Why should wealthy individuals and families engage in philanthropy, and what’s the best way to get started? Experts on giving answer these questions and more.
This transcript has been generated by an A.I. tool. Please excuse any typos.
Stacie Jacobsen: [00:00:00] Thanks for joining us today on The Pulse by Bernstein, where we bring you insights on the economy, global markets, and all the complexities of wealth management. [00:00:15]
I'm your host, Stacie Jacobsen. As we get closer to the holidays and year end, there's often a greater focus on philanthropy.
It's a time of year when people are feeling generous, they're gathering together with loved ones.
And they're trying to [00:00:30] maximize donations for tax purposes.
Now, families often find a greater sense of purpose through philanthropy, whether you are starting your philanthropic journey or you already have an established plan.
It's a great time to have these intentional conversations [00:00:45] about your family values and aligning your giving with those values.
To get started, it's helpful to identify the three specific stages of giving.
The first is the why. Why do you and your family want to give? The second is what you want to [00:01:00] support, and the third is where do you want to give? Is it local?
Is it regional or national or maybe even global?
So to make a positive and lasting impact, it's advantageous to seek out the perspective of experts who are immersed in this world, [00:01:15] professionals who understand the stages of effective giving.
Today, we're joined by two of these experts, Alison Morse, Vice President of Philanthropic Consulting at the National Philanthropic Trust.
And Phil Buchanan, president of the Center for Effective [00:01:30] Philanthropy and author of Giving Done Right, and also co host of a podcast by that same name.
They'll offer their insights on giving and discuss some of the best ways to make a positive impact.
Alison and Phil, thanks so much for joining
Alison Morse: us. Thanks so much for [00:01:45] having us, Stacie. Great to be with you.
Stacie Jacobsen: All right, Alison, let's go ahead and get started with you.
When an individual or a family comes to you and they're interested in giving on a really meaningful scale, how should they get started?
What do you [00:02:00] typically recommend?
Alison Morse: That’s a great question to start with. And what I really focus on are some core questions for reflection for the individual or the family to start with.
What's bringing you to the table [00:02:15] now in terms of your philanthropy?
It might be a wealth holder who's Ready to retire and starting to think about giving it might be a young person who's feeling really energized about a particular Issue and wants to bring their family [00:02:30] around that common cause so number one is what's motivating you in the moment.
The second is who do you want to have around the table?
Family means all kinds of things to all kinds of people and so, you know, who should be in that conversation? [00:02:45] and then the third is thinking about what do you want to learn together?
And I really want to emphasize the word learning instead of achieving, because as we'll talk about today, so many of the issues are very complicated, [00:03:00] big, big things to tackle.
And so really trying to figure out what's your learning goal.
And then I would just say that once that reflection has happened, when you finally come together, there's an opportunity to really dig into values. [00:03:15]
What do you all believe in? How do you find that common cause?
And you might find that for legacies of giving and legacies of family, that there is that through line of values already there.
Or you might need to start the [00:03:30] conversation.
And I really encourage donors who are just starting out to connect with their wealth advisor, connect with those in their network already, because there are fantastic tools that already exist that can help people [00:03:45] have that early conversation.
And the most important thing.
Is to give one of the really challenging trends in recent decades is actually a decline in the percentage of American households that are giving [00:04:00] about two thirds 20 years ago to just under half in the most recently available data.
And so give in any way you can, you know, at whatever level that you can and, you know, don't delay because there are real challenges [00:04:15] facing these organizations every day.
And especially now, as we have seen a tougher fundraising environment.
Stacie Jacobsen: Yeah, I think that's really important because as many significant donors may be used to the investment landscape or running a business, [00:04:30] approaching a philanthropic strategy, I'd imagine is significantly different.
So Philip, how do you really think that donors who are starting off on this plan need to think about their philanthropic.
Giving different than maybe running a business or their investment strategy.
