Issue 30: 2015

Philanthropy

Give, Monitor, Evaluate

Wealthy donors have the drive — and the tools — to keep a sharper eye on how their gifts are changing lives.

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Traditional philanthropy — sending a check every year, perhaps to the same charitable organization, with little or no further engagement — benefits millions of lives. But now, some wealthy donors are becoming more involved. They’re more selective about where and how they give, and are keeping a sharper eye on how their gifts affect people’s lives. Welcome to high impact philanthropy.

To be clear, focused giving is not new. “Throughout the history of philanthropy in America, donors have focused on specific issues and sought to create the greatest impact possible,” says Claire Costello, national philanthropic practice executive at U.S. Trust. “Yet over the last decade or so, we’ve seen a greater emphasis on measuring the impact of a gift, together with an increase in the kind of tools — technological and otherwise — that donors can use to measure that impact.”

Indeed, more than half of the respondents in the 2014 U.S. Trust® Study of High Net Worth Philanthropy say they “monitor or evaluate” the impact of their giving. They might do this by volunteering at nonprofit organizations they donate to, or by researching the organizations online, where information is readily available. (See “How Donors Monitor Their Charitable Giving,” below.)

Online, on the rise

Among the various factors helping to reshape philanthropy is — no surprise — the Internet.

Most nonprofits now have a website offering ways to donate. “They’re making giving incredibly easy,” says Costello, “and that’s reflected in the numbers.” Indeed, in 2014, while donations of all kinds rose just 3%, donations made through online portals rose 9%.1

Giving by the numbers

  • $358 billion: American charitable giving hit a record high in 2014.4
  • 98.4% of high-net-worth households that donated to charity in 2013, up from 95% in 2011.5
  • 53.4% of wealthy donors monitor the impact of their giving.6

Millennials, the first generation to come of age in the technology era, are part of this growth — more than three-quarters say they donate via a nonprofit’s website.2 What’s more, says Gillian Howell, managing director of philanthropic solutions at U.S. Trust, “with millennials in line to inherit an estimated $30 trillion to $60 trillion in the next few decades, and with some $6 trillion expected in charitable bequests, the use of technology in philanthropy will almost certainly rise.”3

In search of information

Researching an organization before you donate is an important strategic step, say Costello and Howell. “We’ve seen a growing expectation among donors, especially millennials, that they will have online access to all kinds of information about a nonprofit organization that can help inform their giving strategy and decisions,” Howell says. “So, in addition to a donation page, you should find an information page, with a detailed breakdown of support, revenue, expenses, net assets and more.”

 

Anyone wishing to dig a little deeper can visit third-party websites that report on programs, administration and fundraising of nonprofit organizations.

This kind of transparency is a clear benefit to donors — within reason. “Some wealthy donors have told us they simply don’t have time to take in the mass of data that’s available,” Howell says. “While that’s understandable, we would encourage them at the least to gather enough information to understand the issues an organization is addressing and feel comfortable donating to it.”

Finding your passion

If you want to make the world a better place, but aren’t sure where to begin, Howell has some advice. “Start with your values and beliefs,” she says. “They’re the guide stars that can direct the choices you make. The most satisfying philanthropy is inevitably guided by deeply held beliefs.”

Researching an organization before you donate is an important strategic step, say Costello and Howell.

If you’re not sure where your values align with giving, there’s no cause to worry. “Some people know exactly what they’re deeply concerned about and others don’t,” Costello says. “In our experience, that’s not unusual. In fact, figuring it out can be a rewarding process.” Howell agrees, adding, “The process of discovery takes its own time. For some it happens in a flash while for others it’s a slow realization.”

Wherever your values point, there’s almost certainly a charitable organization — with a website for knowledge gathering and donations — that suits your needs.

Donating time

In addition to giving money to a charity, you can also give your time.

Among the respondents to the 2015 U.S. Trust Insights on Wealth and Worth® survey, two-thirds say they engage in some form of volunteering. “Volunteering — whether running fundraisers, stuffing envelopes, serving on the board or any other activity that helps further the organization’s mission — is a wonderful way to engage yourself and your family in ways that align with your values,” Costello says. “It can also provide an opportunity to get up close and personal with the organization you’re partnering with, which can provide greater insight and ability to monitor the impact of your contributions.”

