Recently Wealth Manager magazine wrote a very nice article about the growing trend of wealth management firms specializing in serving philanthropists and positioned my firm, Ensemble Capital Management, as being on the leading edge.
Strategy without tactics is the slowest route to victory, wrote Sun Tzu in The Art of War. Twenty-six centuries later, acknowledging, accepting and exploiting the distinction as a business model is the new new thing in philanthropy.
Strategic philanthropy refers to the big-picture goals, which is to say the popular image of organized giving. Ending poverty, curing cancer, etc. fall under the heading of strategy. The financial plumbing that supports such causes and primes the money pump is tactical philanthropy. The two sides have always been a part of philanthropy, of course. What’s different is the growing specialization of services for each—particularly when it comes to the tactics.
“Philanthropy is broadly understood as the giving of money for social purposes,” says Sean Stannard-Stockton, a principal at Ensemble Capital Management, a Burlingame, Calif. shop that specializes in philanthropic-related money management and financial services for wealthy individuals. “And yet,” he adds, “ there’s been almost no attention to how you structure those financial transactions.”
Until recently, that is. Attention is very much on the rise when it comes to the financial aspects of philanthropy, which Stannard-Stockon and others tag as tactical philanthropy. There is increased focus on the financial processes that make strategic philanthropy possible, he reports. In fact, the trend is so compelling that it convinced Ensemble Capital to re-brand itself four years ago as a specialist wealth manager in the burgeoning niche of tactical philanthropy…
…Arguably, the leading edge of the philanthropy boom is represented by the independent firms that are embracing a philanthropic-centric business model. Consider Ensemble, which was founded in 1997 as a traditional wealth manager, but four years ago began specializing in providing philanthropic services for individuals. Related efforts have since spilled out into the wider world: Stannard-Stockton started his blog, TacticalPhilanthropy.com, in late 2006, raising his profile and leading to his monthly Financial Times column “On Philanthropy.”…
… If the business model of philanthropic planning is compelling, it’s only a matter of time before debate begins in earnest on best practices. One of the emerging topics under discussion includes the question of how to provide philanthropic planning in a way that minimizes—if not eliminates—conflicts of interest. Framing the subject that way recalls the debate over fees versus commissions that first began bubbling in the wider financial services community in the early 1990s. A similar dialogue appears to be forming in tactical philanthropy as it relates to individual clients.
Stannard-Stockton has already staked out his position. “Just as we advise on investments in a non-sales format, we advise on giving in the same way,” he says. “We get paid for managing assets, so we have no conflict in helping people decide between the various vehicles.”
You can read the full article here.
You can’t swing a dead muskrat in my Tri-State area without hitting a wealth manager hanging up their philanthropy shingle.
Everyone is getting in on it.
Last week my bait shop offered discounts on its strategic philanthropy consulting with each purchase of a tub of red wigglers.
I am sure that the field will dabble with ethics, conflicts of interest, and standards of practices about as well as the mainstream foundations do.
What concerns me is that the full service wealthateria or wealth-o-rama shop may perpetuate the lack of accountability, isolation, lack of transparency, and lack of diversity that befuddles its seasoned peers.
Despite the complaints of one of my colleagues who think most wealth manager philanthro-newbies are “greedy suits that are dumber than a box of hair”, I think the new voices in the conversation is a good thing.
You have *such* a way with words Tidy Sum.
It might seem like everyone’s getting in the game, but if your brought together every wealth manager in the country who was actually advising on philanthropy (and not just on how to reduce taxes via charitable giving), you’d still need a handful of your seasoned peers to field a baseball team.
For most wealth managers, philanthropy is just a pretty sounding hook to get in front of a client.