To understand where we are going, it’s always a good idea to look back at where we’ve been. This holds true for the ever-evolving world of philanthropy as well. In fact, now is a good time to reflect and plan for the shift in perspective that is taking place in the philanthropic sector. To accommodate these new emerging facets in philanthropy, new roles and opportunities are coming to fruition. But first a little history lesson, and yes, it all starts with money.
It’s been well over 100 years since we started giving tax exemptions to nonprofit organizations. Throughout these last 100 years, our societal thinking—based on the IRS codification of nonprofits as tax-exempt organizations—is made simple. Basically, there are two major types of organizations: the nonprofit 501(c)(3), which are tax-exempt, and the for-profit businesses, which pay taxes. Since the IRS codified and clearly defined the 501(c)(3) nonprofit, it has been an easy mindset for us to think in terms of two major silos—the nonprofits and the for-profits. Common to both is the role of money.
“With new innovations brought about by technology, donors have more opportunities to give in ways that are valuable to them.”
Let's look at the role of money in nonprofits. For nonprofits, survival has been based on endowments. They have concentrated on building endowments from which to generate interest and dividends to pay salaries and do their good work in society.
Where did the endowments come from?
Historically, nonprofits have built endowments from donors. Typically, they are established from legacy gifts left to the nonprofits from passionate individuals who care deeply about the cause they bequeathed their money to.
To better understand the flow of funding within nonprofits, we need to look more closely at those passionate individuals—the donors—and their giving hearts. How do they decide to give? Who are the "advisors" for the generous hearts?
Times are changing. With the Internet and new innovations brought about by technology, donors are becoming more educated, more informed, and have more opportunities to give smartly in a way that is important and valuable to them. It gives them a great sense of satisfaction to give and see the impact of their giving while they are still living. There are new ways to give and information on potential nonprofit beneficiaries is readily available.
With all this information at their fingertips, where do they go for clarification and guidance? Who will make sense of what could be an overwhelming web of possibilities?
The Source of Guidance
In reflecting on nonprofits, and more specifically on the donors who provide the funding for nonprofits, there are three key considerations for donors with their generous giving. These are:
- the donor’s motivation
- professional guidance - the expertise in giving
- soft skills and emotional intelligence
Traditionally, the donor has had to figure it all out on his own. If he were to turn to an advisor or seek out guidance for contributing to a nonprofit, he’d probably turn to his professional advisors to seek professional guidance and direction on financial giving. Typically, however, these professional advisors have limited areas of expertise in the mechanics of giving such as tax strategies. The most important part of the giving, though, isn’t the finances or tax benefits. It is the heart, or why, the donor would like to give to specific a cause or passion that is important to him or her. In many cases, professional advisors do not bring up these more emotional issues and hence do not address the most important question of all, which is the motivation behind the giving.
On the other hand, the motivation of the donor is commonly addressed by nonprofit professionals. These professionals typically have the title of development officer, director of planned giving, vice president of donor engagement, or some similar term. Their focus is on aligning the passions of the donor with the needs of the nonprofit; not on advising on the funding for the mechanics of the actual gift. They typically are not licensed or trained to have the skill sets which professional advisors typically provide.
The professional advisor’s allegiance may not be to the donor per se, but to the organization that pays his or her salary, commissions on products sold to the donor, or some other means. Typically, financial advisors are paid based on assets under management so there is little incentive for financial advisors to bring up the philanthropy conversation. If the donor was interested in charitable giving, why would the professional advisor cut his own salary by suggesting to the donor that they give money from the very assets that he's being paid from? In addition, many professional advisors—the gatekeepers to the wealth of the donor—may not have the appropriate soft skills for the philanthropic conversation to find out and explore what is really important to the donor.
“A philanthropy coach empowers donors to receive the greatest satisfaction from their generosity.”
With the shift in the philanthropic field and the blending of nonprofits with for-profits in the form of social enterprises, benefit corporations, and other hybrid models combined with the leveraging of new technologies and the Internet, the timing appears ripe for a new professional. This new professional is focused, aligned with and has the skill sets for serving the individual donor. This new professional is the philanthropy coach. It is important to make the distinction that this new professional is a coach—someone who trains and instructs—not an advisor. A philanthropy coach educates and empowers individual donors to become the best possible donor they can become so they may receive the greatest satisfaction from their generosity. The philanthropy coach is on the same side of the table as the donor, always acts in the best interest of the donor, and is compensated by the donor.
Furthermore, the philanthropy coach has the soft skills and experience to elicit an understanding of what is really important to the donor. This is vital in matching the donor's passions to the donor’s giving goals. The ideal philanthropy coach should also be experienced and credentialed with professional expertise such as financial planning, accounting, or estate law. With this experience and expertise, the philanthropy coach is laser-focused on philanthropy—coaching on the tools, techniques and opportunities available for the donor to become more impactful for the causes and passions that are important to him or her. The philanthropy coach should also serve as the quarterback of the donor’s professional advisory team in working with the donor. The philanthropy coach eliminates the conflict of interest present with some professional advisors and remains focused on the best interest of the donor.
So where do you find a trusted philanthropy coach? A trusted philanthropy coach should have their Chartered Advisor in Philanthropy® designation and, ideally, be licensed and credentialed to serve as a fiduciary, such as a Certified Financial Planner (CFP®) professional. A good place to start the search for a philanthropy coach is at the Advisors in Philanthropy website. I suggest that if you are considering working with a philanthropy coach, you have an initial exploratory conversation with at least two prospective coaches to fully understand their experiences, their skill sets and their process for coaching to find the best fit for your overall giving goals.