Donor choice, part 1 – Philanthropy market diversifies

[Editor’s note: This is the first in a series of stories looking at choices facing donors.]

By Todd Cohen

The philanthropy marketplace is in flux.

Donors know more and want more choices, and an expected surge in wealth is starting to flow between generations.

To serve donor demand, competitors that offer philanthropic services are learning from, adapting to and even working with one another.

And individual donors increasingly are opting to work with a handful of philanthropic and financial-services organizations, and to use a handful of philanthropic strategies.

“Donors are smarter, there is more money, they want more choices and there’s no expectation of back-off from the roaring growth of philanthropy we’ve all seen,” says Carla Dearing, CEO of Community Foundations of America in Louisville, Ky.

With wealth on the rise, lines are starting to blur among groups vying to deliver philanthropic services to donors.

For example:

  • The Minneapolis Foundation has teamed with Foundation Source, a firm in Norwalk, Conn., that provides back-office services to help donors run private foundations.
  • Fidelity, which already managed foundation assets that now exceed $400 million and donor-advised funds that now total nearly $2.4 billion, last year launched a record-keeping and administrative tool for advisers and individuals who manage private foundations.
  • Merrill Lynch financial advisers are marketing a new donor-advised-fund program to clients on behalf of more than 30 community foundations, and the firm has stepped up efforts to provide strategic consulting to wealthy donors.
  • A syndicate of community foundation groups has raised $3.5 million to develop new technology to help compete with financial-services companies.

“The boundaries of all of us are really getting murky,” says Eileen Heisman, president of the $500 million-asset National Philanthropic Trust in Jenkintown, Pa.

Despite the economic downturn, philanthropic giving is holding its own and expected to stay strong, according to preliminary results of a new survey co-sponsored by Community Foundations of America and HNW Inc., a Boston-based group that provides customer-relationship-management services to financial institutions and other companies serving high-net-worth clients.

Echoing that forecast, researchers at Boston College recently concluded the limping economy had not altered their five-year-old estimate that at least $6 trillion would go to charity as part of at least $41 trillion they expect will be transferred between generations over the next 50 years.

Annual gifts to more than 650 community foundations in the United States totaled $3.5 billion in 2001, the most recent year for which data are available, compared to $4 billion in 2000 and $3.6 billion in 1999, according to the Columbus Foundation in Ohio.

Total assets of donor-advised funds, including those at community foundations, grew to more than $12.5 billion in 2002 from nearly $11.3 billion in 2000, according the National Philanthropic Trust.

During that same period, the number of donor-advised funds grew to nearly 73,500 from more than 42,600.

And the number of private foundations grew to more than 60,000 in 2001 from nearly 50,000 in 1999, although their assets fell to $446.5 billion after peaking at $455.6 billion in 2000, according to the Foundation Center in New York.

While bigger foundations suffered bigger losses because they were more likely to have invested their assets in the markets, preliminary estimates suggest the number of private foundations continued to grow in 2002, said Steven Lawrence, the center’s director of research.

Other stories in the series:

Part 2 – Need spurs philanthropy market [10/8/03]

Part 3 – Donors shop to meet needs [10/13/03]

Part 4 – Service fuels philanthropy [10/20/03]

Part 5 – Financial firms target donors [10/27/03]

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