Weaving Philanthropy Into Your Practice as a Trusted Advisor Trends, Tools, and Takeaways You Can...

Weaving Philanthropy Into Your Practice as a Trusted Advisor

Trends, Tools, and Takeaways You Can Use TodayRuss Shaw, Philanthropic Specialist, Wells Fargo Private Bank, Philanthropic [email protected]

mailto:[email protected]

2

Helene Whitlock Alley and her husband, Reuben E. Alley Jr.

“Fire Victim Leaves Millions”

Washington Post, February 7, 2008 $7.3 million bequest gift to

Juvenile Diabetes Research Foundation (largest bequest in organization’s history).

“The bequest’s size stunned the foundation, which had known Alley as a dedicated “hundred-dollar donor,” said Alan Berkowitz, the group’s national director of planned giving. ‘I was shocked, shocked,’ Berkowitz said. ‘We had no idea what her wealth was.’”

Reason: her brother had Type 1 diabetes. His battle with diabetes was “heart rending, frightening, and inspiring.”

3

“Big Donation Saved Bit by Bit”

Grand Junction, ColoradoThe Daily Sentinel, February 10, 2008

Lena Sammons Read died at the age of 96 on Feb. 19, 2007, preceded in death by her husband Clarence.

“She lived very frugally in a small trailer in Crawford, about 12 by 5 feet, which she and her husband bought,” [the estate executor] said. “She lived there for 40 years or more, close to the school, and most of the time she walked.”

She left $565,000 in scholarships to help Crawford students pay for higher education for the next 50 years.

Also left bequests for Crawford’s ambulance service, library, fire department, Methodist church, and cemetery district.

Crawford, Colorado. Delta County.

Population 366 in 2000 census.

4

Multiple Studies on Philanthropic Behavior

1. Planned Giving in the United States 2001. NCPG / NFO Research, Inc. (Partnership for Philanthropic Planning)

2. Bank of America High Net Worth Philanthropy Studies - 2006, 2008, 2010, and 2012 (The Center on Philanthropy at Indiana University)

3. Bequest Donors: Demographics and Motivations of Potential and Actual Donors. Campbell & Company / The Center on Philanthropy at Indiana University, 2007

4. Iceberg Philanthropy, Green / McDonald / Van Herpt. 2007 (Direct Mail Donors)

5. The Stelter Company (donors aged 40+)• Discovering the Secret Giver, 2008 • What Makes Them Give?, 2012

6. The 2011 Study of High Net Worth Women’s Philanthropy and The Impact of Women’s Giving Networks, The Center on Philanthropy at Indiana University, 2011

7. The U.S. Trust Study of The Philanthropic Conversation, 2013

8. Donor Advised Fund Report, National Philanthropic Trust, 2013

9. Giving USA 2014 – Giving USA Foundation, June 17, 2014

5

HNW Households Giving to Charity

2012 Bank of America Study of High Net Worth Philanthropy, The Center on Philanthropy at Indiana University, November 2012.

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Giving as a % of HNW Household Income


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Benefits of Offering a Philanthropy Service

http://www.bertelsmann-stiftung.de/cps/rde/xbcr/SID-44B2CEE6-4DBE4048/bst/xcms_bst_dms_27033_27034_2.pdf

Source: The role of wealth advisors in offering philanthropy services to high-net-worth clients. Scorpio Partnership, 2008

http://www.bertelsmann-stiftung.de/cps/rde/xbcr/SID-44B2CEE6-4DBE4048/bst/xcms_bst_dms_27033_27034_2.pdf

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The Role of Advisors


Where are individuals going for advice on giving?

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Intergenerational Transfer of Wealth

• 1999 Estimate: $41 Trillion, 1998 – 2052• ~$6 Trillion in charitable bequests

• 2014 Estimate: $59 Trillion, 2007 – 2061 $6.3 Trillion in charitable bequests$20.6 Trillion in lifetime giving$26.9 Trillion (in 2007 dollars)

Source: John Havens / Paul Schervish: Boston College:• “Millionaires and the Millennium: New Estimates of the Forthcoming Wealth Transfer and the Prospects

for a Golden Age of Philanthropy,” 1999• “Why the $41 Trillion Wealth Transfer Estimate is Still Valid: A Review of Challenges and Questions,”

2003• “A Golden Age of Philanthropy Still Beckons: National Wealth Transfer and Potential for Philanthropy,”

2014

The Role of Advisors

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The Planning Horizon

Why?

