, USA. Maxine has worked through Tracy Gary's Inspired Philanthropy and has created a giving plan in the light of her vision and values, and her long term goals. She has decided to reduce her scattershot giving and to focus increasingly on the Women's Foundation. She will up her gift this year from $10,000 to $15,000. She will also serve on the Board. Her sense is that it is women who will lead as we all seek to preserve a loving, just, and sustainable community for our heirs.
As an advisor, what I see is that the one with a vision is Lorraine, but that her vision only governs a piddling $30,000. The sad fact is that Max has not acheived a long term vision at this point. Another sad fact is that he is not a giver, yet. And a big sad fact is that he and Lorraine will owe, say, $30 million in estate tax some day. Perhaps another sad fact is that the children will inherit the remaining $70 million, more than Lorraine and Max may feel the kids really need.
As an advisor I believe that the vision for this family should govern and drive the entire $14 million a year of income and the entire $100 million of assets. For that to happen someone has to debrief this couple about their shared vision for the rest of their lives, for their children, their grandchildren, and for society. I suspect that Max will dominate the discussion of the numbers, but that he may well defer to Lorraine for a vision that goes beyond self and family. When it comes to kids, grandkids, and the claims of humanity, her voice may prevail.
I am reasonably sure that with proper planning this case calls for annual gifts over one million and a legacy of over $30 million. That would be a going in expectation. The real numbers will flow from their deepest, mutual goals. I also suspect that in setting specific giving goals that Lorraine may take the lead not only because she has the heart for it, but also because she has the relevant expertise and experience. She has been out and around in the community. She has served on boards, done volunteering, done site visits. She knows what fuels her own passion, and she knows the needs of the community. She knows what might interest the children and grandchildren, and she knows her husband well - what would interest him and engage him if he does decide to do one more major project. Perhaps he too will go into nonprofit service, or perhaps he will start a social venture.
Who knows where this case will go; it is a real case and it is still open. Max is meeting with a woman who is not a financial advisor, but a nonprofit person who holds herself out to the public as a giving consultant. Now, if this consultant operates with blinkers, she will work hard on that $30,000 annual giving budget. If she caught the point of view I was presenting in Tracy's workshop, she will get Max and Lorraine to clarify their big picture life and legacy goals. Then she will get them involved with advisors who can do financial and estate planning with a philanthropic twist. Net results? Mostly likely $50,000 plus in planning fees for the professionals. Commissions to advisors for products sold, perhaps in the hundreds of thousands of dollars, particularly for life insurance for estate planning. Annual giving budget increased by a factor of 100 ($3 million annual rather than $30,000 annually) and a legacy up from zero to at least the current amount slated for estate tax, say, $30 million. If $1 million each is enough for the kids, then maybe the charitable portion is $98 million. Who knows; but these are quite reasonable outcomes given the facts above.
So, when you say you start with vision and values and do a legacy plan, what do you mean? Are you a giving professional who tweaks the $30,000 giving budget, trying to increase it a little, or to get a bigger slice, or are you the one who engages advisors and nets tens of millions of dollars in gifts now, later, and at death?
Working well with advisors is just working smart; and, it pays off in better plans for clients, and bigger gifts for charity. Also, the advisors to whom cases like this are referred will likely reciprocate with referrals back.
Families who think thoughtfully about what they want to achieve with their wealth—either through their foundation, their personal giving or both—and who communicate that clearly to their advisors, will have more success in seeing their legacy fulfilled. Unless you develop a plan and share your vision, your financial advisors may advise you to follow a conservative giving plan that doesn’t take into account your capacity to give or desire to go beyond just preserving wealth. Based on her book “Inspired Philanthropy, Creating a Giving Plan and Leaving a Legacy,” Tracy Gary will discuss how to develop your giving plan and partner with your advisors to unleash greater generosity.
This is what Tracy and I are trying to foster; she with her "gigs," I at Gifthub, and both of us in open source partnership with others who serve donors bent on serving the larger human community. Advisors serve families, clients, the money itself, themselves and their firm. For advisors to create a plan in service to community needs, the client must step forward with the ideals clearly stated. Training donors to do that is what Tracy and I are all about these days. We think it is good for families, and good for the community. Having presented these ideas at Advisors in Philanthropy with Tracy a few days ago, it is clear that qualified advisors embrace this process.
Tracy Gary and I did our talk, modeling "the dance" of donor and advisor in giving. The talk was well received and looks like it will lead to invitations to do other talks elsewhere. We did talk a little about helping all families in a community flourish, the wealthy and the non-wealthy too.
The Ecosystem of Philanthropy
Who is part of your "better world" ecosystem? That is, if you want to create for yourself and those you love a better life in a better world, what other "players" impinge on you, for good or ill? And how might you, then, uplift both your own actions and the overall ecosystem so that a better world is possible? That is the line of thought that I have been pursuing within an informal network over the last several years. I will organize for my own use these observations under key names in my ecosystem.
