The Cross-Fertilization of Finance and Philanthropy

[We are pleased to introduce this series of six articles as a companion to the book by Steven L Meyers, Personalized Philanthropy: Crash the Fundraising Matrix and Make the Real Shift to Donor-Focused Giving. While that book was written primarily for gift officers and professional advisors, these articles are written to share with donors – hopefully to begin a new conversation about philanthropy with clients/donors who ardently wish to support their most treasured charities. The articles aim to introduce some of the basic concepts of Personalized Philanthropy, a powerful new and tested model for charitable planning which challenges conventional fundraising practices in bridging current and future giving so that donor impact and recognition may begin immediately and scale up over time.]

Give Spending RateThe Cross-Fertilization of Finance and Philanthropy

  • Could a donor be very sophisticated financially and still not know how to ask?
  • How will charitable spirit find a way?

A Scholarship Financed with Annual Gifts and Balloon Payments (Philanthropic Mortgage)

Doesn’t know how to ask – Naïve, curious, inquisitive, questioning, searching

Doesn’t know how to ask – Naïve or searching for the right gift at the right time? To characterize as naïve a person who is a sophisticated financial advisor and shrewd investor seems totally off base – until you learn the inside story.

Harold and his wife Diane have a very deep and powerful charitable impulse. Yet, with all of his financial sophistication, it had never occurred to Harold that he might apply a key part of his financial knowledge to philanthropy. However, once they had imagined an “endowment” program that is powered by a combination of current and future gifts (like a virtual endowment), they had less difficulty imagining variations on this theme.

Harold and Diane have children who will soon graduate from college. They can envision a time not long in the future when the funds that have been going toward tuition might go for something else, perhaps something philanthropic.

Harold is a successful businessperson and investment manager. He understands how money can work in different ways and was willing to try applying some proven financing approaches to advance his own philanthropy. His plan enabled him embrace an innovative way to support a student, consistent with his current and future prospects.

The funds for an outright scholarship will be coming on-stream when their children finish college. For the present, Harold and Diane are comfortable making annual gifts that could be used for the maintenance costs of a scholarship program (e.g., $7,500 each year for the first four years). Harold would equate this to a purchase or loan, just paying “interest” (really the annual maintenance) during the early years.

Then, in the later years, while continuing to maintain the program with annual gifts, they would be able to make larger payments to build equity in their program and to fully establish their scholarship program ($7,500 + $50,000 for the last three years). In Harold’s terms, from a financial perspective he would be making three balloon payments at the end of the term.

In any case, Harold and Diane were able to build a financial strategy that fit the terms of their lives. This form of gift, similar to what you might think of as a “philanthropic mortgage” meant their scholarship could begin immediately and that they would be recognized for the important support they were providing on a timely basis. After all, when you buy a home, you don’t have to wait until it’s fully paid for before you move in. You get a mortgage. Why not apply this familiar approach in order to build equity and begin the recognition and impact of your scholarship or other endowment immediately.

How We Count It

In this case, the organization’s financials would recognize a commitment to payments running over 7 years ($7,500 x7), including in the last 3 years balloon payments of $50,000. The total gift under the agreement would be $52,500 + $150,000 = $202,500.

For the four (or more) philanthropists in you

As your comfort level increases with the three game-changing personalized gift designs, which I think of as new applications for consolidating basic building blocks and charitable vehicles under a single umbrella or game plan, you can add great power to your charitable giving.

Working with your financial resources and charitable intent, along with these tools of personalized philanthropy, you, your advisor and gift officer can work in a true alliance together, without the push-pull impedance and seeming sales-force dynamic that much fundraising seems to engender.

This donor-driven process enables you to achieve important goals on your own terms, where the impact and recognition of your charitable support begins right now and grows in future years.

As the commentary states so well, as we all possess the four children within ourselves, perhaps we also possess all the four donors: we are in essence speaking to the wise, wicked, simple and unable to ask elements in all of us.

Coming next: part 6 – Three Pillars of Personalized Philanthropy