By Elizabeth Harrin (London)
You would have thought that with all the belt tightening going on in this economy, people would be cutting back on their charitable endeavours. Not so. In fact, philanthropists are still turning to fund managers for advice and money management – and in increasing numbers. They might not have so much to give away, but they are certainly keen to work with fund managers specialising in philanthropy to make sure their money goes to the right places.
“We are on the cusp of change with philanthropic habits evolving against the backdrop of the significant global downturn,” says Gina Miller, founder and chair of SCM Philanthropy. SCM Philanthropy is a division of Spencer-Churchill Miller Private, a new boutique wealth management practice based in the UK.
“More and more ultra high net worth individuals we see are commenting on the lack of access, communications or follow up regarding the sometimes huge amounts they give,” she adds. “It is not about being publicly acknowledged, just a question of knowing their money is achieving good and making a difference. What we are aiming to do complements what we are doing on the investment side in terms of accountability, measurability, transparency and a low cost base that is fair.”
How to Approach Shifts in Donor Behaviour
Elizabeth Brown, Vice President of Philanthropic Services at the Marin Community Foundation, has also seen a shift in the way donors behave. “One positive consequence of the economic downturn is that an awareness of the problems that we face as a community and a country are more front and center, and there’s a great deal of both questioning and learning taking place on the part of our donors.”
As a result, donors are more aware of the pressing problems of the community. “This has caused them to reassess their philanthropic strategies,” Brown adds. “There are more strategic conversations about philanthropy right now.”
The Marin Community Foundation is one of the largest community foundations in the U.S. and is based – as you’d expect – in Marin County, California, one of the wealthiest counties in the nation. The Foundation has $1billion of assets under management and makes grant distributions of approximately $50 million a year. Brown is now seeing some small changes in where the money ends up. “While some have shifted their giving to more direct service organizations, such as food banks or homeless shelters, most donors have remained consistent with supporting the organizations that align with their personal philanthropic missions, including ones in the arts, education, and medical research,” she says.
The Marin Community Foundation isn’t the only philanthropic fund manager to see this change. Victoria Collins, Executive Vice President and Principal at First Foundation Advisors, has also noticed a shift in the way that donors are acting. “I think donors are being more strategic,” she says. “They are cutting back on donating to any cause that asks and supporting only those that they can really be involved in.”
Working around The Wealth Effect in Tough Financial Times
In addition to targeting causes more strategically, some donors are cutting back on the amounts they hand over to fund managers. Collins calls this ‘The Wealth Effect.’ “The Wealth Effect works positively when the markets and economy are up,” she says. “People feel richer and therefore more generous. When it’s down, a negative ‘Wealth Effect’ results – more anxiety, more uncertainty, more focus on personal financial resources first, on worthy causes second.”
Collins and her team of wealth management consultants provide investment advisory and financial planning services to high net worth families, trusts and businesses. But in her circles, like with Miller, it is not just about the money. “Donors are looking for non-profits that have sustainability as a mission,” Collins says. “Donors are more interested than ever in knowing where their dollar goes – what per cent to administration, what per cent to use and the results of their investment.”
Donors seem more and more concerned about making sure their cash is used to the best possible effect. Fund managers like Miller, Brown and Collins are tasked with making sure this happens. “No monies donated to us will be invested in SCM Private or any other investment vehicle but held in cash waiting to be granted,” says Miller. And given that the economy is going through a weak period, making sure that the donated funds are handled properly and not lost to the whims of the stock market takes careful work. “We are not willing to take any risks with our granting pot,” she adds.
Currently, the beneficiaries of foundations, grants and trusts need to shout even louder amidst the thousands of worthy causes crying out for investment. “When government or state funds are reduced, charities have to work even harder to apply for grants from foundations and private individuals,” explains Collins. “For example, Human Options supports women and children escaping from domestic violence. A cut in state funding across the board for all organizations like this means a cut in programs, staff and services unless other sources of income are found.”
So it’s good news for charitable endeavours that there are still donors gifting sums into the hands of responsible fund managers: donors who, by all accounts, are now more interested and more committed to the worthy causes they set out to help.