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What’s on my virtual coffee table

Want to get away, even just for a moment, from the firehose of political news? Want to just sink into a comfy sofa…hot beverage…maybe some nice snacks nearby…no one to bother you while you read? Instead of vitriol, wouldn’t something pleasant, interesting, and maybe even positively educational be nice?

Well, this blog post is for you. I’ve got some things on my office coffee table pulled out just for you.

If you have some that you’d like to add to the table, click on the comments and add them for the rest of us to read, too.

How collaborative philanthropy efforts are starting to learn from one another

As prospect researchers and front-line fundraisers, we spend a lot of time getting to know (or know about) prospective donors one at a time. Here’s an article that pulls the lens back a bit to recognize a growing trend – collaborative giving – from Devex, the media outlet for development and humanitarian aid. The article outlines major philanthropic initiatives being undertaken by coalitions of foundations and mega-donors. What impact will these enormous “giving circles” have in the next decade? I found this article pretty fascinating.

Credit Suisse Global Wealth Report 2019

I’ll be honest – this isn’t a casual 10 minute read, but it is worth it. This is a research report for when you want some context on the environment within which we’re working – where the wealth is, who holds it, what sorts of wealth they hold, and where it’s moving to next. There are charts. Also graphs. Bring your highlighter. Here’s a quote:

 Thus the global financial crisis marks a turning point in the history of wealth creation – the year in which the influence of the “old world” wanes and the “new world” takes over as the engine of global advancement. A new regime is now in place and looks set to continue.”

Admit it, you want to know what that new regime is, right? The report also outlines wealth ownership in 3 key sub-groups (millionaires, women and millennials), and provides an interesting look into an informed crystal ball for wealth pockets and trends for the next 5 years.

INSEAD article on the changing face of family offices in Europe (Permanent link here)

If you’re interested in Family Offices, don’t miss this article by researchers from the premier European business school, INSEAD. This fascinating and relevant article focuses on the governmental and societal changes that have impacted FOs, and the opportunities enhancing (and limitations blocking) their growth in Europe over the past two decades.

Survey says: It pays to be generous

A recent study by business resource The Motley Fool’s personal finance arm, The Ascent, provides evidence of generosity – and by extension, the nonprofit sector’s role in that – making people happier and more fulfilled in life. (Well, we knew that, right? But here’s evidence). Over 1000 survey respondents provided the basis for these (and many other) findings, including these two quotes:

  • People who are more generous are more likely to believe that life is meaningful, be optimistic, and be proud of who they are.
  • High-generosity people were 23% more likely to be satisfied with their lives overall – and they were also happier with their relationships, their jobs, their possessions, and more.

And that’s a happy thing for a week in which we celebrate World Kindness Day, eh? What articles have you found interesting lately?

 

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It’s not rocket science – ethics, due diligence, and risk

The MIT Media Lab/Epstein scandal is a kick in the gut for those of us in prospect development and for the hundreds of frontline fundraisers that I’ve worked with (and thousands that I haven’t) who do their jobs ethically.

It angers me that my profession is being tarred by the brush of bad actors working in the shadowy fringes:

  • Coaches taking money to get rich kids into reputable universities.
  • Program directors taking money knowingly from a guy who sex trafficked girls (because why else would you insist the gift be an anonymous workaround when the university’s central fundraising office told you that the individual was off limits?).
  • Bad-apple fundraisers, nonprofit leaders, and administrators that turn a blind eye. Or are actively complicit.

It angers me to my core. We already have enough working against philanthropy these days, with dwindling numbers of donors; deficit funding that creates starvation cycles; low pay; a desperate need to retain good fundraisers; a stock market that is unstable; political systems in flux; and pundits who have never worked a day in the industry social-media blasting their opinions about the evils of our sector and scaring off actual decent people that could fund our work. We don’t need people within our institutions working against us, too.

It’s not rocket science. It’s basic ethics.

Fundraising ethics are not a nebulous mystery

There is a boatload of guidance out there on how to behave ethically in fundraising. The Association of Fundraising Professionals (AFP) has a published code of ethics. As does Apra, the professional association for those of us in prospect development. CASE, too. AASP. AHP. I can’t think of a fundraising-related professional association that doesn’t have at least one (and sometimes two) codes of conduct/bills of rights.