Phil Buchanan: [00:04:45] Yeah, I think it is different, Stacie, in a bunch of ways.
Uh, first of all, it's just more challenging.
You are. In your philanthropic efforts, often working on the most complicated and interdependent problems, they're the issues that markets and [00:05:00] government haven't successfully addressed.
That's why they're there to be addressed by philanthropy, and the dynamics are really different in the business world.
It's a competitive dynamic in this world.
You're really gonna have to partner with others to get things done.
Both the organizations you [00:05:15] support and often other funders and then finally assessing how you're doing is way different.
So you can't just look at, well, what's our ROI on our giving the way you might be able to on the investing side.
It's complicated to [00:05:30] get a sense of the progress you're making. So in all kinds of ways, it's really challenging, which is not a reason not to do it because.
If we look at the history of this country and the world, so much of what we take for granted as positive [00:05:45] exists because of effective philanthropy, supporting great.
Nonprofit organizations doing vital work.
So it's really important to do it. Be inspired by the great work that has been done, but also to have some humility about the fact that it is a uniquely challenging endeavor. [00:06:00]
Stacie Jacobsen: So it sounds like it certainly needs to be much more of a collaborative effort.
And, you know, part of that collaboration is It's the advisors, right?
Make sure that you bring in the appropriate people and the experts to align your goals with your ultimate objective.
So [00:06:15] with that, I might put this towards both of you.
You can see who wants to kick us off here, but when there's so many pressing problems in the world today, how do you help donors narrow down which issues are really most important to them?
Or even if it's not what's important to them, how do [00:06:30] they identify where their dollars can be most effective?
Alison Morse: Thank you. I can start us off and say that, you know, again, going back to that values conversation, depending who's around that table with you, there's going to be a whole host of different issues that [00:06:45] people are interested in.
And so it might be that what are you going to work on together versus what might you work on separately and then go off and do your own learning, do your own grant making and come back to that table as a family. [00:07:00]
When I think about how to think about these big, intractable issues like climate change, racial equity, things happening in public education in our democracy, those are really [00:07:15] tough to tackle individually.
But what we start to do with families and individuals is really.
Peel the layer of the onion. So if you think about a specific issue, like I'm interested in global health.
Okay, great. [00:07:30] But let's narrow that down a little bit more. Are there countries or regions or even communities that you feel particularly connected to?
Then if you peel it down another layer.
What approaches might you be most interested in? Is that [00:07:45] directly engaging in service?
Is that around advocacy? Might it be around communications?
So looking at that kind of scope of both issue, scale and size of where you might want to be working and then the [00:08:00] approach that you would want to take.
Phil Buchanan: Yeah, and I, I agree with Alison.
Um, I think it's important also to understand the risk of not being focused and the risk of being too focused.
So focus is really helpful. [00:08:15] Narrowing in on something, understanding who the other players are, how you might engage collaboratively with them, because on these really tough problems, it usually takes collective effort to get things done.
When we see real progress, that [00:08:30] philanthropy has contributed to, whether in the area of criminal justice reform, or dealing with homelessness in a particular region or city, almost always it's about different players coming together.
But then... It's [00:08:45] important not to get so focused that you don't recognize the interdependencies, right?
So I have seen some donors say, well, you know, we only care about K 2 education.
And we're only working on this particular [00:09:00] component.
But often, issues are interconnected. So can you really, you know, improve education in certain communities without addressing poverty, for example?
Which relates to kids ability to learn.
Stacie Jacobsen: [00:09:15] Yeah. And I love what you said about real progress. I think that one of the common misconceptions or criteria that donors are told they should evaluate before giving dollars is to look at something like the administrative costs and maybe restrict [00:09:30] gifts so that they only go to the actual cause instead of overhead.
Can you guys address with that potential misconception? Maybe
Phil Buchanan: I'll start on this one and just say, like, what is overhead?
Like, what are we even talking about?
