Invest & Give

Most of the time I write about positive trends and stories in the philanthropy space. This time I am writing about a failure. I am not writing this to doubt or to criticize people trying something new and different, but to applaud them and to learn from them. Perhaps it is my background at SEI (where the culture is very much about trying something new), that has caused this story to spark my interest.

Here is the concept of Invest & Give: 12 of the UK's fund managers joined forces to launch an investment fund to provide an investment opportunity and to grow capital to generate a recurring donation to The Prince's Trust, one of the most respected charities in the UK. Donations to The Prince’s Trust were calculated as a percentage of investment equating to 0.6%per year. To keep charges low and to maximize the donation, the fund managers agreed to discount their normal retail management fees. I think it was an interesting model which launched with great optimism. But, less than a year later, only GBP 1.5 million was raised.

So the question is "why?"

Angus Duncan, who was Head of Distribution for Invest & Give, says, "The short version is that the last 12 months has proved that investors invest with their heads and donors donate to charity with their hearts and though these may be joined by tissue they do not interrelate enough to make the utility of a fund doing both investment and donations be of interest to the public."

As I wrote previously, charity and philanthropy are different. I do believe that there is a component of self actualization in both charity and philanthropy. People want to feel good about their contribution. In this model, the donor was separated from the act of giving. The brochure for Invest & Give talks about the automatic contribution to the charity twice per year. For those who practice charity, I believe there is a certain satisfaction gained in simply writing the check or making the decision of where, when and how much. The donor didn't have the chance for this and the Fund was not around long enough for the investor donors to look back on the year and see in writing how much of their investment assets actually went to charity. This leads me to believe that perhaps the problem is not with the model, but with the message and the implementation. From what I have read the aim was more about making it easy or seamless, than about providing an environment to learn, to experience and to feel good about the charitable component.

Couldn't the same result (money to charity) be achieved by fund managers discounting the management fee of a charity's endowment?

Nonetheless, I do applaud the effort to try something new. I am not convinced that the two (investing and giving) can not be combined in a way that provides all around satisfaction.

Charity and Philanthropy are Different

In case you haven't noticed, I cannot get enough of The Giving Pledge initiative. There are now 40 publicly made pledges to commit substantial wealth to philanthropy. I have poured through these very personal pledge letters. They are genuine, thoughtful and full of wonderful advice. The letters can be accessed on The Giving Pledge website.

From time to time I will reference one of the pledges and share with you some valuable insights. I am going to start with Eli and Edythe Broad. They write,

"We view charity and philanthropy as two very different endeavors. For many years, we practiced charity, simply writing checks to worthy causes and organizations. Since leaving the world of commerce, we have engaged in what we term “venture philanthropy.” We approach our grant-making activity with much the same vigor, energy and expectation as we did in business. We view our grants as investments, and we expect a return – in the form of improved student achievement for our education reform work, treatments or cures for disease in our scientific and medical research, and increased access to the arts.

Before we invest in something, we ask ourselves three questions that guide our decision:

1. Will this happen without us? If so, we don’t invest.
2. Will it make a difference 20 or 30 years from now?
3. Is the leadership in place to make it happen?"


They further go on to say that this is hard work because its not just about giving money away, but about making a measurable impact. No matter the level of wealth, there are valuable lessons to be learned. I continue to applaud this effort. Learning is a lifelong journey and there is a tremendous amount to gain from this endeavor.

Giving While Living

Atlantic Philanthropies recently released a fantastic report called, "Turning Passion Into Action: Giving While Living." The report includes profiles of 11, diverse philanthropists who are actively engaged and giving generously during their lifetimes. The report is informative and inspiring. I am intrigued by this notion that there is a lot of satisfaction that can be gained from overseeing the gifting of your philanthropic assets. Giving while living is at the heart of The Giving Pledge. The Gateses and Buffet believe that today's wealth should solve today's problems. I really like Atlantic Philanthropies report because it makes no judgment, but does provide some practical advice when setting out on the journey to wind down a foundation or gift a large sum of money in a finite period. The report can be accessed at their website.

The publication includes some steps for donors interested in this approach:

Determine what you have a passion to support
What cause(s) resonates with you? Social justice? Access to health care? Conservation? Women’s rights? Poverty? Education?

Decide what problem(s) you want to focus on
What specific issue or problem do you want to tackle?
What resources can you bring to the issue?

Do your research
Who else is working in this field?
What are the successful and unsuccessful models?
Are there existing organisations to partner with to reach your goals?
Where can you most effectively intervene in an issue?

Select your geographic area(s) of concentration
What area do you want to target? Local? National? Global?

Consider your level of resources, interest, risk tolerance and desire for involvement
Will you give both time and money? How much?
What are your goals and expected results? Time frame?
What are your core competencies that you are willing to put to work?

Think about how you want to give
What motivates you to give?
Do you want to give anonymously, or play a visible role in your giving?
Do you like to work in cooperation with other donors?

Consider what results you hope for
How do you define and assess success? In the short term? Long term?
Do you want to invest in formal evaluations to measure progress?
Are you willing to accept setbacks and even failure on some projects you support?

Develop a plan
Will you devise a plan yourself, or do you need to hire someone to do it?
What resources do you need beyond what you plan to give? How will you get them?
Will a foundation work best for you, or would some other entity be better?

Join networks
What questions do you want to ask experienced philanthropists?
What other groups are supporting your area of interest?
What conferences would be most helpful to attend?

If you are serious about this approach its a worthwhile read before answering these questions. I also recommend reading John Hunting and The Beldon Fund's report called "Spending Out." This too can be accessed via their website.

Maximum Impact Philanthropy

I just read a good article in Private Wealth magazine written by Jan Alexander called, "Maximum Impact Philanthropy." The crux of the article is that wealthy families are still giving, but they have gone in one of two directions: 1) reduced their annual giving amount given the economic climate; 2)revamped their approach. This approach, for a lot of people, is more strategic. Many financial institutions provide traditional philanthropic support to individuals and families. But Alexander states, "...there is also more detailed service that helps the client figure out what charitable causes would enhance his own life, then helps him find the best candidates for funding." Philanthropy is a maturing industry. There is a philanthropic learning curve where people give when asked and then they start to experiment. But the move to become a stratgic donor often causes people to turn to their trusted advisors with whom they already have relationships. Many of these advisors are great at putting together prudent financial plans, but not too many are experienced putting together inspired plans which speak of impact and outcomes from their charitale assets.

This is where specialized philanthropic advisors can come into the picture. These trained and experienced individuals can help advisors deepen their conversations with philanthropically minded clients who want to achieve impact however they define it. They can also work directly with the indiduals and accompany them on their journey.

The need for specialized services providing pure philanthropic advice is a growing trend. Backer and Friedland conducted a survey of 75 consultants to wealthy families in 2008. They summed up their learning as follows:
1. Effective advising takes many forms.
2. Philanthropic advising is still very much a cottage industry.
3. Training and professional guidelines are needed.
4. Providing opportunities for donor learning is important.
5. Effective donor collaborations should be promoted.

Backer and Friedland also highlight 8 key areas of interaction between donor and donor advisor:
1. Financial assessment: Assess the capacity to be philanthropic.
2. Values clarification: Guides philanthropic planning.
3. Family involvement: Determine whether the family members will be engaged and how they'll be impacted.
4. Structure: Apply the appropriate tools and techniques.
5. Actions: Make specific grants to nonprofits.
6. Learning and peer networking: Help the donor connect to others.
7. Collaboration: Work with other funders.
8. Evaluation: Help the donor define and measure success.