“Serving on a board brings certain responsibilities,” says Joseph Curtin, head of global portfolio solutions and institutional investments at U.S. Trust. “It’s important, therefore, that you understand the purpose and policies of the organization, including its finances.” In the case of a foundation, for example, the philanthropic mission must center on maintaining the ability to pay out funds to current beneficiaries, according to the founder’s wishes, while preserving enough funds to support payouts to future generations. In short, anyone in a fiduciary capacity should view investment risk in terms of accomplishing that mission or, he says, risk mission failure.

Have an impact

No matter where your values and passions lead — funding education, helping to clean up the environment or making positive changes in lives and communities — Howell and Costello say these few steps could help you become an effective donor or volunteer:

  • Define your values and choose an issue you’re passionate about.
  • Develop a strategy for how you will create positive impact in your defined areas.
  • Use the tools available to research the organization until you’re confident it’s the right one for you.
  • Make a donation — directly to a charity or via a donor advised fund, private foundation or other giving vehicle.
  • Consider volunteering at the organization.
  • Monitor how the charity makes use of the donations it receives.
  • Evaluate how effectively the organization meets its mission.

In short: Give, monitor, evaluate. And, if you’re pleased with the results, repeat.

For more information on charitable giving and giving vehicles, contact your U.S. Trust advisor.

Illustration by Artpartner-images/Getty Images

1 Network for Good Digital Giving Index 2014 Year in Review.

2 NextGen Donors, Respecting Legacy, Revolutionizing Philanthropy, 2013. (Included Gen X respondents.) (Latest available data.)

3 Transfer period from 2007 to 2061. John J. Havens and Paul G. Schervish, Social Welfare Research Institute (SWRI) at Boston College’s Center on Wealth and Philanthropy, 2014.

4 Giving USA, 2015.

5,6 2014 U.S. Trust® Study of High Net Worth Philanthropy.

IMPORTANT INFORMATION

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

The 2015 U.S. Trust Insights on Wealth and Worth® survey is based on a nationwide survey of 640 high-net-worth and ultra-high-net-worth adults with at least $3 million in investable assets, not including the value of their primary residence. Among respondents, 55 percent have between $3 million and $5 million in investable assets, 32 percent have between $5 million, and $10 million, and 13 percent have $10 million or more. The survey was conducted online by the independent research firm Phoenix Marketing International in January and February of 2015. Asset information was self-reported by the respondent. Verification for respondent qualification occurred at the panel company, using algorithms in place to ensure consistency of information provided, and was confirmed with questions from the survey itself. All data have been tested for statistical significance at the 95 percent confidence level.

Traditional philanthropy — sending a check every year, perhaps to the same charitable organization, with little or no further engagement — benefits millions of lives. But now, some wealthy donors are becoming more involved. They’re more selective about where and how they give, and are keeping a sharper eye on how their gifts affect people’s lives. Welcome to high impact philanthropy.

To be clear, focused giving is not new. “Throughout the history of philanthropy in America, donors have focused on specific issues and sought to create the greatest impact possible,” says Claire Costello, national philanthropic practice executive at U.S. Trust. “Yet over the last decade or so, we’ve seen a greater emphasis on measuring the impact of a gift, together with an increase in the kind of tools — technological and otherwise — that donors can use to measure that impact.”

Indeed, more than half of the respondents in the 2014 U.S. Trust® Study of High Net Worth Philanthropy say they “monitor or evaluate” the impact of their giving. They might do this by volunteering at nonprofit organizations they donate to, or by researching the organizations online, where information is readily available. (See “How Donors Monitor Their Charitable Giving,” below.)

Online, on the rise

Among the various factors helping to reshape philanthropy is — no surprise — the Internet.

Most nonprofits now have a website offering ways to donate. “They’re making giving incredibly easy,” says Costello, “and that’s reflected in the numbers.” Indeed, in 2014, while donations of all kinds rose just 3%, donations made through online portals rose 9%.1

Giving by the numbers

  • $358 billion: American charitable giving hit a record high in 2014.4
  • 98.4% of high-net-worth households that donated to charity in 2013, up from 95% in 2011.5
  • 53.4% of wealthy donors monitor the impact of their giving.6

Millennials, the first generation to come of age in the technology era, are part of this growth — more than three-quarters say they donate via a nonprofit’s website.2 What’s more, says Gillian Howell, managing director of philanthropic solutions at U.S. Trust, “with millennials in line to inherit an estimated $30 trillion to $60 trillion in the next few decades, and with some $6 trillion expected in charitable bequests, the use of technology in philanthropy will almost certainly rise.”3

In search of information

Researching an organization before you donate is an important strategic step, say Costello and Howell. “We’ve seen a growing expectation among donors, especially millennials, that they will have online access to all kinds of information about a nonprofit organization that can help inform their giving strategy and decisions,” Howell says. “So, in addition to a donation page, you should find an information page, with a detailed breakdown of support, revenue, expenses, net assets and more.”