Here at The Helen Brown Group, each employee on their first day has to sign an agreement that they will follow the Apra ethics guidelines. It’s not just lip service, either: I also have a discussion with each new colleague about our company values and expectations for their ethical conduct. My guess is that there are quite a few nonprofit managers that do the same. (Does yours? Do you?)

But besides ethical guidelines, there’s also what I call the “gut check.” If you have to lie, obfuscate, convince someone, or conceal a donor/relationship, you already know in your heart that whatever dodo you’re trying to launch isn’t going to fly. You know what that gut check feels like:

I am an institutional fundraiser. It is the duty of everyone involved in development to make sure that the highest levels of integrity are maintained. I can think of two times in my career that I have felt that the money I was taking was inappropriate, though nothing on the scale of Epstein. One gift was a quid-pro-quo for an internship for the donor’s child, and the other was a gift with questionable tax consequences. I deferred to bosses both times, and I regret it.”

-Commenter user_4429094 on Boston Globe article “Former MIT Media Lab Fund-Raiser says he was following university rules on Epstein donations” (9/10/2019)

I do get it – the pressure of a supervisor, a donor, a powerful leader “strongly encouraging” you to do something you know is counter to your professional ethics is extraordinarily hard to say no to. In the moment it feels nearly impossible. I am fortunate that saying no (which I have done) never put my job on the line, but I know that it can. The question to ask yourself in the moment is, would you want everyone to link your personal reputation with this action? Do you want your name and that donor’s to be forever intertwined? Is it worth that?

We have ethics resources. We need to make sure they’re deployed, understood, and followed by everyone who touches money. Not just people in the fundraising office, because as we’ve seen, the actions of a few bad (or uninformed) actors on the fringes can take the shine off the domes of previously solid institutions and respected development offices in a New Yorker minute.

Risk and gift acceptance

And it’s not just following ethical guidelines internally, right? It’s knowing what potential risks lie out there, too. Knowing which prospective donors could bring reputational risk to your door and avoiding them (or being prepared to defend your relationship with them).

It doesn’t matter (to me) if your leadership decides to accept gifts from Koch or Soros (or neither), tobacco and guns (or neither), big pharma (or no pharma). What about a prospective donor who has done jail time – under what circumstances is your organization prepared to affirm that have they paid their debt to society? What about someone whose source of wealth is a little too hard to nail down, or is tied up in businesses that lend themselves to graft? What will you do then?

If you can defend a company or industry or donor’s alignment with your mission to your stakeholders and the court of public opinion, then you’re good to go. But you need to write it down.

It’s critical to have transparent, published gift acceptance guidelines to help every one of your stakeholders – internal and external – remain clear on whose money you will accept and whose you will not. What projects you will take it for, and what you will not. A gift acceptance policy is a reflection of your ethics and values, and it serves as one important guardrail for your philanthropic work.

I’m aware that many nonprofits in the United Kingdom have in recent years formed gift acceptance review groups. The group meets on a regular basis, and it is required that each solicitation at a certain level go before the group to be discussed and approved (or rejected). Yes, it probably slows the process down slightly, but you can’t beat the transparency and accountability.

What else saves your bacon?

Besides a solid gift acceptance policy and a review panel, due diligence prospect research is one of the few shields that an organization and its leadership have against institutional and personal reputation damage. Due diligence research checks for past civil or criminal charges; whether the person or company is politically exposed; whether they or their family serve on a company or nonprofit board whose mission is antithetical to your nonprofit’s; if they are, in fact, as wealthy or well connected or even who they say they are.

But a due diligence report isn’t worth the paper it’s printed on if its recommendations aren’t followed – or if non-professional fundraisers act outside of that safety net.

Because that’s exactly what due diligence prospect research is: a safety net. You may think it’s expensive to have it, but it’s lots more expensive not to.

