|
|
 |
|
| Thought Leaders: Philanthropy |
Schwabification of Philanthropy
Carla E. Dearing
02/01/2007
|
Competition in the philanthropic marketplace has lowered prices for
donor-advised funds and improved the online services that make them easier to
use, both of which have helped spur their rapid growth. This has substantially
increased the number of wealthy Americans making philanthropy a conscious
component of their financial planning. That’s the good news. The bad news is
that the market has not responded to this growth by providing tools that engage
this demographic more deeply.
Today, donors bring increasing expectations to
their philanthropy, including the need for complete information, varied
opportunities for involvement and full accounting of outcomes. As a result, a
new philanthropic strategy is emerging. In a nutshell, it concerns itself with
the question: What does it take to leverage limited charitable resources in ways
that address the overwhelming needs we face as a global community? For many
individual donors, it includes the question: How do I apply the same level of
savvy that enabled me to amass wealth in the first place to my charitable
giving?
In theory, foundations should be obvious allies for donors who want
to develop their own philanthropic strategies. According to the Foundation
Center, the U.S. is home to more than 67,000 grant-making foundations, which
gave away $31.8 billion in 2004 alone. This group has honed approaches to
address diverse challenges and communities over many decades. While foundations
have undoubtedly produced great triumphs, they have also produced mistakes that
neophytes could avoid. Unfortunately, even the best foundations tend to operate
in tightly closed systems where such comprehensive information sharing is not
valued.
Over the past five years, Community Foundations of America has been
working with a handful of foundations to capture information about the impact of
their grants and grantees in ways that can more deeply engage donors. Among
other things, we have learned that determining the success of individual grants
is costly and time-intensive.
I have heard countless reasons why the
charitable marketplace cannot be driven by user-friendly, well-packaged,
relevant, searchable data sources and analytics that high-net-worth donors could
use to inform their charitable strategy. But mark my words: This market void
will be filled, because wealth management providers and savvy public charities
are coming to understand that it is absolutely essential to their value
equation.
Ironically, the blueprint for how philanthropy will serve affluent
donors tomorrow comes from financial services models as we know them today. At
the risk of oversimplifying, I would boil it down to two components:
The
“Schwabification” of Philanthropy: It is only a matter of time before some
entrepreneur or institution takes a page from Charles Schwab and empowers people
with information in the philanthropic marketplace. While the Fidelity Charitable
Gift Fund and its imitators are making donor-advised funds cheaper, the next
round goes to the company whose infrastructure delivers real value to
philanthropic strategists. Schwab revolutionized the financial market by
disintermediating stockbrokers, who had been able to charge high prices by
hoarding information. Look for the same principles to apply, especially within
public charities.
|
|
|
|
|
|
|
