Gift Hub

From Donor to Philanthropist

Excellent post on "Turning Major Donors into Philanthropists" by Sean Stannard-Stockton at onPhilanthropy. Organizations like the Nature Conservancy, Children's Hospital of Oakland, and Harvard encourage major donors to construct an overall giving plan within their estate and financial plan.  Explaining the process of overall planning to a Planned Giving Officer recently, he said, in effect, "Sounds like it would help the donor and lead to long term gifts to our organization. But we need to raise $20 million within the next 6 months. Maybe we could have our giving officers raise the subject after they get a gift commitment." I can see his point. Many in financial services feel that way too:  Sale first, then plan.  You have to admit, though, that the logical order is Goals - Plan - Implementation, where the implementation includes financial tools, legal techniques and giving vehicles integrated into an effective and efficient whole, consontant with the donors big picture goals. Yes, we are all busy. Everyone is in a rush. The social end result is that we have many donors, few wise philanthropists. Maybe we all have a stake in raising the standard.  (After we close for the next $20 million.)

The Philanthropic Ecosystem

A healthy civil society is an ecosystem. Yet philanthropy remains either transactional ("gift solicitation") or advisor relationship-based ("let me be your trusted advisor").  As a nonprofit, to increase philanthropy you schmooze and solicit donors ("make the ask"), or you can cultivate referrals from advisors who work with wealthy donors. That is current an far from visionary status quo. But to radically enhance the health of our communities, I believe we need to take a more "ecological" or "total systems" approach. To understand an ecosystem you have to know the food chain, who depends on whom, and what. Who wants and needs what? We all, as members of this ecosystem, should support one another in creating an environment in which the good prevails, and all are appropriately served, paid, and rewarded - not just our firm, our charity, our cause, but the whole of which our special pleading is but one part. The good we get may return to us from unexpected quarters as the ecosystem of gifted givers thrives. (I am saying, foolishly enough, "Go at giving with a giving heart.")

What do each of these key players want and need? What do they offer? And how can we collaborate to make our mutual inter-dependence thrive?

• Donors - financially prudent plans with inspired outcomes for self, family, and society. Lower taxes, higher returns, asset protection, risk management, yes, but also fulfilling lives for the parents and the children.
• Financial Advisors - "sticky clients, and sticky assets," but also happy, fulfilled clients who make personal introductions to other potential clients. Likewise advisors wants centers of influence (nonprofits are an example) who make high quality referrals in return for high quality work for those to whom a referral is made.
• Financial Firms - more successful advisors, more sales and assets under management, but also a good reputation in town, and access to circles in which wealthy clients congregate (as at philanthropic civic events).
• Legal advisors - more clients who do more complex planning, but also a good reputation for the firm and access to networks of prospective clients.
• Nonprofits - larger gifts now and later from more active and engaged donors. Lower cost per dollar of money raised as when advisors drop a gift in their laps.
• Community Foundations - assets under management and a leadership role in community life and betterment.

How can we in our respective roles align our efforts, not just in pairs, but in a system that will help each of us accomplish our mission and thrive in the process? What are some of the blockages that might be addressed?

• Donors are frustrated with their advisor's sometimes myopic emphasis on prudent and selfish planning. They want more - more vision, higher ideals, more help with making a difference. This is a driving need in many a client, though seldom addressed. The demand is there.
• Donors are also concerned, as was Warren Buffet, with the effect of wealth on children. They are looking for help in preparing heirs to inherit money and use it responsibly as good citizens. "Who provides that service?" they ask advisors, who have no good answers, usually.
• Nonprofits provide all kinds of opportunities for parents and children to get involved together. A community foundation can help with a small donor advised fund that can be like "training wheels" for a larger gift or foundation later. A community foundation can pair wealthy parents up with the right volunteer and leadership opportunities. But the community foundation is not at the table when estate and financial plans are created.
• Nonprofits are so hungry for money now that they do not position themselves as often as they should as "seed beds" for the soul, or providers of a great service to active donors, as well as other constituents. Many nonprofits are mission-aligned with values-based financial planning, since the mission of the nonprofit has to do with culture, spirit, ethics, knowledge - yet the solicitors of gifts do not see themselves as carrying forward the mission themselves, they are just salesperson's sadly enough making a quota.
  