If you don’t have one yet, create a gift acceptance plan now and take advantage of due diligence

Whose responsibility is it at your organization to make sure that everyone in the institution that cultivates and solicits donors is aware of and is following the nonprofit’s ethical guidelines for fundraising? Do you have an institutional gift acceptance policy and is everyone aware of it? Does your nonprofit demonstrate transparency for all internal and external stakeholders?

Now is a pretty good time to get on that.

 

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A snippet of usefulness from the World Wealth Report

Prospect research is an artfully scientific mixture of fact and conjecture. We spend a lot of time delving into sources of record like newspapers, SEC documents, real estate records, contact reports and other records from our own databases. Then we add informed opinion like white papers, rich lists, and our own experience. If we’re lucky, we can include some data science into the mix.

As we mature in the profession, what we become comfortable with is a curious amalgamation of truth and speculation that we use to rank, score, and predict which groups of people or individuals are likeliest to give to our organization.

It’s not a perfect science yet, but over the years we prospect development pros have gotten pretty good at uncovering useful information and helping organizations use it successfully. According to a recent MarketSmart major gift benchmark study, 84% of nonprofits that use prospect research meet their fundraising goals every year. Only 65% of nonprofits who don’t use prospect research meet their goals (which, you could argue is still pretty good odds, but why not be better prepared and 20% more likely to succeed?)

Last week I highlighted the Fidelity Donor Advised Fund Charitable Giving Report, which is worth adding to your reading list if you haven’t already (especially if your nonprofit type is in one of the top 5 giving priorities).

This week I want to highlight a key graphic in the 2019 Capgemini World Wealth Report (WWR) and add a little context.

In the graphic we can see the different categories of assets that high net worth individuals (HNWI) worldwide tend to hold, and the percentage of their assets that each category is.

How can we use this?

Research on people who live outside of the US is traditionally more difficult than domestic research, so any piece of information on international prospects is potentially useful. But specifically, let’s say you know one piece of the puzzle; that your French prospect has two properties beside their home. Once you find the value (or relative value) of those two properties, you know from the chart that those properties make up 14.5% of their total wealth. Calculate a back-of-the-envelope total visible asset figure et voilà.

No, it’s not hard, specific, factual, information about the individual you are researching, but it is another piece of the puzzle that you can use to get a less fuzzy picture of your prospective donor.

Something else I found interesting in the report was the discussion on how those asset allocations have changed since last year. Nervous HNW investors (whose wealth decreased last year) are moving their money out of equities and into cash, cash equivalents, fixed-income investments, and alternative investments like commodities and private equity. Does this point toward another global recession? Maybe not, but it sure doesn’t suggest that they’re bullish.

I’d love to hear your thoughts on the World Wealth Report, and if you found anything interesting in it that you’d like to share here.

 

 

 

 

 

 

 

 

 

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Usufruct

I listened to a fascinating, highly recommended episode of the Vox podcast series “Future Perfect” this week that was embedded in an article called “Dead people leave billions in their wills. How long do we have to listen to them?”

The theme of the podcast – should foundations exist in perpetuity? – is a topic that has increasingly appeared in fundraising periodicals and in our HBG Book Club discussions of The Givers (David Callahan), Just Giving (Rob Reich) and Winners Take All (Anand Giridharadas). Each book has a slightly different angle on the topic, but generally the consensus is that endowed foundations and donor advised funds take money out of circulation that could be used to solve problems now.

And further, maybe it’s not just that problems could be solved now, maybe it’s a problem that, for some of them, the needs for which the endowments were established no longer exist. Or the original terms were just really repugnant to begin with.

For example

The Vox podcast entertainingly shares two stories illustrating those case scenarios. One story describes a Georgia pleasure garden built for the perpetual, exclusive enjoyment of a city’s white citizens. What happens when, 50 years later, a foundation’s trustees or a municipality are charged with re-examining a donor’s intent? (In the garden’s particular case, the municipality shoots themselves in the foot. Listen to the podcast to learn more.)

