Permanent Giving for Endowment Purposes, our Expectations for the Future and Suggestions for Success
By Joseph C. Imberman
[Part 2; Part 1 is here]
Permanent giving for unrestricted purposes, or the holy grail of endowments for those who solicit has become an almost distant memory in our world. Jewish donors give on a completely unrestricted basis almost solely in their estate plans and when they have not had the benefit of counsel. The Annual campaign of the [federation] system has no more than 1-2% invested and permanently on the shelf. In addition there may be several billion dollars in pipeline commitments through our PACE, LOJE, and Create a Jewish Legacy (CJL) programs. CJL, our most recent and proudest achievement encourages legacy participation, but does little on a national basis to help the donor focus, preferring to encourage local donor centered philanthropy, another holy grail of our movement. Local communities have their own spin on how to speak to donors about these issues, having in many cases involved agencies and even synagogues in the planning and execution of the program (read about the Harold Grinspoon Foundation’s Life and Legacy program).
We know that legacy giving is the most important way to guarantee a future cash stream to our communities. Donor advised fund assets tend to expire with the first generation, (although hard data on this topic is anecdotal at best). What should be our expectation of endowment giving as we look at the next 5 to 10 year period?
- First, even if we do little the system’s resources in this area will likely continue to grow and produce 30 percent of the national campaign in the next 5-8 years. Every investment and philanthropy publication (see Giving USA 2014 as an excellent example, The Chronicle of Philanthropy etc.) predicts the continued growth of donor advised fund programs and touts them as a major generator of new philanthropy. Unfortunately, the system struggles to find the resources to install or upgrade endowment and donor advised fund technology to compete with the many financial firms dedicated to managing the substantial resources already on hand. The potential of a unified national approach to technology which both Jewish federations and community foundations could share is as yet an unrealized goal. Each community continues to do this on its own. And even though we lag the creation rate of Jewish private foundations substantially, donors still give for many reasons, including commitment to the mission and values of the movement, tax policy which still encourages philanthropy and the customer service provided by staff members in local communities.
- Second, communities with the capacity to focus and provide resources should strongly invest in personnel to grow endowed giving. Our market penetration is still very low in the permanent fund area, and while not every donor is willing to endow his/her annual campaign gift, donors understand the request which is being made of them. It is estimated that 65 billion is held by North American Jewish private foundations many of which make substantial gifts to the Annual campaign!
- Third, communities with more limited resources need to continue to integrate their fund development efforts in order to ensure that donors are exposed to more than one request and to project a more complex picture of resource development capacity. Staffs need to be trained to be able to focus beyond the annual campaign. Agency executives need to be pulled in to help. Federations and Jewish community foundations need to work as closely as possible to maximize local resources and receipts. In a period of 10 years, the donor base will have morphed significantly and our solicitation and education efforts will have to evolve accordingly. In addition and crucially, the annual campaign must have a more equal partner in the endowment department or the Jewish community foundation down the hall or in the next building.
- Fourth, Multi generational family philanthropy, which JFNA has attempted to trumpet with the help of special funding and resources from the Andrea and Charles Bronfman Philanthropies will become a way of life as we attempt to bring on board the next generation of our most generous families. Losing this opportunity could have a significant down side impact on our system. In many cases federations and community foundations are suffering from a surprising lack of information on who even encompasses the next generation in a given community.
- Fifth, investment management, the penultimate insider business of federation endowments faces a crucial decision. Will the lay and professional leaders responsible for this singularly important function see it in our interest to pool endowment resources much more effectively, thus lowering fees and increasing returns? Asset growth through prudent investment management could substantially increase the resources available to carry out our mission.
Accepting these challenges in the short term will almost assuredly take our invested assets from $14 to 20 billion and beyond in a 5 to 8 year period. The resources exist, in the area of governance, financial management and even development expertise to fulfill our potential and take the movement to its next level, perhaps even changing the focus from transactional to permanent philanthropy, if only we can summon the determination to invest accordingly!
So here are some suggestions from the playbook of the more sophisticated endowment developer. Do an audit and see whether you are taking the time or trouble to implement them in your campaign.
- Analyze or do an inventory of your major gifts and corresponding endowment realities line by line. Where are you? How do the numbers relate to future needs of the community?
- Based on the analysis and needs create objectives – what needs to be done to accomplish these objectives?
- Have the Board and Executive committee ratify the objectives and plan with a commensurate allocation of resources.
- Create plans for each major donor. Build an information base. Where are the donors in terms of your objectives? Who is going to visit with each?
- Visit each donor. Present the case but more importantly listen to their needs. What are their interests? How does family philanthropy and the interplay of the next generation’s needs and interests interact? How is each family giving on a technical basis – private foundation, donor advised fund, supporting foundation of a public charity?
- Revisit each donor’s plan. Based on their needs, interests, technical realities build an ask – endowing a gift to your annual campaign, endowing a gift with a contract between you, the private foundation or donor advised fund, endowing an agency or thematic gift based on interests, etc.
- Ask – based on results rework the plan, timing, or begin stewardship of the gift.
- Analyze results versus objectives at milestone points.
- Repeat over and over – securing the future needs of your community is a never ending project!
Until recently, Joseph C. Imberman was Associate Vice President, Planned Giving and Endowments at the Jewish Federations of North America (JFNA). He now manages a consulting practice for endowments and foundations and acts as Senior Advisor to the Montreal Jewish Federation (FCJA).For more information contact Joe Imberman at Joe.Imberman@gmail.com or JosephImberman.com.