How?

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Gift Planning Strategies / Vehicles / Assets

Vehicles: Donor Advised Funds Supporting Organizations Private Operating Foundations Private Non-Operating Foundations

Assets: Cash Marketable Securities Life Insurance Closely-held Securities Real Estate Tangible Personal Property Unusual assets Retirement Assets

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Gift Planning Strategies

Bequests

Gifts by Beneficiary Designation Retirement Accounts Life Insurance Other Financial Accounts

Life Income Gifts Charitable Gift Annuities Pooled Income Funds Charitable Remainder Trusts Retained Life Estates

Charitable Lead Trusts

Conservation Easements

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IRA Charitable Rollover

Pension Protection Act of 2006 allowed for qualified charitable rollover Expired in 2009, made retroactive in 2011 by the Tax Relief,

Unemployment Insurance Reauthorization, and Job Creation Act of 2010, then by the American Taxpayer Relief Act of 2012 through 12/31/13

Donors are permitted to satisfy their required minimum distribution of an IRA plan by having the plan administrator make a QCD (qualified charitable distribution)

Qualified Charitable Distribution Donor must be at least age 70 ½ Plan must be a Traditional IRA or Roth IRA Distribution must be $100k or less and made directly to public

charity Gift must be made to a public charity (not private foundations, donor

advised funds) The donor cannot receive a benefit in exchange for the gift (lifetime

split interest gifts will not qualify)

NOT YET EXTENDED TO 2014

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1. What percentage of people have created

a planned gift?

Percentage of respondents who have created a planned gift:Campbell, 2007: ~8%PPP, 2001: ~11%Iceberg (Direct Mail), 2007: ~17%Stelter, 2012: 21% to 27%BOA (HNW), 2012: 43%

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2. What percentage of people would consider

leaving a planned gift?

Percentage of respondents who would consider leaving a planned gift:

Iceberg (Direct Mail), 2007: ~18%Campbell, 2007: ~31%Stelter, 2012 10% to 40%

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3. Most Planned Gifts are Bequests and

Beneficiary Designations

TRUE

TRUE or FALSE?

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Bequest used as Vehicle: PPP (survey of donors), 2001: ~80%Iceberg (survey of nonprofits), 2007: 90% to 100%2012 Stelter Donor Insight Report: ~50%

Bank of America Studies of High Net-Worth Philanthropy:

Vehicles used by High Net-Worth Households:2008 2010 2012

Bequest 55.9% 46.5% 43.0%Donor-Advised Fund 20.6% 17.5% 17.1%CRT / CLT 17.3% 15.4%* 15.5%*Foundation 13.9% 12.0% 9.0%Charitable Gift Annuity 8.4% * *

*Note: In the 2010 & 2012 studies, CGAs were included with CRTs / CLTs

TRUE: Bequests & Beneficiary Designations

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Giving Vehicle Use by HNW Households


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Donor Advised Funds are Popular!

2013 Donor-Advised Fund Report, National Philanthropic Trust

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Charitable Vehicles Recent Usage

2013 Donor-Advised Fund Report, National Philanthropic Trust

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4. Most people tell the charity about

their planned gift.

FALSE

TRUE or FALSE?

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Percentage who have informed charity: Iceberg (Direct Mail), 2007: ~8%PPP, 2001: ~33%Stelter (age 40+), 2008: ~36%Stelter (age 40+), 2012: ~40%

Current Planned Givers: ~49%Best Prospects: ~36%

Myth: Most People will Tell The Charity

2012 Stelter Donor Insight ReportDefinitions: • Current Planned Givers: “People who have a planned gift in place”• Best Prospects: “People who say they will definitely or probably make a

planned gift in the future”

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5. Most Planned Gifts are made by WEALTHY people

FALSE: At time of bequest commitment, 58% of bequest

donors had income of less than $75,000.

Partnership for Philanthropic Planning 2001 survey

TRUE or FALSE?