If times change but the purposes for which a foundation is established can’t (or don’t, or won’t) change, does it even make sense for foundations to be allowed to exist in perpetuity in the first place? What happens if the disease for which a perpetual trust is established to remedy is eradicated? Sure, we can say that the trustees just have to go to court to get the money freed up for another purpose, but as the New York Times reported, sometimes the trustees don’t actually want that to happen.

And that’s where usufruct comes in. The podcast presenters, Byrd Pinkerton and Dylan Matthews, interviewed Boston College law school professor Ray Madoff (no relation to the con man), who describes what the general feeling was in the days before Rockefeller and Carnegie-style foundations came into being. Here’s an excerpt:

Matthews: So Byrd, you promised me an explanation for why we allowed people to have trusts that last forever.

Pinkerton: Yes. So the first thing I learned from Ray is that is hasn’t always been this way.

Madoff: Historically we did not allow people to create their own donor-intent-preserved-in-perpetuity, right? We explicitly did not allow that for the first century after the country was formed. It was seen as aristocratic, it was not the American Way.

Pinkerton: We had literally just fought an entire war to establish democracy.

Madoff: These zombie entities that could live forever were seen as very disconcerting and not necessarily appropriate for a country that was supposed to represent the wishes of the people and that’s why Thomas Jefferson famously said that the world is held in usufruct for the living. And usufruct is a funny word, but what it means is life estate, that the world is to be held for the living for the time of their lives, and after that it is to be freed up for the next generation to hold the world as they see fit. And that was a very strong value of Jefferson and of a lot of the founders. The people in their time controlling the resources of their time for their time.

More generally, the word usufruct means having temporary access to another person’s (or entity’s) stuff, whether it’s money, or a private park, or some other benefit that you don’t actually own but you get to use, like that piece of clothing you borrowed with permission from your roommate’s closet. You get the benefit of it for a time, not for ever.

Things changed in America when the steel and oil and railroad barons started amassing more money than they could possibly spend, and public infrastructure increasingly needed upgrading. There was societal need and a sudden rise of income inequality in this first Gilded Age, but no mechanism or infrastructure for organized or institutional philanthropy was in place.

In modern history, nothing like this had happened before – commoners rising to the economic level of kings – and as far as the 1% of that age knew, based on history they would likely always be princes and the poor would likely always be paupers. An environment started to emerge that was more friendly to (or at least tolerant of) establishing charitable foundations in perpetuity to help keep the fringes of society’s infrastructure shored up.

So the rich (in the form of John D. Rockefeller), wanting to do something positive with this mountain of money, pressured lawmakers for change and eventually got it. The first endowed charitable foundation, The Rockefeller Foundation, was given permission by the US Congress to be formed in May of 1913.

And now here we are, today, discussing changing the rules

Over the past century, the establishment of foundations has undoubtedly made our society better. But the eke-ing out of 5% of foundation assets hasn’t gone a long way to actually solving the issues that face us. It’s increased endowments and given the folks managing assets meant for the underserved a good living.

Much of the commentary we’re seeing in op-eds, articles and books by philanthropy historians and thought-leaders during this second gilded age call into question this trickle of band-aid funding when bolder collaborations could take place. Some call for measured thinking while others are more strident, but the voices advocating for change are getting louder.

Some want endowed foundations to be a thing of the past entirely. Others call for a 100-year existence with mandatory sunsetting. And many (including myself) want greater transparency, protection for donors against misrepresentation and usury, and and at least a minimum donation requirement (or better – a maximum life span) for foundations and donor advised funds.

Now that we’ve had a hundred or so years of seeing the best and worst of the philanthropic foundation and the donor-endowed funds’ legacy, where will pressure for change come from?

Do we even want change? Are we used to perpetual, yet rationed, usufruct?

When change comes, I can’t imagine that it would originate with a state or federal government, and it probably won’t come from within the foundation world itself. Change would be unlikely to be broached by nonprofits who hold an uneasy power position as foundation-fund applicants.

But we’ve seen a movement start already with the creation of The Giving Pledge – donors committing to give away at least half of their net worth during their lifetimes. Maybe change could come from the donors themselves.

Or maybe it’s the press that will push our sector to shift our perspective? Anand Giridharadas, David Callahan and other journalists are gad-flying adjacent to the wealthy 1% and the third sector. Maybe change will come from the buzz they’re creating.