• Advisors are narrowly trained, managed and compensated to move money to tools they sell or manage. They are not enlightened enough generally to take a total systems view and see that by moving money to charity they not only do a better job for donors who crave meaning and engagement, and not only do a better job for society, but that they also position themselves for referrals from the the civic organizations to well-heeled donors and  potential donors.
• Again, nonprofits don't make referrals, they seek them. Furthermore, they may not be perceived by the donor as trustworthy source of referrals, since they tend to intent on making a repeated "ask," rather than looking out for the donor families overall well-being. The currency in this game is relationships with wealthy people. The greatest "coin" the nonprofit has is the ability to cultivate such trusted and elevated relationships based on meaning, mission, and caritas. But the relationship cannot blossom fully, cannot blossom into a life changing gift, until advisors are involved to help the client be as generous as possible now and later, all things considered within a prudent plan.

So around and around we go, year after year, with giving stuck at a low percentage of income and net worth, and with wealthy people often feeling disconnected, stifled, handled, badgered, and used. Bringing together the positive forces, staging events that promote wise giving and civic engagement; building teams and networks of qualified professionals; promoting active referrals back and forth; helping advisors distinguish themselves through civic engagement, both their own and that of their clients - all that is possible. Call it an ecosystem, or an open system. We are not there yet, the opportunity has yet to be seized, but the vision is increasingly clear as are the next steps.

As more and more wealth accumulates in fewer hands, and as income tax, capital gains tax, and estate tax wanes as the means to recycle the cash, it becomes more and more important that we cultivate the ecosystem that will enable the wealthy to be admirable human beings, legacy leaders, enlightened and engaged civic leaders who can see that success is not measured in dollars held, but in the good done with all resources from time and talent to wealth and connections. Yes, becoming a good person starts at age 2, and I'll bet your nonprofit has great programs for 2 year-olds. Why not align your prospect cultivation with your mission? Give to get. Think what you have to give, before you think what the other can do for you. What helps the ecosystem of giving prosper will help us all.

The Future of Community Foundations in the Age of Disintermediation

Lucy Bernholz and Katherine Fulton have written eloquently on The Future of Community Philanthropy in the age of increased competition and collaboration from financial services firms (for assets under management), new legal tools like generation skipping trusts (now holding billions), financial advisers trained in philanthropy (who distintermediate the community foundation's advisory function) and new technology linking donors, advisers, and nonprofits (thereby disintermediating the community foundation grant-advisory function). 

Katherine and Lucy should be studying Newdea and vice versa.

What is the role, then, the real role of a community foundation, the one role that a Newdea, or Fidelity, or US Trust, or Merrill cannot plausibly play? I suggest it is moral and community leadership. The community foundation ought to be in the forefront of encouraging what Tracy Gary calls, "Inspired Philanthropy." This comes down to several things:

1. Increase the total supply of philanthropic dollars in the community by promoting "prudent and inspired" giving.
2. To that end encourage donors to work with advisers to be as generous as possible now and later.
3. Work with advisers to get them fairly paid. (Yes, unless you do they won't play as often as they might.)
4. Educate donors about causes and encourage donors to learn from one another.
5. Open the door to new donors, even if they are not white, educated, or high class. Tons of money is in blue collar businesses, under leadership that may be high school educated. Your donor groups should reflect, presumably, the ethnic mix of your community. Build a welcoming and inclusive community of communities whose staff and board are diverse and shall we say, "not snobby."
   
6. Promote face to face interchange and bonding among the key elements of the community: donors, advisers, nonprofit leaders, volunteers, media, politicians, and passionate advocates of a better world.
7. Provide stewardship of the donor's dollars after the donor is gone in accordance with the letter and spirit of the donor's passionate commitment to a given vision of the good.

