Charitable giving is trending: According to the Blackbaud Institute, overall charitable giving in the United States increased by 2.0% in 2020. In this episode of The Agent of Wealth Podcast, Marc Bautis invites Kris Putnam-Walkerly, a philanthropic advisor, to share her knowledge and experience on charitable giving. She discusses how to transform your giving to catapult your impact.
In this episode, you will learn:
- Reasons for the growth of charitable giving in 2020.
- How to create positive change through charitable giving.
- The differences between various giving vehicles, including donor advised funds and private foundations.
- Balancing charitable interests with action for the most effective results.
- Expectations for the future of charitable giving.
Resources:
Bautis Financial: (862) 205-5000 | Kris Putnam-Walkerly: [email protected] | Delusional Altruism: Why Philanthropists Fail To Achieve Change and What They Can Do To Transform Giving
On today’s show, I brought on a special guest, Kris Putnam-Walkerly. Kris is a trusted advisor to the world’s leading philanthropists. For over 20 years, ultra-high net worth donors of foundations and Fortune 500 companies, celebrity activists and wealth advisors, have sought her advice to transform their giving and catapult their impact. She’s the founder of Putnam Consultant Group and the recent author of Delusional Altruism: Why Philanthropists Fail To Achieve Change and What They Can Do To Transform Giving. Kris, welcome to the show.
I’m looking forward to this topic for a couple of reasons. One of them is when I first meet with someone, I go over what I call the advice value stack. For a financial advisor that has on the bottom managing the money or talking about whether they have enough insurance. But what I try to do is get them up this stack to the next level up, where we talk about their financial goals and what they’re trying to do to put their kids through college or trying to retire.
But then we go up another level and it’s what do they need to do so they have peace of mind or so that they feel comfortable with their financial plan, but getting to the pinnacle on it is someone trying to get to leaving a legacy or being philanthropic, or what really all this financial planning, all this money is for, so I’m excited to talk about it.
Then the other thing, we’re in the middle of tax season and charitable giving is one of the few tax deductions where income limits don’t come into play, so a lot of people are thinking about the topic. How did you get into the charitable and the philanthropic space?
That’s a really interesting question. I’m not entirely sure what motivated me, and in fact I’ll tell you a very funny story. When I was in college (late 1980s), I became very active in political issues, and I went to Washington, DC for a march to support human rights in Central America. These were the days before cell phones, and I got caught up in a civil disobedience that was being organized by celebrities. I got arrested, unexpectedly, for civil disobedience.
The police had us all (the arrested) go on a bus and the bus driver said, “Hey, take the first available seat.” So I sat down, looked to my right, and who was I sitting next to but Ed Asner, the actor, and he asked me the same question. He said, “How did you get involved in this,” and I didn’t actually have a good answer. I still don’t.
It was a calling. My focus has always been on the nonprofit sector and on supporting humanity really in various forms. I ended up getting a masters in social work, thinking that I was going to manage and run non-profit social service agencies. But, I took some classes in evaluation in grad school and learned the importance of evaluating the impact of non-profits so that you can improve the work that’s being done. Then I went to work at Stanford University and was evaluating youth and gang violence prevention programs in California that were funded entirely by the California Wellness Foundation. That really was my first entrance into philanthropy.
If you’re a philanthropist you have access to wealth, right? But that’s just the beginning — you need smarts to go along with it. If you bring in the right experts, look at best practices and see what’s working, you can create a lot of positive change in the world.
So I decided to go work at a foundation — The David and Lucile Patrick Foundation, which is a family foundation of Dave Patrick. At the time, it was the largest foundation in the United States, and maybe even one of the largest in the world. This is before the Gates Foundation.
That was a great opportunity for me. From there, I started consulting first on the side, and then decided I not only like philanthropy, but I like consulting, and that began my career. I’ve been advising and consulting to philanthropist foundations and Fortune 500 companies on their charitable giving and philanthropies for the past 20 years.