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Income at time of bequest commitment:

<$20k 11%$20-34.9 12%$35-49.9 13%$50-74.9 22%$75-99.9 14%$100-124.9 12%$125-149.9 5%$150-174.9 4%$175+ 8%

Median: $60.4 / Mean: $75.9

Myth: Only Wealthy People

58%


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6. Most Planned Gifts are made by OLDER people

FALSE


TRUE or FALSE?

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PPP, 2001 Survey:

Age at time of bequest commitment:18-34 3%35-44 14%45-54 26%55-64 22%65-74 20%75+ 15%Mean age: 58

Myth: Only Older People

Campbell & Company, 2007:

Has charity named in will:<30 0.7%30-40 8.9%40-50 28.1%50-60 21.9%60-70 20.6%70-80 11.0%80+ 8.9%

65% 60%

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Myth: Only Older People

Age 40-49 Age 50-59 Age 60-69 Age 70+

Current Planned Givers

21% 26% 27% 26%

Best Prospects 40% 32% 18% 10%

2012 Stelter Donor Insight ReportDefinitions: • Current Planned Givers: “People who have a planned gift in place”• Best Prospects: “People who say they will definitely or probably make a

planned gift in the future”

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7. A long history of giving is the hallmark

of a planned giver.

Not NecessarilyAmong people who have a PG in place, when gift was made:

Had been donating to nonprofit for 10+ years: 40%Had been donating to nonprofit for less than 5 years: 20%Had never donated to the charity: 21%

2012 Stelter Donor Insight Report

TRUE or FALSE?

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8. The Best indicator that a person is likely to leave a

planned gift is:

A. Their WEALTHB. Their AGEC. Their Church AttendanceD. Their LOYALTY to a causeE. Lack of Living ChildrenF. Their VEHICLE - SUV vs SedanG. FREQUENCY of Giving

Multiple Choice

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Loyalty

The best predictor of willingness to make a planned gift: long-term loyalty to

an institution or cause.

Over 90% of planned giving donors exhibit loyal patterns of giving.

Source: Samuel D. Caldwell, President, The Planned Giving Company. “The Old Gray Mare Ain’t What She Used to Be: The Revolution in Planned Giving Marketing.” 2007, 2008

© 2007 The Planned Giving Company LLC (used with permission)

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9. The PRIMARY way that donors hear about gift planning options

is through their legal or

financial advisor

FALSE

TRUE or FALSE?

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How Learned About

How Donors First Learned about Gift Options

The Charity through its published materials 34%A legal or financial advisor 21%Family or Friends 20%The Charity through an individual visit 11%Speaker at a financial planning seminar 8%General knowledge / self 7%Another donor 6%Other 6%Don’t Know / no answer 9%


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Initiating the Philanthropic Conversation

2013 The U.S. Trust Study of the Philanthropic Conversation: Understanding advisor approaches and client expectations, October 2013

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Focus of Philanthropic Conversations


% of Advisors who raise the philanthropic discussion:• From a Technical Perspective: 71%• From a Goals / Passions Perspective: 35%

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10. For most people, tax reduction is the most

important motivation for their giving.

False

TRUE or FALSE?

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Motivation

Desire to support the charity 97%The ultimate use of gift by the charity 82%Desire to reduce taxes 35%Long-range estate / planning issues 35%Create a lasting memorial for self or loved one 33%

FALSE: Desire to Reduce Taxes


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Trends in Philanthropy: Donor Motivation

2012 Bank of America Study of High Net Worth Philanthropy, The Center on Philanthropy at Indiana University, November 2012

38

Donor Motivation: Women and Men

The 2011 Study of High Net Worth Women’s Philanthropy and The Impact of Women’s Giving Networks, The Center on Philanthropy at Indiana University, December 2011, sponsored by Bank of America Merrill Lynch

* The difference between men and women was found to be statistically significant.

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What if the Tax Deduction was Eliminated?

2012 Bank of America Study of High Net Worth Philanthropy, The Center on Philanthropy at Indiana University, November 2012

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Tax Benefits as a Motivation for Giving


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Women and Philanthropy

Increasing visibility and involvement in philanthropy

Two key predictors of philanthropy:

Education

Income

Women give differently than men:

Different motivations

Higher expectations

Loyalty?

