WINSTON -SALEM, N.C. — Charitable giving, particularly among wealthier individuals, is crawling back up from an unprecedented plunge during the recession.
That modest growth, while still far short of levels three years ago, represents an opportunity for nonprofits that are willing to work hard to help donors move past lingering anxiety about the economy and invest in causes they care about.
That is the view of H. King McGlaughon, who after more than five years as chief philanthropic officer at Wachovia is stepping down to become CEO of Foundation Source, a Connecticut company that provides private foundations with advisory services and web-based administration and grantmaking.
McGlaughon is bullish on philanthropy and the emerging generation of hands-on philanthropists.
“The resources are there,” he says. “The philanthropic impulse is there. But there’s also caution on the part of donors. So fundraisers simply are having to focus more and work harder.”
McGlaughon, who previously headed the philanthropic-services business at Merrill Lynch, joined Wachovia in March 2006 to oversee its philanthropic services, which had been reorganized into a separate line of business distributed through its private bank, brokerage and retail bank.
At the end of 2009, the last year it accounted for its assets separately from those of Wells Fargo, Wachovia administered or managed roughly $17 billion in philanthropic assets, which had grown at an average rate of 10 percent a year for eight years.
After the 2008 merger of the two banks, philanthropic assets managed and administered by the combined group totaled about $21 billion and have climbed to roughly $22 billion after dipping to between $18 billion to $19 billion during the recession.
The philanthropic services business at Wachovia employed 172 people before the merger, a number that fell to 145 for the combined operation after Wachovia eliminated positions that were duplicated at Wells Fargo.
Because Wachovia is the sole trustee for the Kate B. Reynolds Charitable Trust in Winston-Salem, McGlaughon in his capacity as the bank’s chief philanthropic officer also served as its primary manager for the Trust.
The good news is that charitable giving grew slightly in 2010 after two years of steep declines, he says.
“In spite of all that, Americans are giving over $300 billion a year to charitable programs,” he says. “And the levels of philanthropy are as high as they’ve ever been.”
For individual private clients at Wachovia, asset levels of wealth by the end of 2010 had returned to 2007 levels, the only exception being clients with net worth under $1 million, whose assets actually had fallen below 2007 levels.
And while asset levels of wealthier individuals have “fully recovered,” McGlaughon says, the recession has made people “much more cautious and thoughtful about their financial commitments than they may have been prior to the recession.”
So nonprofit fundraisers should be targeting wealthier individuals whose assets have recovered, he says, and should “be prepared to work harder than they had four years ago and make the donor comfortable with making significant financial commitments today.”
Foundation Source, formed in 2002 and based in Fairfield, Conn., serves roughly 1,000 private-foundation clients with about $4.5 billion in assets under administration, and employs about 100 people.
The company’s growth plans call for roughly doubling the number of clients to 2,000 and their assets under administration to $10 billion.
A key strategy for Foundation Source, in addition to working directly with individual clients, is to partner with about 12 professional-services companies, including banks, brokerages, trust companies and law firms.
Those partner companies introduce Foundation Source services to their clients, and it works to deliver its services in partnership with its partner firms.
McGlaughon says the company’s strategy will be to “better create and leverage partnerships within the financial-services industry and other professions.”
Those partnerships are key, he says, because unlike earlier generations of philanthropists who looked to institutions such as banks and trust companies to actually operate their foundations and grantmaking, younger philanthropists tend to be more entrepreneurial, hands-on people “who are actively engaged in their own philanthropic strategies,” McGlaughon says.
As part of that strategy, he says, Foundation Source also aims to partner with community foundations, looking for ways their services and those of Foundation Source can complement one another in better serving donors.
The company’s strategy, he says, “allows us to partner with the philanthropist’s other advisers rather than being in competition with them.”