OK, so what is the business model that supports such community moral leadership? Primarily, the model remains assets under management. What would distinguish the community foundation from for-profit providers would not be rates of return, expense ratios, or high-powered technology, but "high touch" moral and community commitment and leadership. Now, if you asked me as for-profit philanthropy person if any financial services or legal firm could plausibly position themselves the a moral and community leader for the good of, say, St Louis, Dallas, Chicago, or for the good of specific affinity groups, like Evangelical Christians; Gay, Bi, Lesbian and Transgendered,  Latinos,  Greens, and on and on, I would say, "Are you insane? What do you think we are running here, an eleemosynary institution? Philanthropy is a way to get sticky clients and sticky assets. We have information. You want wisdom, virtue, beauty, justice and excellence? See a priest, professor, philosopher or poet. This is a business not a seed-bed for the soul. What do I look like, Jesus Christ? Moral leadership is in the eye of the beholder. You want a book for a little uplift? I got Chicken Soup for the Soul, 7 Habits of Highly Successful People, I got Atlas Shrugged, and Management Secrets of Attilia the Hun. Take your pick. Then let's get back to getting the deal done. Moral leadership. For that we charge extra."

In an ownership society crass is good, and stupid sells. Business may have a double-bottom line, but one reports to the other or it gets fired. The only hope we have of real and deep, wise and virtuous, not to say self-sacrificing, moral leadership is from the nonprofit sector. Please! This is one game the nice people cannot afford to lose to the shrewd double bottom line billionaires to be.

Ask, a community foundation leader, not about your own assets under management. Ask how you in your community foundation can increase the total supply of philanthropic dollars, and how you can help bind the hearts and minds of the supply side and the demand side for those dollars. Take a total systems perspective and ask how you can get good things done by introducing the right people to one another (advisers, givers, nonprofits, media, public policy types). Ask how you can transform and elevate what is low, selfish, ugly and venal in our society (without putting off your board and other constituents who are exemplars of same.) If you do that unselfishly, honestly, honorably, faithfully, and visibly, you will get your share - a growing share of a growing total -  of the philanthropic assets under management and you will have very little competition for your (he swallows hard) "Brand Promise." If you want an uncontested competitive position, try the high ground. You will find it undefended - a wildernness untouched by human foot.

Now why would you provide moral and community leadership as a community foundation? Uh, because that is why you were founded? Because - am I wrong? - you put the good of the community ahead of your own? And those who are last shall be first, and the meek will inherit this world. At some point you either step up and represent what is best in this country and our moral and civic traditions, or you may as well pull over and let the financial companies go by you like an 18 wheeler high-balling down the highway with the horn blasting.  You are lousy at running a business, so how about leading a community revival? If you can't or won't you are not necessary and will be replaced by asset gatherers who do transactional giving deed better, quicker, and cheaper - with no particular heart and no particular soul.  Our  country and our communities need visionary community foundations for the health of our civic life. That is the appeal in the light of which it makes sense for a donor to use a community foundation rather than a for-profit surrogate. Do you make that appeal, if you are with a community foundation; do you partner with the financial firms for the greater good; or do you think you can compete on their turf on their terms? Looking to community foundations for moral and civic leadership, I am often shocked to hear what sounds like a business manager asking, "So what is in it for us?" What is in it for you is survival. But your extinction will only be mourned if you stood for something more important than assets under management. Stand selflessly for the good of the community and you will perform the one essential service that all well informed and resourceful citizens should and will support.  The results will be assets under management, a big raise, etc. 

Inspired Legacies for The World We Want: Leo and Charita Get it All Together

Scene 1:  The View from the Hilltop

Trusted advisor (Lauren) and client (Leo) have spent the day at the client's farm.  Spouse (Charita) and children have gone off to town to see a movie.  For the last two days nothing much has been said about finance, or giving, though much has come up in passing about the state of society, particularly the state of our democracy.  Leo suggests a walk. Through the apple orchard, down a path, across the ravine, then up the hill.  The two are comfortable, being civic friends, with silence. They catch their breath at the top of hill, looking out across the farm land,  the stream, and the city in the far distance, shrouded in smog.  "Look, Lauren, I have been thinking.....," begins Leo. 

