Foundations of Philanthropy

Are foundations an old fogey giving tool? Mark, I didn't mean to suggest exactly that. Rather, in doing planning for clients around self, spouse, kids, taxes and society, the conversation goes too often like this:

• Want to reduce taxes at death?
• Prefer to give the money to charity rather than the gummit?
• Want to retain control of the part you can't keep?
• Want to give your kids a way to get a salary and trip to Acapulco for Board Meetings?
• Want your kids never to have to buy a lunch again?
• Mix and mingle with influential persons?
• Well, a foundation will accomplish all that.

When you ask a person who has had a foundation established for such poor reasons, they will say, "I have no idea why I have this thing. What a burden. What a hassle." If you ask what social purpose the foundation serves, they might say, "To help humanity." Asked how, they might say, "Well, we give to our church and the museum."

Probing deeper you might discover that he wants to support mission work in Africa, and is thinking of taking a year off to work in the mission fields himself. She is a painter with an interest in helping high school kids develop their artistic gifts. Probing deeper you discover that what they really want is to be reassured that they can throw it all over, and start afresh in a new life actively engaged in what they love.  You also discover that their kids have moved out of town and have no interest in mission work or art. So, in the end, it would seem that a foundation may have been a mediocre recommendation at best. Maybe the family should ask what a decent inheritance might be for the kids, put that aside,  then calculate a nest egged needed to maintain the lifestyle, and then look upon the balance as "social capital," spending it down during a joyous and fulfilling lifetime.  As the parents get more engaged in their causes, they may decide that at death the balance goes directly to the church or an arts organization. 

So where is the sale? With a foundation, managing the money. With direct gifts, and a dwindling asset base, two parties are being generous, I guess. The donor and the money manager both deserve a plaque. For enlightened advisors a happy, generous, client is a good source of future work and referrals. For many advisors the conversation bulleted above is about it.

Sadly, we could equally well bullet a fundraising conversation, from say the planned giving director at the museum. There the conversation will generally come back to the museum and ways to give to that one organization. All else, like mission work, proper inheritance for the kids, a nest egg to support retiring early, is a distraction from the focus on raising funds for a specific institution.

How can enlightened advisors work with donors and nonprofits to achieve more total giving, more satisfied clients, and a buzz among a community, leading to better outcomes for all?  I think about this a lot, talk about it whenever I can, and watch eyes glaze among advisors and planned giving people. The ones who get it are the donors. And guess whose money it is? ("Mine!" says the advisor, I manage every penny." "Mine," says the nonprofit, "we are in the will." Taking the donor aside, I will whisper one of Blake's aphorisms, "The cistern contains, the fountain overflows." "It is your money, your life and your chance," I will say to the donor, "to have the impact you want right now." That absurd counsel of perfection is why I live on the streets naked, as a pro bono Morals Tutor to the Stars.)

Comments

[Holden]

Great post.

The thing is, many donors have the will but not the time to give well. Serving humanity is something they value and something they believe in, but it's not what they excel at or are skilled in or want to spend their time on. I think this is why their advisors end up with a lot of power.

Like the media, advisors don't just reflect their customers, they shape them. Starting the conversation with tax advantages and children's salaries can be a self-fulfilling prophecy; that doesn't mean it's serving the donor (or the world) well.

[Mark Petersen]

Phil - yes! This is exactly what happens.

In our case, it wasn't a financial advisor's idea, but my dad's own idea that birthed the creation of our foundation. Any benefit of doing this was not as self-centred as described above -- Acapulco sounds great, but hasn't happened for us! --it just came from a conviction that if he made the money, he and his descendants, not government, should have the ability to determine where it was directed.

Back then, in 1980, when this all happened, he didn't have a sense of what could result from having a foundation, the work it would involve. My parents made early grantmaking decisions around the kitchen table the week between Christmas and New Year's in order to meet their annual disbursement quota. Early decisions were not the most strategic.

But he was true to himself, and realized as time progressed that having a foundation means being proactive and intentional about finding the best ways to steward the wealth and disburse it where it would have the greatest effectiveness. We are moving more and more into engagement with our partners to effect life-giving and results-orientated change. I will be hiring an outsider soon (July 1st) to assist me in this work - he will bring the professional edge we require. We're learning as we move on ... and we are definitely not perfect. Lots of room for improvement.

But that said, I agree wholeheartedly with your comments. It is not always the best idea to begin a foundation. It's not for every family and it may not be the most effective way to produce change in society. In our case, I have inherited this, and am determined to give Canada the best bang for the buck we can give it.

[Phil]

Holden and Mark, thank you both. Feedback from donors to advisors in a public forum is very rare. Those donors or heirs who are little farther along could help the newer people with lessons learned. And advisors could learn a lot from following such a conversation. So, thank you both.