Trends in Charitable Giving
We’re definitely seeing a big uptick in charitable giving. Fidelity Charitable and Schwab Charitable released a recent report that said donors gave record amounts of money to support non-profits in 2020, up 30% from the previous year. I’m sure the pandemic has a lot to do with that spurred that on, but I also think it’s a trend that will likely continue. Do you see that on your side as well?
Absolutely, and absolutely I think the pandemic spurred a lot of that on. Both Schwab Charitable and Fidelity Charitable saw that growth in their donor advised funds, which for listeners that may not be familiar with that term, is an alternative to starting a foundation.
Donor advised funds are handy if you don’t have millions of dollars but you have $5,000, for example. You can essentially create a charitable checking account called a donor advised fund, and organizations like a local community foundation or a Fidelity Charitable manage it — handling all transactions. But you, as a donor, decide which causes you want to support, and can use that account to fund those nonprofits.
In the past several years, there’s been a lot of growth in donor advised funds. And then certainly I think it was a great opportunity to respond to crises, not just the pandemic, but racial injustice and other crises that have occurred in 2020. Certainly there’s always natural disasters — such as the wildfires on the West Coast — and hurricanes and floods. So there’s been tremendous growth in giving and an increasing number in the kind of vehicles and ways to give.
I received a question on the donor advised fund recently, where someone asked, “When giving, what are the differences?”, or why should they consider a donor advised fund, versus setting up a foundation, versus just writing a check from their checkbook. Are there different reasons for taking each of those paths?
What I advise my clients to do first, because that’s a common question, is to focus on the what before the how — meaning to spend some time with yourself as an individual or a company to figure out what are the issues that you care about, what kind of impact do you want to have in the community and what kind of philanthropic family do we want to be. Essentially, to create your strategy or “giving plan.” Ask yourself what change you want to see in the world, and only after that is determined, focus on what I call the how — how do we accomplish that?
The ‘how’ includes the kind of vehicle. Is it a foundation? Is it a donor advised fund? Or is it writing checks or issuing payments from your bank account? Here are a couple things to think about:
You can start a foundation, but that requires creating a non-profit 501(C)3 organization. Do you as a donor want to start an organization? That involves other legal issues, like taxes. You have to manage that — and it’s not insignificant.
So the advantage of a donor advised fund is that it’s less complex, and by definition there’s an organization hosting it, so they’re handling the reporting, the compliance, the legal and tax issues for you and the issuing of payments.
But, it also depends on the size and what you’re trying to accomplish. My suggestion is if you have a lot of money, $5-$10 million plus to start with, the kind of change you want to make might involve partnering with other kinds of companies, foundations or donors, and it’s important for you to create your ‘brand’ as a funder. I don’t mean your logo, but who you are and who you stand for. You may need staff to carry that out and execute your philanthropy goals. In this case, a foundation could be the right approach.
Donor Advised Fund vs Private Foundation
McKenzie Scott, the ex-wife of Jeff Bezos and the richest woman in the country, donated over $4 billion last year without a foundation or an organization behind it issuing payments. So there are all kinds of options and it really depends, again, on what you’re trying to accomplish.
I know you mentioned the complexity involved in creating a foundation. Are there any of those three structures that are more nimble than the others? For example, let’s say if someone wanted to do something quickly, is it somewhat easy to set up a donor advised fund for example, or is that something that takes time? I imagine the foundation, being the most complex, probably takes the most time to set up?
In terms of setting it up, absolutely. I would imagine that you can get a donor advised fund set up with a community foundation or a large organization like Schwab Charitable or Fidelity within days. Quite frankly, the fastest would be mailing a check — although these days, mailing a check might be the longest by the time the mail arrives.
Nowadays, yeah. So if someone wanted to build their brand, partnering with other organizations, could they still do that through a donor advised fund?
Absolutely. Building a brand really depends on how much you, as the donor, are present. It depends on how you show up, partner and communicate. Being proactive about how you’re going to be involved in the issues you care about and practically reaching out, finding other donors, companies and foundations that are sponsoring that same issue or cause, and finding ways that you could collaborate or co-fund a project/issue.