Scene 2: Democracy Conference: The Community of Interest

Leo and Lauren are not surprised to have found each other's names on the list of those attending the "post-partisan" conference on revitalizing civil society.  They see many old friends, and recent acquaintances. They see people from religious organizations, the arts, political advocacy, the media, funders, and activists.  At the reception, they watch pockets form as various groups coalesce and disperse.  "Feel at home?," Leo asks Lauren. "Well, yes, sort of. I know a lot of people here, and am glad to see so many new faces from the Christian community and business world." "Yeah, but we Buddhists had better stick together," jokes Leo, "we are out-numbered."

Scene 3:  The Family Therapist

Leo and Charita are both on their second marriage.  The children from Leo's first marriage are estranged.  He has taken her children into the house, if not completely into his heart.  They have one child from their marriage.  With a prenup in force, the money in the family is Leo's. After the trauma of his first divorce, he is not too eager to share control, as committed as he is to Charita.  As "dysfunctional" as his own kids may be, he has not given up on them.  As much as he loves her kids, "blood," he feels "is thicker than water."  As he thinks about his "lasting legacy," he gets uncomfortable.  There is so much that is unspoken. His legal work, other than the prenup, is way out of date. His company, started years ago with very little money, may soon be bought out.  Lauren, the one advisor he trusts, is urging him, to basically, get his act together. So, here he is with Charita in the family therapist's waiting room. "Shoot," thinks Leo, "Why does life have to be this hard? How do I tell Charita that her kids ain't getting squat?" 

Scene 4: Around The Planning Table(s)

Well, how many tables? Just one with Leo, Charita, and their advisory team? Or will she have her own legal representation, and he is his, negotiating at arm's length? Who will lead and who will follow in the conversations that ricochet around from Leo, to Charita, to the CPA, the trust officer, the financial advisor, the money manager, the insurance agent? (And somewhere in the background maybe the family therapist is involved, and maybe a philanthropic advocate, or organizer for democracy).

If we put a dot on a sheet of paper for each professional, and used lines to diagram who talks directly to whom, how would those lines look?

Controlling CEO Model: Here Leo would call the shots, maybe keeping Charita informed. All lines go from Leo and back to Leo.

Trusted Advisor Model: Here Leo puts Lauren as the "monkey in the middle," as he jokingly refers to her. She is the one in whom he confides his hopes, dreams, doubts and ultimately his decisions. "Get it done," he says, "and keep me informed." Now all the lines go to and from Lauren as trusted advisor and project manager.  How well she keeps Charita informed may be a sore point. (Is she working for Leo or for the couple?)

Patient Doctor Model: Leo is no passive patient etherized upon the planning table, expecting his advisors to read his mind and do what is right. He is, if anything, over-controlling. But what of Charita? Might she just let go and let it happen, trusting that her interests will be weighed and considered? Will she say, "Whatever you want, dear"? Or will she assert herself, and if so how will her views be debriefed, represented, and factored into the plan? When the legal and project plans are drafted,  does she get sign off or just Leo? And who decides that?

Collaborative Chaos Model: Here advisors jockey for access to Leo or to Charita or both. They keep one another in the dark, and play for positional advantage. Each has his or her own ends in view, and favorite tools and techniques, as well as having the client's best interests at heart. It is not clear who runs the team, and so paper and bills fly back and forth, until the planning tolerance and bill paying tolerance of the family have been reached, and the planning subsides for awhile, half finished.

Scene 5: Hilltop a Year Later

Leo's business has been sold. A chunk went into a family foundation. Leo himself is out of a job, in essence, having sold his company. The legal work has been created for the ultimate tax wise distribution of his estate at death.  As head of his new foundation Leo is wondering, "Now what? Democracy....wasn't that the point? How do I get from the interest on this pile of money to a more vital democracy? What am I supposed to do now, exactly? Read all these piddling grant proposals and dole out the chump change? I am a leader, not a penny-ante banker. Wasn't this supposed to be fun? I just got myself a rinky-dink hobby job as an amateur program officer at my own foundation.  What was this all supposed to be about?"

Scene 6: Family Therapist Year Two

"I am just so damned depressed," says Leo. "About the country, about my life. I just know there is so much more I could be doing.  How do I get something going? I am sick of nothing to do. I am sick of reading proposals.  I am sick of being treated like I am some kind of god when all they want is my money. What am I doing with my life? I am a useless piece of dirt." To which the therapist says, "And, Leo,  how does that make you feel?" 

