Beyond Asking the Philanthropic Question

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.   

Comments

[Randy Fox]

Phil,
I couldn't agee with you more. Let's add the guys at Legacy Wealth Coach, to those working with advisors. Maybe us, too but I'm not sure. Anyway, I hope this gets read and then something done about it.

[phil]

Randy, good, yes. Thanks, I will update the post.

[Dan Bassill]

I fully agree with what you've said. I'm not sure if you've ever looked at the Boston Innovation Hub (search Google to find it), but it's a pie chart with the slices adding up to represent the total of all issues important to the Boston community.

Each slice opens a new page which points to a specific issue with information about that issue.

I've been looking for people who used a pie chart like this as an organizating and collaboration tool, inviting people who were interested in any specific slice of the pie, to connect with each other in on-line and place based relationship building, similar to what you've just described.

My own work in Tutor/Mentor Connection is just one part of this pie chart, so in my own world, I'm just trying to connect people who are concerned with this issue, so we can meet the needs of each stakeholder, and mobilize resources to better address the problems that we deal with.

I had my first significant conversation with a "financial advisor" last fall, because he found me while searching for tutor/mentor programs in Chicago which his client wanted to support. We've started a conversation, which is the first step in building the type of relationship I think you are describing.

I'd like to find ways to accelerate this type of group formation.

[phil]

Dan, do you know that the Advisors in Philanthropy Conference will be held in Chicago in August? Drake will be among the advisors there. Do you know Drake? He might be a good person for you to meet.
http://www.drakez.com/

The key to understanding advisors is to understand that a) they generally don't control where clients give and b) they are always looking for ways to meet new people who might be qualified clients. The question, then, is whether you have passionately committed donors who might need good advisors as they plan their time, money, legacies.

If you approach advisors with the idea of getting referrals it will be slow work. If you approach them with the idea of giving referrals or doing events together, it will go faster.