Also, community foundations, which are located in every community in the US and around the world, are a great vehicle for connecting to other like-minded, local individuals. A community foundation is a non-profit that raises money from donors and then gives it away to the non-profits and causes in that community. The staff of these foundations tend to have a really strong knowledge of issues and the kind of needs in the local community and which organizations are worthy of support.
How to Balance Charitable Interests With Action
You mentioned the first step is trying to figure out what change you’re trying to make. After that step is complete — which I’m sure is not that easy of a thing to do — do you then, as a consultant, step in to help someone implement a plan in terms of structure?
It depends on the person and where they are at. For example, I’m working with you, Marc, and you are super clear about a cause or issue that you care about. If that’s the case, then we take it from there. But you might not be clear.
Like a lot of people, I care about a lot of different causes; mental health, substance abuse treatment, early childhood education — you name it. So you could have a lot of causes running wild in your head. In the book, Delusional Altruism, I write about this common challenge of feeling overwhelmed. Part of the reason for that feeling is that there are so many needs and causes to support that it can be difficult to narrow down. Additionally, what’s most important to you can differ from others involved, like a spouse or children.
So first it’s starting with the donor and identifying their values and interests, then helping them narrow that down, and finally potentially engaging other family members into the process.
At what point does time and money constraints come into play, in terms of narrowing down? At what point do people say, “Okay, we’re just going to focus on one,” or two, or three? Or is it possible to focus on 10-to-15 different issues?
Well, anything is possible! But, I tend to agree with you. There is a value to go in deep on one, two or three causes for a variety of reasons. One is, as a donor, you’ll want to learn about the issue — building relationships with the non-profits to understand their needs and where you can then make the greatest impact. If you double down on a particular issue, then there’s more resources to help tackle that problem, and you’re certainly going to learn a lot more compared to picking 10.
Though your money could be divided among 10 different issues, it’s less money per cause, if you will. Then you, as the donor, could feel like a deer in the headlights in terms of trying to understand and learn about the different issues and organizations. So I think there’s a lot of value to really focus in on a couple.
For example, Marc, what’s an issue that you personally care about?
Financial literacy? Perfect. That’s a super important issue and within that umbrella term there is a lot to tackle, right? Financial literacy could begin in preschool or elementary school, where the focus may be on educating children on skills so that they grow up to be financially intelligent.
It could be working with adults who are experiencing challenges that they never learned early on. It also could be incorporating financial classes into high school curriculum so that no kid graduates without knowing how to balance a checkbook.
There are a lot of different angles to tackle in terms of age, target and strategy. Do you want to support a nonprofit after school program that’s helping kids, or do you want to advocate that the State of New Jersey incorporates financial literacy education into the curriculum of all public schools? Those are two different approaches. Both have value, but different strategies — and you’d work with different organizations.
So even when you pick one issue or cause there’s still some unpacking to do.
Do you see organizations that just want money, or do some allow participation? I’m sure that some donors are happy writing a check. But I think there’s also some that, in addition to the money, also want to participate by giving their time to the organization. How does someone go about finding which organizations fall under what category?
If you’re the donor that wants to roll up your sleeves and put in work, I would start with the issues and causes you care about, pick organizations you want to support, then reach out to them. Say that you’re starting a foundation (or donor advised fund) and you’re looking to build a relationship with nonprofits supporting financial literacy, or homelessness, or whatever it is. Find out how to get involved. Ask them, “Can we have a conversation about what you’re working on, what your priorities are for the year, and how we can help?” Then listen for a response.
If there’s no response, or they simply send you a link to donate, that tells you that they are not willing to have that conversation. But, if they are willing to talk to you, then you can have simply a conversation.
I think what’s important for donors to recognize is that you bring a lot more than money — you bring knowledge, which could be knowledge of the community, local policy makers, or movers and shakers that can open doors.