Key actors in her vision are donor, advisor, and nonprofit. Key indicator of success is the number of dollars raised. Key driver of dollars raised is donor training to help the donor manage the planning process with advisors towards a more inspired, but also prudent result. As donors are trained to ask for philanthropic plans that very request will motivate more advisors to provide such plans. Training for advisors would then be well-received, since tied to a practical result, that of meeting a real demand. Also, a key actor is the next generation, the children of the donor. If money goes to charity it might come at the expense of taxes first, but at some point it will come at the expense of inheritance. Hence, children must be raised and mentored in their roles as carriers on of a giving tradition. Nonprofits on this model become the convener of the appropriate training and conversation and network.
Tracy and I will present this vision to Advisors in Philanthropy at their Annual Conference next week. The following week I will present a version of it to Southeastern Council of Foundations. We do have some early success stories. A number of other professionals have expressed interest in this way uplifting the philanthropic ecosystem.
Catherine Austin Fitts
A former investment banker, and former assistant director of HUD, Catherine seems to have stumbled upon the dark side of money and become for awhile an "enemy of the state," as she puts it with a smile, suffering the tribulations of Job, as a lesson in civics for herself and others. She is not keen on philanthropy, because she has seen where money, in certain cases, comes from, with whom it consorts behind the scenes, and how brutally those who control so much of the world's money and power behave when their insider games are outed or challenged. She has seen philanthropy used as cover or cleanser for the reputations of people who should probably be in jail for financial fraud, extortion, drug running, betrayal of the public trust, mere graft, or high crimes and misdemeanors. She also sees that philanthropy will be tolerated as a cleanser as long as it remains both upbeat and ineffectual. Philanthrocapitalism is also safe because it does not challenge, in fact personifies the hegemonic game.
You might think, then, that while Tracy is liberal that Catherine is a revolutionary Marxist taking her cue from Che. In fact she is a Christian Conservative taking her cue from Adam Smith and Jesus Christ, which makes her a dangerous mind. She is not asking capitalism to give way to socialism. She is demanding that capitalism live up to its own founding ideals: financial transparency, honest book keeping, the rule of law, and the prosecution of criminals regardless of their wealth, rank, philanthropy, connections, or access to armed force, or criminal networks.
Catherine urges us to create a better, more financially intimate world, by withdrawing wealth from the rigged and gamed financial markets and reinvesting in places governed by the rule of law, maybe New Zealand, or maybe your home town, or among a circle of friends who have farms, small businesses, or a local bank. As an investment banker she thinks bigger than that too, asking who will own the water supply, for example, in your town? Who will commandeer the food supply? Might we not form investment pools that would allow local decision makers to steward such resources for the good of the town, rather than, say, Nestles?
You can see that this is not your idea of "philanthropy," but the actors named by Catherine (the drug dealers, the slum lords, the corrupt governmental officials gaming the sub-prime mess, the investment bankers bringing for profit prisons to market, the private bankers who own the Fed, the governors owning prison stocks and passing "three strikes you're out" laws, the shadowy actors trading drugs for arms and arms for hostages, the corrupt accountants of both business and government, the blackmailers and hit squads operating here and abroad to silence those who out the dirty game) are part of the same ecosystem in which philanthropy goes about its upbeat work. Some capitalist like Boverton Beaver who has made billions out of buying companies in, say, the liquor business, gambling stocks, the porn business, or armaments, or in for profit prisons, might call himself a Double Bottom Line Social Investor and might start a double bottom line bakery employing at low wages the convicts on parole from the prison he owns up the hill from the ghetto, blighted by the drug lord whose Harvard educated son sits with Boverton on the board of the local hospital, or the home town newspaper, or serves on a Blue Ribbon Commission studying urban poverty. That philanthrocapitalist might then endow a business school, or a chair in social venture capitalism, or might fund a DC Think Tank on Engaged Philanthropy, or on Pro-Market Public Policy, or might hire out the writing of any number of white papers and scholarly studies on metrics for double bottom line firms. All this might then be applauded by leading philanthropy bloggers who, in their business life, consult to the banks and the brokerage houses with their captive philanthropy departments catering to private wealth from sources both light and dark, or who make their living managing Boverton's money. So the world closes back on itself in an ecosystem in which the herbivores, the carnivores, and the hominids thrive and prosper - up to a point, though that punctuated equilibrium is far from optimal from the standpoint of human flourishing.
