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.