I mean, it gets, you know, defined in various ways, but [00:09:45] I've heard donors say, I don't want to support.
Anything but the food at the food pantry.
I just wanna make sure that because, because I wanna feed people and so I want it to all go for the, you know, chicken and the broccoli.
But the problem with that [00:10:00] is it's equally important that the food pantry has a space for which they must pay rent that people can come to in order to be served food.
And it's equally important that they have staff. who are paid salaries to coordinate the volunteers [00:10:15] who serve the food.
So if you really want to support an organization that's feeding hungry people, the best thing to do if that is their mission and it aligns with your goal is to give them unrestricted support to use on whatever costs they need [00:10:30] to use it to offset and not to think that you somehow know better than the leader of that organization.
How to allocate your gift to achieve your shared goals.
And if you don't have that level of trust in an organization, why give to them at [00:10:45] all in a restricted or unrestricted way?
So I think that these ratios often obscure what really matters most, which is the results being achieved.
Alison Morse: I would add to that just to say, and Phil, I know that you and your [00:11:00] team have worked on this a lot, but looking at the nonprofit sector more broadly, certainly post pandemic, so many organizations are really facing a crisis in terms of their cost.
We all know that the cost of living has gone [00:11:15] up, particularly in the United States.
And so when you look at livable wages for staff, when you look at cost of rent. Other things that Phil has mentioned, those are really for particularly small organizations, the make or break of [00:11:30] whether that organization is really going to survive and thrive in the current economic situation.
Phil Buchanan: Can I say something else about this, Stacie, which is that I've seen sometimes among donors, and it usually evolves over [00:11:45] time, but particularly among new donors, a kind of suspicion of nonprofits and their leadership and staff, a belief that, you know, maybe these folks don't really know what they're doing.
I've spent a lot of time in nonprofits across the country.
I was just in Texas at [00:12:00] some senior centers in San Antonio and in rural Bandera County, population 22, 000.
What these organizations do. It's nothing short of heroic. These are people who are driving or organizing [00:12:15] volunteers to drive 80 miles to deliver meals to folks.
These are organizations that reinvented themselves in the pandemic to become vaccine centers or to serve multiple times the number of meals they usually do.
So what I always say is Hey, you know, [00:12:30] your business acumen that allowed you to create a lot of wealth. That's fabulous.
Take some time and really learn about what it's like to lead a nonprofit because actually it takes everything it takes to lead an equivalent size business and a lot more.
It's a [00:12:45] harder, not an easier.
And once you understand that as a donor, your orientation changes and you realize a big part of what you're doing is just trying to provide that kind of support that Alison's describing that is [00:13:00] necessary for these organizations to do their best work.
And if that organization's objective, like I said before, overlaps with yours.
Then support them in a way that allows them to be strong, retain great people, invest in what they need to do the work, technology, whatever it may be, [00:13:15] and you will see that you're really contributing to impact if you approach your philanthropy in that way.
Stacie Jacobsen: Yeah, there's some really great minds in the nonprofit space that have learned to do more with significantly less and always have [00:13:30] to be so flexible and pivot with whatever is thrown at them.
So that's a great point. You know, Alison, as we're entering into Thanksgiving and the holidays, what are some of the challenges involved in getting these large multi generational [00:13:45] families on the same page with their philanthropic efforts?
And, you know, even at, do they need to be on the same page or is there room for different members to have their own strategy?
Alison Morse: Yeah, that's a great question.
Every family has a different dynamic. [00:14:00] And so really wanting to focus on what brings you together in this moment.
And I would say this is again where your wealth management team can be really helpful because there are a number of different giving vehicles that can help you decide [00:14:15] to give.
Um, collectively as a family, or maybe there's that model where the family gives to a specific number of issues together, but then other members of that family have their own separate areas of interest and [00:14:30] giving vehicles that they are managing throughout the year.
Stacie Jacobsen: Yeah, in my experience, philanthropic giving has been a great educational tool to bring in younger generations.