What other actors? What are we leaving out? How about the teachers, writers, artists, prophets, and thinkers who are the masters of our spiritual, intellectual, ethical, and cultural traditions? (If you are not familiar with such figures you might think instead of Star Wars or Marvel Comics or Grand Theft Auto or the Matrix; those may be close enough to wisdom, if that is all you have and you don't know the difference.) If our better world is to be guided by what T. E. Hulme called "the best that has been thought and said," then we must listen to voices of the graces, or the holy spirit, or the muses, or the voice that speaks out of the thunder, or the still voice we have been ignoring, or whatever one wishes to call that voice that rises in us when we are obedient to what is greater than ourselves, what is most alive and life-giving in our traditions. I could go on at great length on this point. Eloquence trumps power. The pen is mightier than the sword. Love conquers all. And the dead shall rise into eternal life, dead or not, as they live on within the tradition they would not betray, even at the cost of their own life, the ultimate gift. As different as are the three figures mentioned above they share an almost helpless love for the life of the mind and of the spirit. When they discuss giving, it is within the shadow of Mt Ararat within eyeshot of the ruined garden. I am not implying that they would get crossways with worldly wealth or power. We catch more flies with honey than with vinegar.
Phil to Thee
Well, you can see that the company I keep makes my head ache and buzz. What I come down to is this: Whatever is the correct map of the ecosystem in which we live, whatever actors you see, or think you see, whichever you name, or fear to name, whatever your personal resources, you cannot blink the questions:
- What kind of person do you want to be?
- In what kind of world?
As you meditate on those questions, you will need your own vision of success, and a realistic model of your current situation - whether upbeat or dark or chiaroscuro. Given that vision of a better life in a better world, and given your assessment of what you are up against, you will have to make your own decisions, in the light of the traditions that speak to you and through you, as to how you will deploy your money, your time, your attention, your life energy, and your love within a risk profile that includes your assessment of the probability of success or failure under conditions you can barely discern. Each of us can see only a little.
Best Practices within a Learning Community
As we find our way, across this landscape, let us share what we see, share what we learn, mapping our terrain, and sharing the paths that lead out of the dark wood into the light. As you address the two questions above (and they cannot be evaded for the evasion itself is an answer), consider sharing what works and does not work so that we can collectively do better than we could alone. I am trying to take that approach here sharing my notes on what I am learning, and hope you will share as well, whether through a note to me, or on your own blog, or however you wish. Perhaps if we live in truth, and speak what we know, and look out for each other, we not only ameliorate specific ills, and prosper in our own lives, but also uplift the overall ecosystem of which our efforts individually are but a tiny part.
Philanthropy Journal on Secrets of Working with Advisors on planned gifts. Involve them early, treat them as allies, do not try to work around them, is the gist.
The Planned Giving Design Center has been updated and relaunched. PGDC.com 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.
Part I: Community Foundations Want Advisors to Ask the Philanthropic Question
Over the last ten years I have often been asked by those in established philanthropy, "What can we do to get advisors to ask the philanthropic question?" I would like to turn that around, "What can we do to get community foundations and nonprofits to do comprehensive values based estate and financial plans to unlock the wealth inside farms, ranches, fast food franchises, electrical contractors, home builders, and all the other small business where wealth is illiquid - and thereby increase giving within the community many times over?"
Of course nonprofits do not do that kind of comprehensive planning; they just make a philanthropic ask without understanding the client's overall financial picture.
Just as nonprofits want advisors to refer those with liquid wealth to them, so advisors want nonprofits to refer those in need of full planning to us. We need to begin to break down these silos so that we have a culture of giving that is more open and welcoming not only to high class liquid wealth, but also to the advisor who serves clients with dirt under their nails, whose wealth is locked up in illiquid operating businesses, the foundation of Main Street America.
When is the last time you as a nonprofit fundraiser said to a donor, "Don't just give a pot shot gift to us, as much as we might welcome it; let's go to your advisor's and plan a gift that makes most sense in the context of your overall financial situation, your overall legacy plan, the many nonprofits you support, your own lifestyle needs, and your aspirations for your children, as well as for your community"?
Until we begin to synergize across the silos, understanding the cultures of living and giving in which we and our constituents are embedded, another decade will go by as we talk past one another, about "asking the philanthropic question." We need to become co-conspirators for the good, asking the larger questions about what the client/donor wants to do with his or her overall life, money, and legacy. Planning that effectively takes the best from all of us, operating as team or network.
A few nonprofit thought leaders, like Charles Collier do full values based planning. The Heritage Institute is training others, along with advisors. So are Tracy Gary (with a focus on getting fundraisers, donors, advisors to partner in this work) and Jerry Chasen (with a focus on JDs and financial advisors) and Barb Culver (focusing on advisors) and Jay Steenhuysen (focusing on advisors, but from his background in fundraising). Also training and supporting advisors are Inknowvision and The Legacy Companies. Also, Advisors in Philanthropy is a professional organizations for advisors, most of whom work on Main Street, USA. I hope many will follow in getting serious training in philanthropy as a liberal art and as a financial science, not just advisors, but nonprofit professionals too. We can't all be experts in the other's areas of expertise, but we can learn enough of what the other knows and does to form a team for the advantage of donors, families, and community.