Scene 7: Team Formation At Democracy Conference Year Two

Leo, Charita and Lauren are huddled with Melinda who has created an online meeting place for funders, activists, and "domain experts" around grassroots democratic revival. A number of community foundations want to use materials she has created to stir up local conversations and deliberations about issues of concern to the local community. Melinda has a network of Open Space conveners who can do citizen driven meetings at small cost. She wants to feed these local conversations up to a master site, or maybe even a national conference, to create enough critical mass to break through into the mediated consciousness of her couch-sitting compatriots.  She has a couple of books she sees herself promoting, The World We Want by Peter Karoff, and Inspired Philanthropy by Tracy Gary.  She has web friends who will give the project "link love," driving online traffic. She wants to attract big gifts and "legacy giving" along with lots of little gifts accepted online from ordinary people, and to pair funders and activists to go off in many directions in pursuit of the world each wants in their community. She has tons of other ideas and no way to make ends meet as she gets things going. Leo sees that she is talented, passionate,  under-funded and out-classed.  "How could we grow this to scale," he asks. "What would it take?"

Charita sees the old fire in Leo's eyes. "The man is taking charge," she murmurs. Lauren is taking notes, scoping out the projects, figuring out who else should be on the action team, running budgets and timelines in her head. When Leo attacks, it will be all out.  He will need a business plan for this new startup and he will need to rejigger his personal finances to fund it. Lauren is factoring prudence into her fast-running financial eqations. How much will Charita need if Leo blows it all? What should be reserved for the kids of his marriage, her prior marriage, and their marriage together? What is Charita thinking about Leo's new mission in life? Can this be the project that draws them together and engages their blended family?

To Be Continued

Gentle Reader, you can continue this saga as you wish. You can vary names, ages, gender relationships, race, and family situation. Change the cause. The moral is the same. Planning for "The World We Want" is not so easy. The world we want is in our bed with us each night, and in the kitchen each morning, and on the phone when the kids call home. The world we have is on t.v., and in the news, often simplified and distorted. The world we want is not some isolated rich person giving grants, not even if the rich person might be us. The world we want is more inclusive, vibrant and active.

Morals to Be Drawn

1. Inspired legacies as Tracy Gary calls them are embedded in deep contexts from which they must be "birthed." The inspired legacy promoter cannot forget or neglect or bypass the deep issues around conflicting personal, family, business and civic claims on the donor-citizen's time, attention, and funds.
2. The World We Want will not be funded out of the interest on money sitting in foundations. There is not enough of it. And, unless coupled with active leadership, money alone won't have much transformational effect.
3. The World We Want will be funded largely by couples, with new wealth, like Leo and Charita, who work through the issues with a good planning team and get their money and their energies aligned with their talent and their community.
4. The World We Want will be catalyzed by legacy leaders who think beyond themselves to engage activists and organizers to co-create a movement or a self-catalyzing chain reaction.
5. We are still building the framework within which these self-catalyzing networks of advisors, new money, old money, foundations, volunteers, and activists can meet, form relationships, create projects and get moving. The framework or "hub" will need to foster face to face and online interaction that goes on with increasing intensity year by year.
6. If done right, the networks will be self-catalyzing in the sense that they free up more money and energy than they use up.
7. I would like to imagine that Leo, having found the team, will aggressively invest his personal funds, as well as his foundation funds, and his life energy and managerial drive in creating the infrastructure needed to help others do the same.

When Peter Karoff asks how the world we want can be accomplished, the case study above is my best answer.

Partnering with Advisors for the World You Want

I am starting a new category, "Inspired Legacy Partnerships for the World We Want," as a way to pull together thoughts that may be of interest to those we call "donors," or "clients," or "resourceful people," or rich people and their advisors, and the communities to which the resourceful people give and to which they may provide personal leadership. This is a tough topic to address at all, much less in public. We have as a society taboos about talking about money in public and we have styles for doing so, most of which I will violate, from time to time, in order to bring to the surface the underlying issues - which include social justice, for example, and economic inequality. We also have a whole set of taboos about being real with those who outrank us in terms of wealth. As a result the richer a person is, the less likely they will be challenged, and the more likely it is that they will be flattered and enabled by their advisors. The results for the wealthy are not always pretty. My longtime role models, or mission partners, in this exploration are Tracy Gary, and H. Peter Karoff.  The difference, I think, is genre. Tracy excels at inspiration; Peter in the lyrical modes. My gift (unfortunately for both me and you) is satire. I feel pretty strongly that what the rich and powerful need most is a Fool. And I step forward somewhat reluctantly to play that role pro bono publico.

