In my full-time role at Covenant Family Wealth Advisors (www.covenant.ca) I have been advising a Christian couple with respect to their financial and estate planning. They are in the process of discerning how to give away the bulk of their estate, which would be over $100 million. This process highlighted both the importance of having a plan and being able to identify key giving principles.
THE IMPORTANCE OF HAVING A PLAN
Let’s start with the basics. This couple are the classic “millionaires next door:” hard-working, low-key, long-term oriented and not status-obsessed. They want to make a difference through being good stewards. They are not unique in their thinking or planning, although the total dollar value of their estate was quite large. The amount they wanted to allocate to charity was after they had made appropriate provisions for their family. At Covenant we help clients develop a comprehensive stewardship plan.
A lot of forward thinking and strategizing is required to develop and fulfil a personal philanthropy plan while at the same time truly living generously requires a degree of open-handedness and readiness to respond when an unexpected opportunity arises. Many donors suffer from the stress of reacting ton constant appeals from pastor, missionaries, charities and family members. There can be an onset of philanthropic paralysis. For those who have already determined the resources they have available for responding to requests, thy will be able to do so with confidence while continuing to fulfil pre-determined objectives. That’s the benefit of a philanthropic plan.
THE IMPORTANCE OF GIVING PRINCIPLES
I was struck, however, whenever I go through the process of devising a philanthropic plan that there is a gap between the mindset of donors and those of many NPOs. There is such a gap in the thinking between the mindset of so many faithful givers and the NPOs seeking funds that it is a chasm. There are many generous people who can’t seem to find worthy causes. Here’s some pointers on what ultra high net worth donors look for.
- Rewarding Excellence, Not Failure – Very few donors want to rescue something that’s not working, or an institution that is heavily in debt. It’s like financing past mistakes. As one donor put it, for an educational institution that is heavily in debt, perhaps it is past its due date. Ouch. Perhaps it should die and other institutions and initiatives, more in tune with the market, will rise—it’s part of the entrepreneurial life cycle. Successful Christian business people will vote with their wallet and, of course, it is not their job to “fix” what they might see as not working in a charity.
- Relationships – It’s still about relationships. Who do you know and trust? The reality is that giving follows relationships and these relationships are built on a foundation of credibility and mutual respect. The relationship and confidence grows over time. Too many institutions in need of funds don’t invest time in relationships and thus don’t get the support when they need it. So, when it comes to doing estate planning, these institutions are not front of mind.
- A viable business model – you can dress up a pig, but it’s still a pig. Take away the promotional material and lying underneath is a business model. For example, too many educational institutions don’t have a viable model. Perhaps it is not integrating online education or perhaps it is not being able to deliver an educational experience at a reasonable cost.
- Accountability - Are the NPOs transparent about what they are doing? Entrepreneurs want to understand what exactly is going on as all small decisions in the aggregate will impact the institution. So, small decisions are vitally important. Entrepreneurs and business owners want to know about outcomes. What’s wrong with that? If they give money, they want to understand the results to see if they are stewarding their money wisely. Too many NPOs offer vague and general platitudes, rather than specifics.
- Collaboration - I am continually struck by NPOs that wish to raise funds by basically having others finance their vision. Instead, of the opposite approach, which is to bring in stakeholders and co-create a visions which everyone can get behind.
THE BOTTOM LINE:
To give away $100 million effectively requires good stewardship: have a plan and identify core giving principles. At Covenant, we facilitate philanthropic planning that reflects the above principles and the conviction of high net worth Christian families across Canada.