 

Anyone wishing to dig a little deeper can visit third-party websites that report on programs, administration and fundraising of nonprofit organizations.

This kind of transparency is a clear benefit to donors — within reason. “Some wealthy donors have told us they simply don’t have time to take in the mass of data that’s available,” Howell says. “While that’s understandable, we would encourage them at the least to gather enough information to understand the issues an organization is addressing and feel comfortable donating to it.”

Finding your passion

If you want to make the world a better place, but aren’t sure where to begin, Howell has some advice. “Start with your values and beliefs,” she says. “They’re the guide stars that can direct the choices you make. The most satisfying philanthropy is inevitably guided by deeply held beliefs.”

Researching an organization before you donate is an important strategic step, say Costello and Howell.

If you’re not sure where your values align with giving, there’s no cause to worry. “Some people know exactly what they’re deeply concerned about and others don’t,” Costello says. “In our experience, that’s not unusual. In fact, figuring it out can be a rewarding process.” Howell agrees, adding, “The process of discovery takes its own time. For some it happens in a flash while for others it’s a slow realization.”

Wherever your values point, there’s almost certainly a charitable organization — with a website for knowledge gathering and donations — that suits your needs.

Donating time

In addition to giving money to a charity, you can also give your time.

Among the respondents to the 2015 U.S. Trust Insights on Wealth and Worth® survey, two-thirds say they engage in some form of volunteering. “Volunteering — whether running fundraisers, stuffing envelopes, serving on the board or any other activity that helps further the organization’s mission — is a wonderful way to engage yourself and your family in ways that align with your values,” Costello says. “It can also provide an opportunity to get up close and personal with the organization you’re partnering with, which can provide greater insight and ability to monitor the impact of your contributions.”

“Serving on a board brings certain responsibilities,” says Joseph Curtin, head of global portfolio solutions and institutional investments at U.S. Trust. “It’s important, therefore, that you understand the purpose and policies of the organization, including its finances.” In the case of a foundation, for example, the philanthropic mission must center on maintaining the ability to pay out funds to current beneficiaries, according to the founder’s wishes, while preserving enough funds to support payouts to future generations. In short, anyone in a fiduciary capacity should view investment risk in terms of accomplishing that mission or, he says, risk mission failure.

Have an impact

No matter where your values and passions lead — funding education, helping to clean up the environment or making positive changes in lives and communities — Howell and Costello say these few steps could help you become an effective donor or volunteer:

  • Define your values and choose an issue you’re passionate about.
  • Develop a strategy for how you will create positive impact in your defined areas.
  • Use the tools available to research the organization until you’re confident it’s the right one for you.
  • Make a donation — directly to a charity or via a donor advised fund, private foundation or other giving vehicle.
  • Consider volunteering at the organization.
  • Monitor how the charity makes use of the donations it receives.
  • Evaluate how effectively the organization meets its mission.

In short: Give, monitor, evaluate. And, if you’re pleased with the results, repeat.

For more information on charitable giving and giving vehicles, contact your U.S. Trust advisor.

Illustration by Artpartner-images/Getty Images

1 Network for Good Digital Giving Index 2014 Year in Review.

2 NextGen Donors, Respecting Legacy, Revolutionizing Philanthropy, 2013. (Included Gen X respondents.) (Latest available data.)

3 Transfer period from 2007 to 2061. John J. Havens and Paul G. Schervish, Social Welfare Research Institute (SWRI) at Boston College’s Center on Wealth and Philanthropy, 2014.

4 Giving USA, 2015.

5,6 2014 U.S. Trust® Study of High Net Worth Philanthropy.

IMPORTANT INFORMATION

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

The 2015 U.S. Trust Insights on Wealth and Worth® survey is based on a nationwide survey of 640 high-net-worth and ultra-high-net-worth adults with at least $3 million in investable assets, not including the value of their primary residence. Among respondents, 55 percent have between $3 million and $5 million in investable assets, 32 percent have between $5 million, and $10 million, and 13 percent have $10 million or more. The survey was conducted online by the independent research firm Phoenix Marketing International in January and February of 2015. Asset information was self-reported by the respondent. Verification for respondent qualification occurred at the panel company, using algorithms in place to ensure consistency of information provided, and was confirmed with questions from the survey itself. All data have been tested for statistical significance at the 95 percent confidence level.