Phil Cubeta recently had an insightful post about the three types of “advisors” that philanthropic families usually turn to for help:
People use the same terms to describe different things. When I ask those who call themselves philanthropic planners to describe their process they all say,
- I meet with clients to set goals.
- Then we discuss tools and techniques to achieve those goals.
- Then we implement.
- Then we monitor.
But what financial advisors mean by goals and what fundraisers mean by goals and what grant-consultants mean by goals are quite different. Likewise the tools and techniques may be different. Typically,
- Fundraisers go from goals to gift without going through an analysis of the clients overall estate and financial plan. The gift, from an advisor’s perspective, is out of context, not integrated, an appendage.
- Planners generally take goals to be centered on self and family with a glance to a tax reduction strategy called "philanthropy." They may also set and achieve goals around investment strategies, to increase return, reduce risk, and fund specific dollar outflows.
- Grant making consultants or gift consultants (like Tracy Gary or The Philanthropic Initiative) start with goals for society or a specific cause, and match that passion with appropriate giving grant making strategies, whether the grant comes from a checkbook, a donor advised fund or a foundation. But they don’t back that gift up into the financial and estate plan of the donor. They deploy the existing giving budget, and maybe nudge the client to increase it, but they do not work at restructuring the client’s finances to increase that giving budget, while also taking into account the donor’s many other non-philanthropic goals.
In other words, fundraisers represent the nonprofit they work for and gift consultants represent the public good and/or the client’s philanthropic urge. Financial advisors represent the client as a consumer. They represent the side of the client that is concerned with financial stability and spending power. But who represents the client as a whole? Why can’t clients be advised as whole people who have personal spending needs, children they would like to pass part of their estate to, and philanthropic interests that they would like to support? Last November I wrote about the need for a comprehensive understanding of the philanthropic family that does not compartmentalize the personal and social uses of their financial assets:
All of the assets that you accumulate during your life can be thought of as falling into two buckets. The assets that you use to finance your own lifestyle or those that you pass on to your heirs are your personal capital. The assets that you give back to society – either by default through the tax system, or proactively through direct transfers to nonprofits – are your social capital.
Most people understand the need to manage your personal capital proactively. There are numerous websites, books, advisors and other resources that encourage the tactical management of personal capital. What is often missing is any kind of strategy for personal capital. Why are you accumulating all of this money in the first place? What are your goals in life? How are you going to use your personal capital to truly benefit yourself and your heirs? There are certainly plenty of philosophical, self-help and spiritual resources to help guide your way. However, people rarely address the strategic goals and the tactical decisions around personal capital collaboratively.
Social capital suffers from the opposite condition. Lots of people and resources encourage us to utilize one strategy over another. The very act of deciding which nonprofit to fund is a strategic act, so every donation solicitation can be understood as an appeal for you to decide on a specific strategic direction. However, few people think of their social capital tactically. When tactics are discussed, they are generally viewed as a way to reduce the distribution of your social capital in favor of your personal capital. Most people think of the tax break from giving as a way to retain personal capital, rather than understanding its ability to redirect social capital away from the tax system and to your favored nonprofits.
My expertise is in tactically managing personal and social capital collaboratively. At the tactical level, personal and social capital are identical – they are fungible financial resources. At the strategic level, personal and social capital may be used quite differently. However, at their root they come from the same pool of financial resources. How you dip into this pool and allocate your capital to personal or social projects is a strategic decision. Tactically, your personal and social capital is one and the same. You must manage all of it as a comprehensive whole.