The purpose of these ongoing reflections, from the earnest to the satirical, from the high flown to the prosaic, is to encourage those citizens who have greater than normal wealth to work with their advisors to provide leadership, now, later, at death and beyond to the communities they support. We are not going to talk about technical planning issues. That, actually, strikes me as a dreadful use of donor time. That is what a donor should delegate. To discuss plumbing with plumbers is a glum task. Let the plumbers plumb the cathedral; you should work with the architect to envision and design it. Pedants can't help talking in their pedantic vocabulary; they have not got  the personal skills, the self-knowledge, the humility, nor the moral imagination to escape from the trammels of their tax, legal, or financial mindset. Not all advisors are pedants, but, judge your own for yourself. Even those who are wise in their own right, do not sell wisdom; they sell legal, tax, and financial services and products. They are uncomfortable, most often, outside the boundaries of their professional practice, and wisdom or spiritual or philosophical insight is not a licensed trade.

"Touchy-feely" is what these advisors to wealth as a class call the topics we will discuss, topics like moral and civic responsibility, wisdom, caritas, philia, and the role of wealth in creating a healthy family in a just society. To them that is hogwash, or church talk. All well in its way, but not a billable event, nor conducive to a sale. They want to move as quickly as possible to dollars and cents and legal documentation. We in our conversation at Gifhtub will get there, to the verge of that, but we will start with what you are trying to accomplish: the ends first, the means second.

Technically competent advisors are as necessary to an inspired legacy plan as are plumbers in building a worldclass university. Such a school has hot and cold running water, good sewage, and few backups. But plumbers are not the whole of it, nor masons, nor gardeners, nor cooks. What animates a school as a community is a living body of knowledge passed on face to face by the carriers of those traditions. When the body of knowledge includes ideals and love who is the carrier? Not JDs doing their jobs on company time, not the CPA in his or her role as number cruncher, and not the financial advisor in his or her role as risk/return manager.

Insofar as you are more than flesh, more than matter in motion, or a balance sheet and income statement and tax returns and legal documents, to the extent you are a parent, a child, a citizen, and a moral and spiritual being, you cannot and must not put control of your planning in the hands of plumbers, cooks, legal experts and spreadsheet wizards. You will bring them in at the proper time to make good on your goals, but you must put, as they say, "First things first," and begin with the world you want in mind.

That is enough for one post. Let me leave you with a true thought. As a client of skilled advisors you have two non-delegatable duties.

1. Give your advisors clear goals and priorities
2. Give your advisors all relevant personal, tax, legal, and financial information.

Means and ends? Exactly.  You cannot delegate the ends of life to an advisor, unless maybe it is your personal Confessor, or Guru. Nor can you  ask your advisors to work in the dark, without clear facts about you and your situation. Your role, then, as a client, in partnering with your advisors for the sake of your own finances, for the sake of your family, and for the sake of your community and the ideals you hold holy, is to deeply meditate on the ends in view, and effects you would like to accomplish. Then you must reduce that vision to a form advisors can understand. And you must be forthcoming about "the facts" of your finances, your worldly belongings, what the Romans used to call your "impedimenta," the goods you drag like a mule through this world in your spiritual journey from which you exit with nothing at all except the project and ideals that live on in others.

How to reduce your thoughts and ideals to clarity in a way advisors can appreciate and act upon is the topic of this category. As rude as I am about advisors, they will appreciate that the "touchy feely" stuff has been done in advance of your hiring them, and they will be deeply appreciative of your ability to be forthcoming as to your resources and what you mean to accomplish. Better you tell them than that they have to make assumptions, some of which will be wrong.  Far from being hostile to advisors,  I am teaching you how to be their ideal client, partnering with them for the best possible outcomes all things considered.