Part II: Financial Services Firms and Community Foundations: Allies or Competitors?
Beyond the boutique philanthropic training and service outfits, many if not most financial services companies now have philanthropic divisions. Bank of America, Merrill Lynch, UBS, CITI, Goldman, Wachovia, Bessemer, and others have strong philanthropic areas.
When community foundations think we in financial services need help asking the philanthropic question, they may be wondering, "Where did all the money go?" The truth is, we ask the philanthropic question, and provide in-depth philanthropic planning within an estate or financial plan, so that we can glom onto the assets and manage them ourselves and thereby displace the community foundations. What is missing in all this is active interest in impact - how those charitable dollars stockpiled in financial institutions can be put to work to make a better world. Even there, impact analysis is increasingly coming under for profit firms. Foundation Source, a rapidly growing provider of foundations, has a former grant-maker from, I believe, Pew, on staff. Newdea amounts to a for profit community foundation. They too offer tools for analyzing effectiveness and impact.
Candidly, community foundations are asset managers who provide ancillary services. That model has been taken over by for profits and we are beating the community foundations at their own game. We will continue to do so as long as community foundations remain stuffy, inefficient, and transactional. We don't need you to tell us how to handle wealthy people. We could use a little idealism, a little civic spirit, a genuine commitment to social good. But how well do community foundations live up those ideals, and does it provide a sufficient differentiator?
Again, why do financial intermediaries need community foundations, when they can, effectively, own one? (Not own, per se, but establish and run a functionally equivalent structure.)
A community foundation may get, say, 60% of its new money via advisor referrals. Hence, they might think that if more advisors knew about the community foundation and asked the philanthropic question, the money would roll in. What is missing from this analysis is that most advisors never refer to community foundations. Perhaps, .05 - 1% of cases where philanthropy is an issue ever get referred. Instead, financial advisors are working with their own company or commercial providers in order to maintain client control and control of the assets.
Ten years ago, advisors and firms had much to learn from community foundations. Now, it is the other way around, but community foundations seem still to feel that it is up to them to teach us the A, B, Cs.
III: Attorneys and CPAs?
Perhaps if financial advisors have a vested interest in not referring to community foundations, attorneys and CPAs will? After all, fee only professionals do not compete for assets under management. Well, ask yourself where the estate tax attorney and CPA working with wealthy clients get their own business. Largely via referrals from life insurance agents and other financial advisors. So, the attorney and the CPA who refer to the community foundation, instead of back to the financial advisor who also wants to control and manage philanthropic dollars, is making a choice with implications for the CPA's or attorney's own referral network. Unless the community foundation puts the CPA or attorney into a referral rich social network, it might behoove the professional to cultivate those who repay the referral favor.
IV. Giving Advisors a Piece of the Asset Management Fees?
Perhaps community foundations can cut the financial advisor in for "taste" of the management fees. Some community foundations have preferential arrangements with one or two big companies. This, of course alienates, advisors from other firms who are not on the platform. Other community foundations will let any advisor get a piece of the action, if the case is large enough. Whether this feeding arrangement works to the advantage of donors and to society (as fees come ultimately at the expense of grants), is another matter. A low cost for profit intermediary, like Fidelity, cutting out both the advisor and the community foundation, in favor of grantees may seem a more socially conscious choice.
V. Beyond Competitive to Cooperative Advantage
Whether we are CPAs, attorneys, nonprofit fundraisers, community foundations, or financial advisors, the time has come to partner as peers and colleagues to advance philanthropy by doing what is best for our clients and donors. This goes way, way, beyond asking the philanthropic question. It goes beyond short term plans to get our piece of the action. It is a matter of making sure that donors are well advised as to their overall financial life and that they are also well networked into the right circles locally so that their giving has impact.
I am not sure we need more information. I am sure we need more shared understandings and a greater sense of shared civic purpose. The community foundations and leading nonprofits should be in the forefront of this. If they do not step forward, it will be Bank of America, Merrill, Fidelity, Newdea, Foundation Source, Bessemer, Northern Trust, or Wachovia, say, who are the philanthropic managers and brokers for an ever-increasing percentage of charitable dollars. Not a bad thing, but somehow in all this, I believe we have to have more than a philanthropic capital market where for profits and nonprofits function as fungible service providers. We must cultivate a nonprofit sector with its own "telos."
Something wonderful is lost when for profits supplant nonprofits as the philanthropic leaders. I hope we can partner within a civic spirit kept alive by our nonprofit allies.