Or it could be a collaborative mixture of voices from inside and out of the nonprofit sector. Just Giving author Rob Reich is an academic at Stanford who most certainly relies on philanthropic support to fund his research.

And these were some of the last words I heard on the Vox podcast: “Future Perfect is made possible by a grant from the Rockefeller Foundation.”

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7 Highlights from the Knight Frank Wealth Report

One of the yearly reports that sends a tingle up the collective spines of the prospect research community is The Wealth Report from Knight Frank. The 2019 edition came out this week, and my copy is already highlighted and sticky-noted – how ‘bout yours?

If you haven’t had a chance to download and read it yet, here are seven highlights I didn’t want you to miss… [Read more…]

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How the wealthy say ‘I do’ to philanthropy

Since June is the most popular month for the pledging of troths, it got me to thinking about The Giving Pledge, which is an organization of billionaires who pledge to give away 50% of their fortunes while they’re still alive.

I realized that I hadn’t really heard much about the Giving Pledge when it resurfaced in the news recently with MacKenzie Bezos’s sign-up. That could be because interest in the club seems to have waned a bit in the decade since Bill and Melinda Gates and Warren Buffet splashed out the announcement at its founding. 122 people signed on in the first four years, but only 68 have committed in the five years that have followed. [Read more…]

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Will “Anonymous” become ubiquitous?

Image by Pete Linforth from Pixabay

It used to be that anonymous donors were relatively rare. When I started my career, you’d see maybe two or three anonymous donors on any given annual honor roll of donors.

Now there are a growing number of opportunities for donors to hide in plain sight in addition to just a listing as “Anonymous,” and I’m wondering if the appeal of LLCs and donor advised funds (DAFs) and other vehicles-to-come will become even more attractive to a particular kind of donor.

Let’s say, for example, that you are a philanthropically-minded (yet very minor) member of a dynasty with a less-than-stellar public reputation. Or a member of a polarizing family or profession. A junior Sackler, say. A pot-shop millionaire. Tiffany Trump. Some nonprofits might welcome your money, but others might be uneasy with forging a relationship. You cause due-diligence alarm bells to go off. It’s awkward.

You have causes you want to support, but the causes don’t want your support. What do you do?

Well, you could make an anonymous donation via a DAF or LLC. You’d get the tax deduction, the nonprofit is blissfully ignorant of your identity and free of any pesky ethical/due diligence concerns (I’m playing devils’ advocate here, don’t @ me), and all you’re missing out on is the naming-rights glory which, given the circumstances, is publicity you don’t need right now anyway.

Or maybe you just want to give your tens of millions in peace. Announcing that you’re wiping out the student loan debt for a whole graduating class or signing the Giving Pledge invites too many hecklers yelling that you shouldn’t have made your money that way or that your personal and political beliefs are too self-serving or that you’re not giving to the right things. You’ve got some eloquent support, but giving anonymously is looking pretty attractive, right?

Giving USA and others do a great job of tracking trends of donations to specific causes, but I started to wonder if think tanks, consultants and/or nonprofits are starting to track what percentage of major donations annually are anonymous, and what percentage of total giving that represents. Is it increasing? Staying the same? Are certain (types of) donors more frequently opting for anonymity?

Depending on the answers, how might that data impact how a nonprofit approaches high-visibility (or highly risky) prospects?

I contacted my colleague Dan Lowman, senior vice president of the Survey Lab at GG+A, to see if they have been tracking any data on the subject and luckily, they had helpful information about $1M+ gifts from across the non-profit sector.

Source: GG+A Survey Lab

As you can see, it’s been a pretty bumpy ride over the past 13 years, but the trajectory of anonymous donations above $1 million is on the rise. We’re less than halfway through 2019 with only 43 anonymous gifts of $1m+ so far, but if the pace holds true to its acceleration, the Survey Lab projects an all-time high for anonymous gifts this year.

As a percentage of all $1m+ donations, anonymous giving this year could outpace each of the past seven years by a mile.