The 2011 Study of High Net Worth Women’s Philanthropy and the Impact of Women’s Giving Networks

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43% of the nation’s top wealth holders are women1

~40% of all businesses in the US are owned (50% or more) by Women2

Women live longer than men by ~5.2 years on average3

Women are responsible for 83% of all consumer purchases4

Charitable Decisions in High Net Worth households: Women are sole decision-maker or equal partner: ~87%5

Gender Differences in Philanthropy are Real6

Single women more likely to give than single men Married men and married women more likely to give than

single men

Sources: 1. IRS, Personal Wealth Tables, 20042. Center for Women’s Business Research3. Center for Philanthropy at Indiana University, Women’s Philanthropy Institute4. Diversity Best Practices & Business Women’s Network5. 2011 Study of High Net Worth Women’s Philanthropy6. Center for Philanthropy at Indiana University, Women’s Philanthropy Institute

Women & Philanthropy

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Women who give want to:

1. Create something in response to needs

2. Change society for the better; make a difference

3. Commit with shared vision

4. Connect, build relationships

5. Collaborate, build partnerships

6. Celebrate; have fun

7. Control their finances and their lives

8. Gain confidence in making decisions and influencing family and friends

9. Finding courage to take risks to transform society

Women’s Motivations for Giving

Sondra Shaw-Hardy and Martha Taylor, co-founders Women’s Philanthropy Institute, authors of The Transformative Power of Women’s Philanthropy.

SOURCE: Giving USA Foundation | GIVING USA 2014

Total giving, 1973-2013(in billions of dollars)

Giving USA 2014Data Slides

Use of the Giving USA 2014 content is subject to the Giving USA 2014

Service Agreement, which prohibits us from distributing the slides in

handouts.

Please download the free Giving USA 2014 report Highlights at

www.givingUSAreports.org/2014

http://www.givingusareports.org/2014


Total charitable giving graphed with the Standard and Poor's 500 Index, 1973-2013 (in billions of inflation-adjusted dollars, 2013 = $100)




handouts.





Giving by source: Percentage of the total in five-year spans, 1974-2013(in inflation-adjusted dollars, 2013 = $100)




handouts.





2013 contributions: $335.17 billion by type of recipient organization(in billions of dollars – all figures are rounded)




handouts.





Giving by type of recipient: Percentage of the total in five-year spans,

1974-2013* (adjusted for inflation, 2013 = $100, does not include

“unallocated”)




handouts.




49

Trends Among the Ultra HNW

• Bill & Melinda Gates Foundation ($40.2b as of 9/30/13)• Change in timeline for spending:

• From lifetimes plus 50 years• To lifetimes plus 20 years

• Warren Buffett:• $3.6 billion to NoVo Foundation, the Howard G. Buffett

Foundation, and the Sherwood Foundation • $13 billion to the Bill & Melinda Gates Foundation (2006-2013)

• The Giving Pledge: http://givingpledge.org • To commit at least 50% of their wealth during lifetime or in will• 127 signers as of 5/12/14• Not without critics

Spot a Trend?

http://givingpledge.org/

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More Trends in Philanthropy…

• #GivingTuesday• “Black Friday,” “Cyber Monday,” and…• December 2, 2014• Related “Day of Giving” events:

• Love UT Give UT Day: March 20, 2014 - ~$1,060,000• Give Local America: May 9, 2014 - $53M+

• Foundation Gifts to Higher Ed:• ~$9.2 billion, accounting for 29.5% of all gifts to higher ed• Between 2011 and 2012: increase of 5.5%

• Spending Rates:• Most foundations have maintained assets; minority spending

down• 2007 to 2009: 90% grant at least 5%

• 19% had payout rates of 10% or more• Foundation Source 2008-2011: small foundations: 11.6% toward grants &

other charitable expenses

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• Mega Bequests in 2012 (selected)• Fred Fields: $166 M to The Oregon Community Foundation

• Coe Manufacturing Company

• Guy David Gundlach: $140 M to Elkhart County Community Foundation

• Insurance company entrepreneur

• Sisters Jean & Nancy Davis, and husband / wife Junius & Zella Allen: $20M total to The Pittsburgh Foundation (unrestricted)

• Richard & Geri Brawerman: $20M to The Jewish Federation of Greater Los Angeles (scholarships)

• Dr. Louis and Violet Rubin: $15M to the Community Foundation of Northern Illinois (DAF to support local programs)

• Garthe & Grace Brown: $10M+ to The Oregon Community Foundation (DAF to support cardiac research at Oregon Health & Science University)

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• Impact Investing: Increasing• “Investments made into companies, organizations, and

funds with the intention to generate measurable social and environmental impact alongside a financial gain.” - J.P. Morgan & the Global Impact Investing Network (G.I.I.N.)

