Philanthropy’s Growing Pains

In the current issue of The Chronicle of Philanthropy there is an excellent article (subscription required) about the conflicts that are arising as community foundations try and compete against the national donor advised funds (such as the Schwab Fund for Charitable Giving and the Fidelity Charitable Gift Fund).

The article describes the Greater Green Bay Community Foundation’s efforts to expand their historical focus on advising donors on which nonprofits to give to and to begin advising nonprofits on how to raise money. But the creative arrangement has some serious conflicts of interests that need to be address.

From the article:

"It is an unusual role for a community foundation, and one that elicits
mixed reactions from philanthropy experts. On the one hand, the
foundation’s work can be seen as blatant "double dipping" — it is being
paid by charities to raise money at the same time that it is being paid
by donors for advice on how to give money away."

Lucy Bernholz who blogs at Philanthropy 2173 is quoted in the article as well:

"You’re setting up a dynamic by which a nonprofit could expect that if it pays for this advice, it gets a grant."

The whole idea of advising both sides of the fund raising table reminds me of the conflicts in the investment banking industry, where banks get paid to advise public companies while their research department advises investors on which companies to invest in.

As The Second Great Wave of Philanthropy unfolds, we’re going to experience a lot of growing pains. The framework for facilitating the transfer of assets from individuals and companies to nonprofits will need to be constantly evaluated. Lucy wrote a great book a couple of years ago called Creating Philanthropic Capital Markets, which addressed some of these issues. Currently Phil Cubeta is discussing the same issues on his blog Gift Hub. This evolution of the philanthropic industry will be a critical component of The Second Great Wave.

Until the evolution is further along, donors will have to fend for themselves to some degree. Luckily there are many innovative nonprofit and for profit ventures which are hurrying to assist the new tactical philanthropists. Over time, this blog will highlight a number of these services and I encourage anyone who comes across a service they like to let me know.