You may have expertise — like you may be an accountant or someone who has scaled a business — so you know about growth. All of which is expertise that can be of value. And of course, nonprofits are always looking for volunteers and board members.
When we all are meeting in person again, you might have a home or a large conference room in your office that you could offer up to a non-profit, to hold an event or have their strategic planning sessions. You know what I mean? There’s all kinds of ways that you can give and think about your whole self and bringing your whole self to the conversation.
The Culture of Scarcity in Nonprofit Giving
Okay. I know we’ve mentioned your book and that one of the frequent challenges you see people have is feeling overwhelmed. What are some of the challenges that people have after they’ve made a commitment to giving, when they’re taking the step to actually getting going?
There’s quite a few. My book title, Delusional Altruism, doesn’t mean that donors are crazy. It means I believe donors are genuine in their altruism and really want to make a difference, but are getting in their own way — preventing themselves from having the impact that they seek.
It happens in a lot of ways. Feeling overwhelmed is one of them. Another is having a scarcity mindset.
People find this surprising, because many don’t equate great wealth with scarcity, but I think this is a hugely pervasive problem in philanthropy. It’s really this misguided belief that by maintaining a spartan operation somehow you’re delivering greater value to the community or to the issue.
Where this really commonly manifests is a belief that non-profit overhead is bad, and you should only give to organizations where 99 cents of every dollar goes to the community and only one cent goes to “overhead.” But if you think about it, just like running a business, you need to invest in yourself in order to grow, be successful and have quality.
If you are really into a cause/believe strongly in a non-profit and you know that they’re doing really good work, then wouldn’t you want them to have top talent? And wouldn’t you want them to retain that talent? Don’t you want them to have great financial management systems, the ability to raise funds, a good board of directors, the ability to evaluate their effectiveness and make course corrections and improvements, the ability to have invested in some technology so that they could? You know, just in case there was a global pandemic they could easily work from home?
Of course you do. You want them to be strong, because the stronger a nonprofit or a business is, the more likely they are to succeed and achieve their goals. But too often we recognize that for business. We recognize the importance of investing in talent acquisition, talent retention, research and development, investing in technological upgrades, but when it comes to nonprofits we kind of throw all that out the window without thinking about it. We expect them to get by on a shoestring.
Poorly paid staff, over-reliance on volunteers, like ineffective systems. But why, right? Because how is that going to help increase financial literacy? How is that going to help tackle issues to help increase substance abuse treatment in their community? It’s not. So I think we really need to invest in what it actually takes for the nonprofit to achieve its mission, and upgrading your financial management system requires some investment. Conducting an evaluation requires it to hire the evaluator.
So I think it’s important to support the capacity of nonprofits and build those trusting relationships with the executive directors, so that you can resource them to do the work that they need to do. Of course, they should be accountable to delivering on their mission and to achieving the results that they’re setting out to do, but I think it’s better to support them to be able to do that effectively than to hamstring them by forcing them to chase money.
That’s one, the scarcity mindset. And the scarcity mindset applies to donors themselves. I think to have the greatest impact as a philanthropist, as a donor — whether you’re giving away $1,000 or $100,000 — is to invest in yourself. You need to invest in your own learning, taking the time to understand your community, the issues, the nonprofits, and reflecting on your experience as a donor — such as what you think is working well or not well.
It doesn’t require a lot of money to do this. I don’t mean legitimately investing in yourself, or taking your family to the Four Seasons in Maui — which would be lovely. I just mean taking the time to have a family meeting, or perhaps hiring a facilitator to help you with the process. Also, think big. Maybe you only have $10,000 to give, but if you partner with other funders in the community you can leverage that and create $100,000 to have a greater impact.
I really advise financial wealth advisors and family offices estate planning attorneys to think about how you can engage the entire family in philanthropy. It’s a great way to build relationships across generations, which is important, and it’s a great way to identify shared values and a shared vision.