• 2012 Survey:• 99 Impact investors• $8 billion invested in 2012 for social impact• Plans: $9 billion in 2013

Community Foundation of Utah:• Mission Related Investments• Issue Funds• The Utah Fund Social Investors Forum• The Utah Social Enterprise Collaborative• The 2010 Social Innovation Challenge

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Generational Cohorts

AgeTraditionalists:

Depression (1912-1921) ~93 to 100+

World War II (1922-1927) ~86 to 93

Post War (1928-1945) ~69 to 85

New Philanthropists:

Older Boomer (1946-1954) ~59 to 68

Younger Boomer (1955-1964) ~50 to 58

Generation X (1965-1976) ~38 to 49

Millennials (1977-1984) ~30 to 37

The Philanthropic Planning Companion

- Brian M. Sagrestano and Robert E. Wahlers

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World War II Cohort (1922 – 1927)

• Patriotic

• Respectful

• Romantic

• Self-Reliant

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Post War Cohort (1928 – 1945)

•The American Dream

•Conformity

•Stability

•Family

•Self-fulfillment

57

Generation X (1965 – 1976)

• Free Agency

• Independence

• Friends over Family

• Cynical

• Street Smart

• Quality of Life

• Acceptance of Sex and Violence

58

Millennials (1977 – 1984)

• Hopeful

• Fearful

• Adaptable

• Tolerant

• Diversity

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Values Comparison by Cohort

World War II Post-War Generation X Millennials

Self-reliantSelf-

fulfillmentIndependent Adaptable

PatrioticThe

American Dream

Cynical about future

Hopeful about future

Romantic FamilyFriends over

FamilyChange is

good

Respectful ConformingFree agent / street smart

Tolerant

60

Additional Ideas

“Strategic Philanthropy” Definition?

Checkbook Philanthropy?

Having a “plan” for philanthropy (DAF, PF, CRT, etc.)?

Giving with focus?

Outcome evaluation, based on a theory of change?

“Transformational philanthropy” vs. “Incremental philanthropy?”

Buying vs Building

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Weaving Philanthropy Into Your Practice

Start the conversation!

Philanthropy is very important to most HNW / UHNW clients

Philanthropic values can bridge the generations

Focus on the “WHY?”

Values are everything

Discovery Starter Questions What nonprofits have you been supporting, and why?

What inspires you to make your charitable gifts?

Which of your recent gifts have given you the most satisfaction, and why?

Why?

How?

62

Weaving Philanthropy Into Your Practice

Women are changing the face of philanthropy

DAFs are increasingly popular

A “philanthropy practice” can be extremely rewarding!

Thank You

63

Disclosures

Wells Fargo Bank has agreed to provide the foregoing materials on a complimentary basis and not pursuant to or in conjunction with any new or existing agreement, account or relationship, including fiduciary relationships.

Wells Fargo Wealth Management provides products and services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries.

These materials may contain certain assumptions based on information provided by you to Wells Fargo. In preparing these materials, Wells Fargo has not conducted any independent verification of the accuracy or completeness of any information provided to it by you, or your agents and/or advisors, nor have we conducted any appraisal of any of your assets, whether held by Wells Fargo or other parties.

This information is provided for illustration and education purposes only. Wells Fargo & Company and its affiliates do not provide legal advice. Please consult your legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.

Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses.

The allocation mentioned here may be different from your individual allocation due to your unique individual circumstances, but is targeted to be in the allocation ranges for your objective. The asset allocation referenced in this material may fluctuate based on asset values, portfolio decisions, and account needs. The asset allocation suggestions referenced in this material do not take the place of a comprehensive financial analysis.

Insurance products are available through insurance subsidiaries of Wells Fargo & Company and underwritten by non-affiliated Insurance Companies. California Insurance License Number 26-007024. Not available in all states.

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