Conflict, including conflicts of interest, are a fact of grown-up life. How well we manage them is often an issue. For-profits compete for clients. Nonprofits compete for donors. Donors use philanthropy to advance competing visions of a better world. One site of contestation today are "for-profit organized nonprofits." That is, a for-profit sets up, say, a donor advised fund family, or provides foundations, or reaches inside a community foundation, or a college, or donor federation, to provide sub-accounts that the for-profit manages. Such services are offered through Philanthropic Services Divisions at banks and brokerage houses which are judged by their managers on profit and loss. "We are not an eleemosynary organization," the managers will chide those who forget for whom they work. Calling a division "Philanthropic Services" should not confuse those who provide them into thinking that money out the door of the bank to the poor is a good thing. It is at best a necessary evil, and cost of doing bidnis.
Imagine a charitable account into which a donor, Melody, has deposited $300,000. Imagine that the account is managed by Jane, an investment advisor whose asset management fee is 1.5% a year, or in this case, $4,500 a year, an amount equal to Jane's lease payment on her Beemer. Imagine that Bill works for a hospital that needs exactly $300,000 more in order to open the new neonatal care unit. Tamar is another fundraiser. She works for the religious organization where Melody has long been active. Tamar needs exactly $300,000 to endow a teacher of religious history for pre-teens.
Question: Are Melody, Jane, Bill, and Tamar partnering here for inspired outcomes, or are they engaged in a tacit tug of war of win and lose?
More enlightened question: In what way can the players in a philanthropic ecosystem rise, at certain moments, beyond competition to cultivate a system in which, on balance all prosper more than they would without healthy collaboration/competition?
Jane the Advisor will lose her Beemer if Melody funds either charity unless Jane picks up another $300,000 somehow. From her client? From a client referred by the charities? Now, say, that Jane does not flinch when the gift is in prospect, that she in fact works late into the night facilitating a gift the net net of which is that infants survive in the hospital, or that preteens get religious instruction, an that her broker dealer loses $300,000 of assets under management. Who will notice? (Other than her manager who may be irked.) Will what goes around come around? Or, will Melody lose the Beemer and maybe her job, if her manager sees she has lost focus on bottom line results? If what goes around does not come around, we all ought to re-read Hobbes, Machiavelli, and Leo Strauss, and cut each other's throats with a courtier's smile. "Faith, hope and charity," said a Fool, "and the greatest of these is charity." Sometimes it takes faith in others to be charitable, because we are giving more than we can rationally afford. Each of us in the giving game can keep an eye out for those who are doing good deeds and acting out of enlightened self interest, or blind faith, or foolish hope. And, by referring to these hopelessly idealistic people, honoring them and making them more visible, we can help the system thrive, to the betterment of all concerned. Jane, if others reciprocate as they should, will lead her firm's top producer list, not because she holds onto the money in that one account, but because she has won the trust and confidence, indeed the gratitude, of some of the best clients in town. When her manager gives her "Rep of the Year" award for assets under management, the ecosystem is working as it should.
Should nonprofits rejoice in each other's victories? Well, why not participate in creating a climate in which donors are more likely to give? Leave a Legacy is one such civic program in which competing nonprofits can collaborate for shared positive outcomes. Sharing the cost of speakers for events is another. Sharing best practices is a third. Or, forming a study group of fundraisers trying to elevate their level of play. Or, forming a group of fundraisers and advisors to collaborate?
I predict that the next "illumination" among fundraisers will be that for-profit philanthropic surrogates control many a major gift. We in financial services over the last ten years have flat out whipped the nonprofits at their own game and now control the money, including philanthropic uses. Nonprofits will have to collaborate more with for-profits and with other nonprofits if they are once again to be leaders in the big dollar philanthropic wealth transfer process. To put it bluntly, the state of the game is that for-profits don't need nonprofits because for-profits now own and operate their own nonprofit surrogates. We got the money!, smiles the financial advisor managing donor advised accounts, or assets in a foundation his firm has set up for a client. We control the donor! We don't need Baylor, or the United Way. We run our own charity, set up in Arizona. We encourage our clients to fund our nonprofit family of funds inside our branded donor advised account, or docs-in-box foundation. The clients don't know the difference. They think they are being philanthropic since our donor advised fund is tax-deductible. Their not knowing zip about grant-making suits us fine. An ignorant client just lets the money pile up in the funds, and that works out for us. Beemer number two in my garage.
The rancor that follows the above illumination will lead to many a belligerent moment at cross-silo (for profits with nonprofits) conferences; in fact I have witnessed a little of that at a recent conference as fundraisers and forprofit managers of donor advised funds contested what counts as philanthropy. I suggest that the solution is not name calling, but carefull attention to those in the for-profit philanthropic world who are making sacrificial moves for the public good, and actually moving the money along to the "real nonprofits," the ones doing good works in the community. Notice, please, who does that, applaud them, and help the good that goes around to get around. Unless you do, the money is going to pile up in for-profit donor advised funds whose key benefits are tax deductions for donors and Beemers for those who manage donor advised funds assets.
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