Source: GG+A Survey Lab

That bump in anonymous giving at the heart of the Great Recession is an interesting spike, isn’t it? Was that a time when philanthropically-minded individuals didn’t want to flaunt the fact that they were conspicuously wealthy? Or something else?

With income inequality on the minds of many, and intense public scrutiny of wealthy donors by philanthropy-watchers increasing, are we about to see another spike in anonymous giving? Will it be a blip or part of an on-going trend? I think it will take another two or three years for us to know for sure, but I for one am going to be watching with great interest.

FOR FURTHER CONSIDERATION

In this article, Vox.com’s Dylan Matthews interviews Phil Buchanan, president of the Center for Effective Philanthropy.

From the article:

 Stepping way back, for the last 18 years in this job I’ve felt like philanthropy and the nonprofit sector it supports often get taken for granted. I think we undervalue the role of this sector, particularly in our country, and I think much of the narrative has been, “Philanthropy and nonprofits are broken and business thinking has the answer.”

And now we have a new critique, which is more from the left politically, from folks like Anand [Giridharadas] and others, which is, “No, actually, philanthropy is just an anti-democratic force or a ruse to distract from evil-doing. Actually, government has the answer.”

I actually think that nobody’s got all the answers. I think it’s particularly concerning right now because there’s some evidence that giving levels may be plateauing. It’s hard to tell for sure because we’re all waiting on the Giving USA data [the gold standard dataset on charitable giving]. And while I think we should be really critical of stupid or ineffective philanthropy, we should hold up giving as a value and recognize that when done well, it can have tremendous positive impact.”

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Don’t miss this new report

Nobody has ever scientifically measured the role of prospect research in major donor fundraising before. Sure, we researchers have always been confident in our knowledge that research is important for fundraising success, but how do end-users really feel? How exactly is it important? What parts are most useful? How do fundraisers actually use the information they receive?

And – scary question to ask – could fundraisers do as well raising funds without prospect research? [Read more…]

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Civil discourse

This is going to be a fairly short blog post today, because my intent is to point you elsewhere. I’d like to recommend that you go to CEP president Phil Buchanan’s recent article called “Putting Critiques in Perspective in Pursuit of More Effective Philanthropy” on the Center for Effective Philanthropy’s blog last week.

As I’ve mentioned a few times here and other places, the HBG Book Club has recently read, studied and debated Winners Take All by journalist Anand Giridharadas, and The Givers by Inside Philanthropy editor David Callahan. Both books paint a provocative landscape of mega-philanthropists and their impact on the nonprofit sector and our democracy.

I imagine our book club will soon be reading Stanford professor and political scientist Rob Reich’s book Just Giving: Why Philanthropy Is Failing Democracy and How It Can Do Better and Buchanan’s own forthcoming book Giving Done Right: Effective Philanthropy and Making Every Dollar Count because they also contribute to this important philosophical discussion happening right now in our sector.

These authors’ narratives and opinions all weave together like differently-colored yarn in one fabric, but they also diverge from each other along the fringes. But given the seeming penchant lately for people with differing views to shout and vilify rather than calmly and intelligently discuss and debate, I was pleasantly surprised, encouraged, and educated by reading Buchanan’s blog post in response to the positions of the authors of those books, and the comments/rebuttals/expansions by some of those very authors as well as other experts in the field in reply.

I encourage you to read Buchanan’s article and to contribute your insights either on his blog post or here. I’d really love to hear what you think.

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A hygge opportunity for UHNW philanthropists

Along with the rest of the HBG Book Club, I am currently deep in chapter 6 of Winners Take All; the Elite Charade of Changing the World by Anand Giridharadas. At the same time, I’m reading “Four Pathways to Greater Giving; What will it take to unlock dramatically more philanthropy from America’s wealthiest families?” a new white paper published by The Bridgespan Group.

Reading these two together with the soup in my head from Henry Timms’ and Jeremy Heimans’ book New Power, David Callahan’s The Givers, and Jake Bernstein’s Secrecy World that the book club also read over the past year is starting to create some very interesting new synapse pathways in my brain. [Read more…]

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