It teaches them really how to [00:14:45] research what's important to them, which organizations to give to, how much and how far the dollar will go.
And then also, just as importantly, how to put together a presentation and speak their mind in front of family.
Phil Buchanan: I think that the best examples [00:15:00] I've seen of families giving together.
Play out almost like the opposite of the show's succession, you know, where people are basically on that show as I experienced miserable, really wealthy and fighting with each [00:15:15] other over resources and, you know, you flip that around.
You can actually align people. In what is a joyful activity, which is to give right.
The research shows that those who give are [00:15:30] happier and it's an opportunity to learn about each other and understand differences and where folks are aligned.
And I think when done in the ways that Alison is describing, it strengthens relationships among [00:15:45] siblings, you know, between kids and parents and grandparents.
It can be really powerful, and it's a great legacy to leave for those who have the opportunity to do so.
Both the impact of the gifts, but also the tradition of giving that [00:16:00] hopefully your kids will carry on. Yeah.
Stacie Jacobsen: And, I will add, as we've talked about the importance of having these family conversations.
It's hard to know how to get started.
So just for our listeners, you know, I have no doubt that your families know how to sit around the [00:16:15] table and have a good time and tell stories and, and laugh and talk about everything that's happened over the past year.
But where families sometimes find it challenging is to get into those deeper intentional conversations.
So there are [00:16:30] tools that experts have developed.
There's facilitators that can come in to start the conversation.
Just so that each family member feels that their voice is heard and that it's important. So you're not on your own, guys.
Okay, you know what, look, especially this time of year, but a lot of [00:16:45] families are hit up for some smaller donations, whether it's for, you know, support for a run that somebody is doing or for their child's school.
How do you think about these smaller requests that may come in on [00:17:00] a regular basis?
Is that something that you should just say, yes, it's going back to my community and, you know, here's a couple hundred dollars or do you have a better plan to handle those requests?
Alison Morse: Sure. We've all been there. We get the requests for somebody who's running a marathon or [00:17:15] their kid is traveling to X, Y, Z country to do a volunteer project.
And so how can we support them?
Where I would say that there is an opportunity to look more at an investment strategy is to think about like a pie [00:17:30] chart.
What portion of your giving would you allocate to those almost emergency response or friend and family requests and set your budget for that and set your parameters.
So Stacie, you've mentioned we're entering [00:17:45] giving season that can be really busy for families with holiday parties and galas and. Charity auctions.
And so really defining what you will and won't give to, but also making that part of your philanthropic [00:18:00] portfolio and budget can be very helpful on this point of the inbound requests that you get.
I agree completely with Alison and this is arbitrary, but I would say don't let it be more than 20 percent and be intentional about the other 80%.
[00:18:15] Set a cap on what you'll be responsive to and operate within that budget.
So of course you're going to give your niece something for, you know, the project that she's raising money for a local nonprofit.
You don't want to be that aunt or uncle, but you're operating within some [00:18:30] constraints and you're making sure that you're being intentional.
So when you look back at your giving at the end of the year, it looks like something you intended to do, not something that just happened that you can't make heads or tails of or find a thread across.
Stacie Jacobsen: All right, Phil. I love that.
It's kind of nice [00:18:45] to know that there is some parallels in the world of philanthropy with the 80 20 rule.
Now, I want to touch on a story in philanthropy from the past few years, and that's MacKenzie Scott. She decided to give away.
Billions of dollars and took a [00:19:00] very methodical and thoughtful approach to that process.
So what lessons Phil and Alison, can the rest of us learn from how she approached giving?
Phil Buchanan: Yeah, we at the center for effective philanthropy are doing a research project, looking at the impact of MacKenzie Scott's giving on [00:19:15] the organizations that she supports.
And just like the order of magnitude. You know, difference is is massive.
