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.

Social Impact Investing

I have been spending a lot of time reading about and thinking about social impact. Social impact is defined as the effect of an activity on the social fabric of the community and well being of the individuals and families. Given my asset management background, I am particularly intrigued by social impact investing and this growing and evolving investment opportunity.

I came across a report from Hope Consulting called Money For Good. The report identifies the US market opportunity for impact investments and charitable gifts for individuals. The report also looks at what for- and nonprofit organizations can do to tap into the market.

One of the Money For Good Project's main goals was to create a voice for donors. In their words, "The goal of this project was to understand US consumer preferences, behaviors, and demand for impact investment products and charitable giving opportunities (together, these make up the “money for good” market), and then to generate ideas for how for- and nonprofit organizations can use this information to drive more dollars to organizations generating social good."

The 100-page report is a good read, but I have summarized the findings and recommendations for institutions targeting these donors/investors interested in social impact investing.

Key Findings:
- Most individuals are open to impact investing, but need to know more.
- There is $120B of market opportunity, half of which is for smaller (<$25k) investments; even the wealthy want small investments.
- The opportunity is greater when positioned as investments, not alternatives to charity.
- Once people get involved, their willingness to invest increases (ramp in effect)
- People discover & transact through their advisor.
- The key barriers investors see relate to the immaturity of the market, not the social or financial qualities of the investment opportunities.
- Overall, downside risk is more important than upside financial returns.

Recommendations for Institutions:
- Segment on behaviors, not demographics.
- Tag and track your donors by segment.
- Determine what segments are best for your organization, given your strengths.
- Develop consistent outbound marketing that appeals to target segments.
- Prioritize investments based on what will drive donor behavior.
- Capture donors early.
- Understand how to manage different segments when approached.

This is an immature market. Like so many different approaches to investing and gifting, an inexperienced donor can struggle with figuring out where to start and how to go about finding the right opportunity. From my readings and conversations the tough part is getting the right level of information into the hands of these donors/invesors and then cultivating the decision process in such a way that gives comfort and satisfaction.

Managing Relationships with Advisors

I listened in on a conference call hosted by The National Center for Family Philanthropy on Thursday, July 8th. The topic of discussion was Managing Relationships with Your Legal, Financial, and Investment Advisors. The presenters were Patricia Angus, a New York-based philanthropy and family governance consultant and Dawn Dobras, a trustee of the Stocker Foundation.

Three most important take aways:

1. Do your part! The families, foundations and staff are actively engaged in the process of selecting advisors.
2. Use a systematic process through every stage. The process should be independent and non-subjective. You’ll know what you are getting out of the advisors you hire and you’ll know when its time to change your advisor.
3. Learn and grow! Take away something from every experience going through the process of selecting and working with advisors.

Support For Donor Education

Rockefeller Philanthropy Advisors just announced a new grant received from The Bill and Melinda Gates Foundation to develop tools and share best practices with emerging donors. The grant is a one-time gift of $3.7 million. The initiative is leveraging the high interest in effective philanthropy.

They are looking to create a new culture of "great giving" by providing knowledge and resources to allow families to create their own roadmaps for their philanthropy.

Over the next three years they aim to develop more than two dozen guides on issues such as giving motivations, approaches, vehicles, family roles, operations and impact assessment. The guides will be available free of charge via the Rockefeller Philanthropy Advisors website. They will also embark on a program to ensure advisors to the wealthy have access to these guides to share with clients.

I believe that the role of the philanthropic advisor is critical because the idea of putting some thought and infrastructure to your gifting could be seen as daunting. This is really wonderful for everyone involved in the space. The end goal seems to be along the lines of - share stories and knowledge to create an even bigger source of funding. It helps to change the mindset a bit from set aside an amount for charity upon your death versus live it, experience it and manage it the way you want to.