Yes, it can strengthen the family too. It’s something that everyone is doing together. There’s buy in and everyone has input. Not that everybody has to agree on the same thing, but have those conversations.
Too often, advisors wait until their client is elderly — when they’re doing estate planning — and you’ve missed an opportunity at that point to: A) Help your client give back during their lifetime, and B) Engage the younger generations in the elder’s philanthropic vision, understanding why they are being charitable and how they can participate.
We were talking earlier about business owners being one group of people I work with. Do you see business owners not just implementing a charitable giving strategy for the company, but also implementing a matching strategy, where they’ll try to promote charitable giving down to the employees by offering a matching component?
Absolutely, and this is for a small and large business. One of my clients is the J.M. Smucker Company, the maker of jams and jellies. They have been a very charitable family-owned company for generations, and recently refreshed their company’s purpose to align their giving and corporate purpose — this includes getting clarity on the issues and causes that they as a company care about, and then identifying ways to engage employees. Part of that is the matching gifts program, another part is volunteering and supporting volunteer efforts, while another part was helping employees during COVID.
Yes, matched-giving is a great way. It is a policy or a plan where if your employee donates to a cause, you as a company will match that donation up to a certain dollar amount. It’s a great way to encourage your employees to give back.
Whether it’s a business, company, family office or a family, when you engage with someone, do you come in and help them execute their vision? Is that what the typical engagement looks like?
Yes, I help them create and implement their vision — this happens in a variety of ways.
Many of my clients retain me as a trusted advisor, and I’m on-call, all the time, available for three-to-six months or a year. This is truly unrestricted access to me, to be their sounding board for discussions about their charitable giving.
Others bring me on for what I call a VIP jumpstart day, which is a full day together — either in Cleveland or virtually, via Zoom. That’s an opportunity where we first, in advance, talk about their goals and what they’re trying to accomplish, and then I can create an agenda where we can help them accomplish those goals within a six-hour period.
Right now, I’m working with a client whose foundation has been around for a while and they want to rethink the next decade. I’m helping them do that, while also creating their plan for the next year.
I’m working with another funder who has a specific interest in supporting building the capacity of nonprofits and wants me to help them think through how they could support that effort. That’s more of a one-shot together to really jump-start their thinking and planning.
Then I do a lot of strategy development, like helping a family create a strategic plan for their foundation. I was talking to one gentleman this morning about helping him start a foundation. But, again, it’s all about answering the questions: What are you trying to accomplish? What’s the best way to accomplish it? And then on the back end supporting that implementation, which often is a matter of helping people identify their top priorities.
Usually when you create your strategy it feels like there’s a million things to focus on, but you can’t. I ask them for the three most important things to focus on right now. Once I help them get clarity, I then hold them accountable to implementation.
Well, we’re just about out of time. Kris, I’d like to thank you for being on the show. You provided some really great insight into the world of charitable giving. How best can someone reach out to you or find more information about you and your services?
I want to share one free resource that I think will be of great interest to your listeners. It’s called Eight Things Every Philanthropist Can Do To Change The World Even When The World Keeps Changing. It’s a free guide. To get it, text “Plan2021” to the number 411321.
It’s a great resource of eight steps to create a plan — whether that’s your giving plan, strategic plan, wedding planning, etc. It’s important, especially these days, when it feels like the world and the conditions around us keep changing. Many times, it can feel hard to plan ahead because you think ‘What’s the point? Things are going to change again.’ But that’s true — they’re always going to change. This is a practical guide to figuring out how to plan ahead anyway, helping you navigate the unknown with confidence.
That resource links directly to my website. And then of course the book, Delusional Altruism, is available on Amazon, Barnes & Noble and other book retailers.
Perfect. I’m looking forward to downloading the guide myself, because there’s a lot of information out there on creating a retirement plan or creating a plan to pay for your child’s education, but there’s not that much on how to create a charitable giving plan. I think that will be a welcome read for our listeners.
The Expected Family Contribution (EFC) for Financial Aid Eligibility