Fundraisers seeking to understand donors will find the following article from the New York Times of interest, and a call to work toward identifying the donor’s perspective. This article also presents an interesting perspective of philanthropy from the financial adviser’s view. When working to secure major gifts, the donor’s financial adviser often plays an important role, and this article sheds some light on their concerns.
By PAUL SULLIVAN
Published: October 18, 2013
WE have entered giving season. This is the time of year when charities increase their outreach to donors who traditionally wait to the fourth quarter to make annual gifts. And what would this season be without research into the state of our giving habits?
Yet a new report by U.S. Trust, which revisited questions asked two decades ago, piqued my interest because it challenged some of the accepted wisdom about how people give money — or at least how most of us think they give their money away:
- The advice they’re getting is not the advice they want.
- Tax rates matter very little when donors are making a gift.
- When people are hesitant to give money to a charity it is not because they are worried about giving away money they might need.
- Finding just one charity or cause to focus on is hard, but it is more rewarding than giving a little money to every group — or friend — that asks for a donation.
The report’s findings have relevance to donors at many levels who seek a greater understanding of what their gifts are doing.
THE ADVICE MISMATCH
When donors and financial advisers discuss philanthropic giving, it seems to resemble a John Gray book: one is from Mars, the other from Venus. Donors want to talk about their interests, while their advisers tend to talk about the various technical ways to make a donation, like giving appreciated stock.
“The clients always think the conversation is too technically oriented,” said Ken Nopar, a philanthropic consultant based in Chicago. “They want to talk about family goals and charitable giving.”
Claire Costello, head of philanthropy for U.S. Trust, said the mismatch came from advisers who were unsure about their philanthropic knowledge so they stuck with offering the technical advice they were more comfortable with.
“They fear they don’t know enough,” she said. “Or they worry that they’re not charitable and will be exposed. Or they’re very charitable and they fear they’ll be seen as preaching.”
This mismatch has implications. In its annual survey of charitable donations to be released on Monday, The Chronicle of Philanthropy said the 400 largest organizations reported little increase in gifts from last year, except among people who were giving $1 million or more. As of early October, those gifts are twice what they were at this time last year, the report says.
Yet a shift is happening for smaller donors, too. The United Way is still No. 1 for gifts received, but Fidelity Charitable, the nation’s largest donor-advised fund is a close second, the report says. Its contributions grew by nearly 90 percent last year.
Donor-advised funds allow people of different wealth levels to get a tax deduction the year they put the money in their fund and recommend gifts, sometimes as small as $50, later. It is a popular vehicle for someone who wants to give money to charity and get the deduction that year but could use some advice on how to parcel out the money.
And what this means is that people need advice. Henry Goldstein, a principal at the Oram Group, said he saw a growing need for philanthropic counseling that was not linked to money management if donors were going to understand the groups they were giving to.
“To name a wing at a hospital may not be the best use of funds,” he said. “The name goes on the building but the money goes somewhere else. That’s O.K. if they know it, but often they don’t have the time to do the due diligence.”
The take-away: Don’t stay quiet if your financial advisers talk past you about all the financial structures around giving — interrupt and tell them what you need help on.
TAXES DON’T MATTER
“I can honestly tell you that taxes have no effect on any decision I make,” said Eric Suder, who made his money in telephone technology and now gives it away to help first-generation college students. “That’s something that doesn’t interest me. I don’t have enough bandwidth to think about it.”
His focus, he said, was in using his money to increase the graduation rate of students who are the first in their family to attend a four-year college. He said he trusted that his accountant and adviser were helping him get the correct tax deductions but that did not influence what he was doing.
Yet the U.S. Trust report found that advisers thought 40 percent of wealthy donors would reduce their giving if the estate tax was repealed and 78 percent would reduce it if the income tax deduction was reduced or taken away. But only 6 percent of donors said a repeal of the estate tax would affect their giving, while 45 percent said they would reduce giving if the income tax deduction were changed.
“A lot of people donate to charities who can’t even itemize their deductions,” said Mark Miller, a certified public accountant at Sikich L.L.P. in Milwaukee.
But, he said, an adviser, if not the client, should be aware of tax savings since managing them can mean more money for a charity.
He gave the example of a $20,000 donation of stock that had been owned for more than a year and was bought for half that amount. If a donor in the highest income-tax bracket gave the stock to charity — as opposed to selling it, paying the taxes, and giving what was left to the charity — she would save $949 on taxes and give the charity $2,396 more.
The take-away: Giving to causes you care about is important but do not tune out advisers who talk about the most tax-efficient ways to give.
FEAR OF BEING PESTERED
Why wealthy people would not give to a charity is a conundrum to many. Are they meanspirited? Are they afraid of running out of money? It turns out many fear being deluged with solicitations — the very kind that are being sent out this time of year.
The report found that the top three reasons donors did not give to a charity were that they feared that their gift would not be used wisely, they had no connection to the charity and they did not want to be on a solicitation list. Conversely, their advisers thought they were afraid they would not have enough money to leave to their heirs, or would run out of money or did not think they were wealthy enough to donate.
“Once you’re on a list, your name gets passed around,” said Ike Brown, the vice chairman of NFI, a privately held transportation company. “Not only do you get hit up on a community basis, you get hit up on a national basis.”
Mr. Brown and his wife, Candy, have given generously to various Jewish charities and to friends’ charitable events over the decades. But as their giving became larger and more focused, they had to find a way to manage it better. “It was always a fulfilling feeling, but it was shortsighted,” he said. “We wanted to get involved with philanthropic giving that would be a fabric of our life.”
In this instance, he said he received good counsel from his adviser. That adviser, Dodee Crockett, a managing director at Merrill Lynch Wealth Management in Dallas, said she had developed a stock line for people to deflect the many solicitations they received.
She said she told clients to say, “This is a one-time gift. I’m honoring the work of my friend. This is not the mission of this family.”
Doing so, she said, allows the family to focus on what matters to them and ignore the solicitations that still come.
The take-away: Find a way to deflect requests gracefully so you can give to what you care the most about.
THE BENEFIT OF FOCUS
Perhaps not surprisingly, people who were happiest with their giving had focus. The report found that 55 percent of them were most interested in developing a strategic giving plan.
Mr. Suder, 67, said his focus now was to expand the First Scholars program to 100 universities from seven at a cost of $800,000 to $1 million to start each program.
“To get to 100 universities, we’ll align ourselves with other large foundations who want to make an impact on education,” he said. “We have a clear return on investment. Give me $20 million and I’ll tell you how many kids will graduate based on that.”
Mr. Brown said his family continued to give to Jewish charities it had supported over the years, but it was focused on financing a building for the Dallas Holocaust Museum-Center for Education and Tolerance.
“I went to them without them soliciting me and made a large donation,” he said. And after years of being asked for donations, he added, “I’m going to be asking my friends for money.”
This, of course, is the type of enthusiasm anyone who gives money away wants to feel.