In December of 1843, Charles Dickens released a wonderful story entitled "A Christmas Carol" in which a crotchety old tightwad discovers the pleasure of sharing his wealth and the emotional gratification that comes from helping others in need. With another holiday season rapidly approaching I was drawn again to this story, and specifically to the last line of the book as a starting point for this article: "His own heart laughed, and that was quite enough for him."
Based on recent studies of our growing philanthropic population, the majority of today's clients don't feel the same level of satisfaction from their charitable acts that old Ebenezer did. At a minimum, most of these clients – the same individuals who are donors and supporters of various nonprofit organizations - are looking for more visible evidence of the benefits of their charitable acts, and more transparency into the actual grassroots impact of their gifts.
This is especially true within the Gen X and Gen Y segments of our audience. An audience, incidentally, which advisers are struggling to connect with before they become heirs to their parents' wealth. Statistics continue to show that between 90% and 98% of heirs will move assets from their parent's adviser, and developing relationships with these 'clients of the future' is critically important – (unless you love cold-calling to backfill lost relationships.) Also recall from our
previous article and
whitepaper that over 95% of mass-affluent, HNW and Ultra-HNW clients are already actively involved in charitable gifting, and we'll add to that here that over 87% of millennials (those aged 20-35) have given financial support to a nonprofit in the last year.
Having grown up with the internet and social media, as well as in an era of economic, political, and social uncertainty, these next generation donors are demanding greater accountability from both their advisers and the charities they support. Unlike their parents, they are less interested in creating a legacy and are more interested in creating an immediate impact today. As advisers to this population, our challenge is to support both a client's interest in exploring philanthropic tools and techniques as well as to help them achieve the levels of satisfaction and gratification they require in order to remain engaged; with both the causes they care about - and with us, their advisers.
Fortunately, at the leading edge of this demographic push are dramatic changes to the design and architecture of traditional donor advised fund programs (DAFs). These tools are extending their role beyond the traditional 'charitable checkbook' or transactionally-based functions to that of a powerfully strategic philanthropic instrument. These changes are finally enabling advisers and financial services firms to support the types of client research, family and adviser collaboration, and impact reporting that today's donors demand.
The magnitude of this generational issue is emphasized by recent statistics which show that aside from the millennials, baby-boomers control more than $13 trillion in household investable assets, or over 50% of total U.S. household investable assets. In the February 2013 Chronicle of Philanthropy listing of America's top givers to charity, we witnessed for the first time in history the top donors, Mark Zuckerberg and his wife Priscilla Chan, giving money ($996 million) to a donor-advised fund set up with the Silicon Valley Community Foundation where they control on an ongoing basis their grant-making, rather than directly to a community foundation, university or private foundation.
They were followed by donor couple No. 2, John and Laura Arnold ($296 million), who do utilize a traditional family foundation, but nonetheless put a significant portion of their charitable funds into a DAF with the Fidelity Charitable Gift Fund. Just a few more steps down the list was Alfred Mann's $70-million gift to his donor-advised fund in the Nevada Community Foundation.
The growing dominance of donor advised funds as the instrument of choice for not only the mass affluent but the mega-affluent is evidenced by the Fidelity Charitable Gift Fund which is now the second-largest nonprofit organization in the United States — bigger than the Boy Scouts, bigger than the Red Cross, bigger than the Salvation Army. Another similar donor-advised fund manager, the Schwab Charitable Fund, raised more money last year than Harvard.
So the next question becomes how to effectively leverage this trend and shift our discussions with clients from the traditional “tax-based” themes surrounding philanthropy, to a more socially focused discussion supporting the next generation's desire for expanded impact and transparency. To support that shift, firms today also have the ability to bring these programs in-house through turnkey, private-labeled donor advised platforms. Firms today have the ability to capitalize on new technology that has evolved significantly from original systems, and which has been redesigned from the ground-up to exceed the support levels available through either commercial or community based DAF programs, and that delivers the exact types of impact reporting and support for family collaboration which today's donors expect.
These new solutions make it easy for clients to access a highly personalized, Web-based interface to manage all the 'transactional' aspects of DAF accounts, as well as including robust communication capabilities for clients and advisers, family collaboration, and grantee communication. All of this represents a significant evolutionary advance and a tremendous development advantage for organizations adopting and offering in-house charitable solutions to their advisers and clients. For additional information please visit
Crown Philanthropic Solutions on the web.