Right? So at the median, her gifts have been around five or 6 million for the large staffed [00:19:30] foundations that we work with.
The median gift or grant is like 125, 000. These gifts from MacKenzie Scott have come to organizations without any strings attached.
No stipulation as to how or when the money [00:19:45] needs to be spent.
And I'll tell you, there's a lot of people in philanthropy circles that I run in who said, Oh, this is going to be a disaster.
These organizations aren't going to be able to handle these gifts. There's going to be unintended negative consequences.
Other funders are going to pull back.
They're going to staff up [00:20:00] and then they're going to go over a financial cliff and not be able to sustain those costs.
And it's early. We're two years into this study and so I can't definitively say what will happen. But I can tell you we've seen no evidence of that.
What we've seen is these [00:20:15] gifts have been powerfully transformational for organizations and for leaders.
That organizations have generally used them across various sort of categories.
So, yes to expand their programmatic work.
But also to invest in their internal capacity and [00:20:30] also put some aside for long term financial sustainability that they have been transformational for leaders who feel emboldened in a different way.
They've helped organizations to collaborate more effectively because they're not so worried.
About [00:20:45] resources, and they have rather than hurting fundraising efforts, which was the fear.
People say, Oh, you don't need support. They've been more likely to help fundraising efforts and draw in other funding.
So what's the relevance of that? Given that almost [00:21:00] nobody can give at the level of Mackenzie Scott, I think there is relevance, which is that actually when we trust vetted organizations.
They know what to do with resources, and so we can give with a little more trust in those organizations.
Alison Morse: Maybe then we sometimes [00:21:15] assume and I would add to that that we know that she's using a group of expert advisors to surface and vet these organizations, but they're also publicly available.
So for you as a donor, you can go [00:21:30] on and see where she's given. And that's great. The due diligence has been done.
The vetting has been done. Thank you.
The other thing that I think is important about what she's doing is that she's resurfacing some organizations that some of us may have discounted [00:21:45] or forgotten about.
So things like Meals on Wheels, the local United Way, um, Easter Seals, things that.
You know, don't come up in our day to day conversations, but are really steady organizations [00:22:00] within their communities.
And then certainly there are the gifts of the new organizations that are coming to the forefront through this funding.
Stacie Jacobsen: You know, I'm going to take a minute to talk about some strategies for reducing the effective [00:22:15] cost of the gift to the donor, you know, many donors and I get it.
It's easy. You write a check or you transfer funds towards the end of the year.
Giving Tuesday is coming up.
But what I'd really encourage you to do is first look to your [00:22:30] investment portfolio.
If you have highly appreciated assets that you've held for over a year, those are really a great asset to think about contributing.
Now, the reason for that is that the charitable organization gets the [00:22:45] same amount of money, whether it's a publicly traded stock or cash, but you as a donor get to transfer out that appreciation.
Which would otherwise be taxed at federal and state capital gains rates [00:23:00] this year, there's really been the magnificent seven, which are responsible for the majority of the U. S. markets momentum.
So many portfolios do have individual. Holdings that have larger appreciation.
You know, there's one other strategy that I will bring up [00:23:15] and that's for those investors that are over the age of 70 and a half and would have a required minimum distribution.
That's another way that you can give directly to an organization.
I'll stop there and just say that for more details on that, our philanthropic team [00:23:30] just published a year end blog and it's posted on Bernstein. com or you can see it in the show notes.
It's titled finish strong, make the most of year end giving.
All right, Alison and Phil, thank you so much for joining us ahead of Giving [00:23:45] Tuesday.
We really appreciate your insights for both the longer term and more immediate gifting for our donors.
Alison Morse: Thank you. It's been a pleasure. Thanks for having us.
Stacie Jacobsen: And thanks everyone for tuning in. That's all for this week on The Pulse.
Thanks again for listening, and please remember to [00:24:00] like, share, and subscribe.
We'll be back in two weeks with another episode, so don't forget to tune in.