Give it away now

(July 2005) Philanthropy is big in Canada. How big? According to a recently published survey by Imagine Canada and Johns Hopkins University, the non-profit and voluntary sector in this country accounts for 6.8% of GDP.

Much of this economic activity can be traced back to the charitable bequests of high-net-worth (HNW) Canadians. In fact, according to a report by theCanadian Centre for Philanthropy published in the year 2000 (the most recent year for which the organization tracked statistics), some 86% of Canadians with household incomes of $100,000 or more donated to a charity.

And that’s where you come in. As an advisor to the wealthy, charitable giving is an important part of your business — or it will be soon. As your clients age, their financial priorities will shift from wealth building to wealth preservation, and then to wealth transfer. They will look to you to provide them with expert advice about how best to structure their charitable bequests. Becoming an expert in structuring large charitable gifts — or adding such an expert to your team — makes good business sense.

But if you want to serve HNW clients well (and build a sustainable competitive advantage), you need to offer more than technical knowledge: you need to offer guidance and wisdom. In the context of charitable giving, you need to offer advice, perspective and insight that will enable your clients to discover and understand what they really want to accomplish through their charitable gifts. To do that, you need to take your HNW clients through a charitable giving process.

STEP 1: DETERMINE CHARITABLE GOALS.

Typically, clients will come to you with vague ideas of “giving back,” or perhaps a feeling they should be helping out others. Your job will be to help them explore their motivations for giving, so you can match those motivations to an appropriate giving structure. The following questions will help:

• What kinds of gifts have you made in the past? Was the experience of giving as positive as it could be?
• Is there a specific organization or cause you would like to support? Or would you prefer to donate to a wide range of charities?
• At what level would you like to make an impact: local, national, or international?
• What kind of involvement are you looking for? Would you prefer to be recognized for the gift? Or is an anonymous donation what you want?

STEP 2:ARTICULATE GIVING VALUES.

Just as a corporation articulates its mission statement in order to give it purpose, so too should your clients articulate their values to guide their charitable giving activities. Depending on the client, this statement might just be an informalchat with you, or it might be written down as a formal declaration. Whatever form it takes, it should cover three main areas:

• Core vision: A brief summary (two or three sentences) of the principles and values that have led the client to make charitable bequests.
• Area of support: A description of the types of causes and/or organizations the client would like to support.
• Giving criteria: A list of important factors that the client willconsider when deciding which organizations to donate to.

STEP 3: SCREEN CHARITIES AND CAUSES.

Once you have a statement of giving values in hand, you can help the client screen potential charities. Some clients will come to you with some names of organizations they’re interested in helping. That’s fine, but you’ll want to make sure the client performs due diligence and screens any charities for the following criteria:

• Purpose: The charitable goals of the organization should ideally be focused and clearly articulated.
• Method: The best organizations have a strategic plan for accomplishing their goals in a reasonable time frame.
• Leadership: It’s a good sign when board members are active in the cause and passionate about what they’re doing.
• Financials: How does the organization attract donations? What portion of those donations is directed to actual programs, and what portion to operating expenses?

These elements should help to create a short list of charities. After that, it might be a good idea to contact the organization and arrange face-to-face meetings with board members, staff, or even those who have been helped by the charity — this is particularly important when the intended gift is large.

STEP 4: CONSIDER THE END USE OF THE GIFT.

The final step in the process is to determine where the money will be put to use. In my experience, most HNW clients will want to have some say in where the organization spends the donation, particularly if the intended bequest is a large one. Consider the following options:

• Operating expenses: The daily expenses of running a charity, such as rent, utilities, office supplies, etc.
• Program support: Donation can support or improve an existing charitable service.
• Capital campaigns: The bequest can help to build new facilities or expand existing ones. Significant donors are often recognized formally through naming programs.
• “Leadership gifts”: Large donations intended to reward an organization for its accomplishments and motivate other private and corporate donors to give.

The point of this process? To become a partner in your clients’ charitable work. By making the giving process easier and helping clients achieve their charitable goals, you’re not only working for your client, you’re working for your community too. At the end of the day, that’s the best kind of work there is.

Thane Stenner, CIM, FCSI, is a first vice-president and investment advisor with the T. Stenner Group of CIBC Wood Gundy. The views of the author do not necessarily reflect those of CIBC World Markets Inc. This article is for information only. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of Canadian Imperial Bank of Commerce and member CIPF.

thane.stenner@cibc.ca www.thestennergroup.ca

(07/07/05)