From Shoemaker to Shoe maker in Three Gnerations!

 
It’s an old story winningly told by TOM ROGERSON  senior director and wealth management advisor at WILMINGTON TRUST COMPANY (trogerson@wilmingtontrust.com). A 14^th generation Mayflower descendant, still living on the family’s original land in Massachusetts, Tom is the scion of a wealthy Boston family that lost all its money – in three generations.

He weaves his personal story into solid wealth management advice for families. Speaking to a meeting of philanthropic advisors in Vancouver BC - members of the Giving Institute (www.givinginstitute.org) - it is less a story about money itself but how family dysfunction and poor-to-non-existent communications among the family, from the paterfamilias downward, took away the wealth.

A recent study, Tom reported, showed that typically a family loses lost 80% of its wealth within 50 years of the fo under’s death. The takeaway is only partly about how the wealth will be managed, or by whom, but ratherthe family dynamic. A dysfunctional family will end up with a dysfunctional foundation – quarreling about the founders’ (usually parents) commitments versus the children’s interests – either philanthropic but commonly about money that they’d rather have themselves; about who’s in charge and how decisions are made. Tom’s presentation included this quote attributed to George Burns:

“Happiness is having a large, loving, caring, close-knit family in another city.” Tom Rogerson

Two And A Half Cheers!

Giving USA Foundation today reported that American individuals, estates, corporations, and foundations donated an estimated $335.17 billion to charitable causes in 2013, an increase of 4.4 percent (3.0 percent, adjusted for inflation) from the revised estimate of $320.97 billion for 2012.


Each year Giving USA Foundation (www.givinginstitute.org) publishes a detailed compendium on the previous year's charitable giving. The research and development is carried  out by the Center on Philanthropy at Indiana University, a long enduring relationship between the two groups. The Giving Institute, an alliance of 36 fundraising consulting firms, owns the name but  on its own GI lacks the staff and resources to compile and report the data.

Though charitable giving is still not at the pre-recession level achieved in 2007 ($349.50 billion, inflation-adjusted) positive news is great. But we all live and work in a world of immediacy. For years I have been stewing about the six-month reporting lag. To me this a major downside of a very expensive undertaking. Frankly,the earth does not move on this news. For national media it's a one or two day story. For me there is little of actionable value for a given client.

What matters most is the sources of giving (below) and those proportionate data have been constant since 1956 when we started tracking it. In fact the money given hovers around plus or  minus 2% of GDP. The needle hasn't  moved. Also the research does not report cause related marketing, a huge amorphous chunk of corporate "giving." Nor does it examine the remittance economy which to me is as much philanthropically motivated as foundation grants; and it under-reports estate giving because most estates are below the taxable line for which returns must be filed federally. (The states are another matter. Don't ask). 

The first few pages of the Giving USA report attract the most media attention and are of the most value. But the recondite details are of very limited interest or practical use. So for whom does the data matter? The Giving Institute is spending some three hundred thousand dollars a year for the benefit of a relatively small cohort of academics and maybe the Gnomes of Zurich. The R&D that goes into Giving USA does yield those summary pages. But how much longer can GI sustain this magnitude of expense? This question has been knocking around for years and the desultory discussions the members have had go nowhere. At bottom, we are a very small trade association in search of high purpose. 

The Institute doesn't or can't bring in new members fast enough at any dues level to offset the huge cost.In  my over-a-glass chats with top notch outside firms who are not members but are every bit as good as we self anointed "thought leaders" are the response is always the same:it's just not worth the money. No value add. Nor is the Foundation's philanthropy effort, though vigorous, sufficiently robust because try as we might we don't attract much in the way of outside donors.

Advertising revenue has not eventuated because we don't have enough base to justify the cost to a serious  buyer. Fidelity (which  just once gave us  money), Vanguard and Schwab would have been and may still be the best prospects - but we have to show real value given that they have their own marketing  platforms.

Indiana University is and has been a great partner for whom I have the highest regard. But frankly they are swimming  in money; do they really need ours? Why couldn't we license the Giving USA name to them for a big royalty payment? 

Our company continues its membership because we recognize an obligation to give back - and we truly enjoy the company of other firms' principals. We have never rationalized  our participation economically. If we did we'd be gone.



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The Giving Institute's Summer Symposium

On June 17th  Giving USA Foundation will release numbers on philanthropy for 2013 and I'll post my comments then. A number of consulting firms  like The Oram Group belong to the Giving Institute whose mission is the advancement of ethical philanthropy. We first joined  in 1955, dropped  out in 1975 and rejoined  in 1992. (The Institute members were still discussing the same issues in 1992 as they were when we resigned because Harold Oram got  into a toe-to-toe with the late George Brakeley - over nothing.  Money. But I stray).

In late July Giving Institute will hold its annual "summer symposium" in Vancouver BC. (Good duty; great city). In addition to the aforementioned comments to come on Giving USA I have a few other issues for the graybeards (including me) to think about:

THE GREAT WEALTH TRANSFER

Paul Schervish of Boston College and his colleague John Havens have been studying and reporting  on the intergenerational wealth transfer for years. But a funny thing happened to the Rapture on the way. The economy tanked and we heard  little of the wealth transfer for several years. Now the wealth transfer is back - along with other misleading economic signals. The College's Center on Wealth and Philanthropy reports that "... estimates of the much anticipated 'wealth transfer' in this country have been a topic of conversation in the nonprofit and financial worlds for years--and the numbers are staggering. By the year 2055 some $41 trillion will change hands as Americans pass their accumulated assets from one generation to the next."

I'm not an economist but I've always found these estimates a squirrely business way too dependent on fragile economic assumptions as indeed was the case in  2007-8. We are now  in another high tech bubble. All the pumping and dumping of stock in companies with no profits, directed  by naughty high testosterone guys who should have never been allowed to leave the principal's office.

Also the banks are back in the sub-prime business. Mostly because no CEOs went to jail. This time at least a few banks will not be too big to fail.

The point is there's a difference between real wealth and paper wealth. The "great wealth transfer" doesn't make which is which clear - at least  not to me.

Takeaway: Let's have some objective evaluation. Meantime - as consultants  - let's advise our clients to concentrate on  the wealth that's already provably there.

PHILANTHROPY'S GREATEST MYTH

The myth: the rich are generous.

The fact: taken as a class the rich are cheap by any measure and not giving anywhere near capacity.

For all the publicity generated  and garnered by Buffett, Gates, Zuckerberg and  others who have taken the pledge there is a much larger sub-class of one percenters with even  more aggregated wealth who've done no  such thing. Charitable giving still hunkers at plus or minus 2% of a generally gaining GDP. Of course that means a modest absolute dollar increase as the percentage enlarges  but it's  nowhere near the capacity of the wealthiest quarter. That 2% hasn't budged since records were begun. Money is pouring into donor advised funds that offer an  immediate tax deduction and safe parking forever.Foundations are sitting on half a trillion dollars or more in tax forgiven cash. Who is that helping?

The growing economic inequality of this nation is well documented. The poor and the near poor (once the middle class) are said by economists from Piketty to Krugman to be increasing in number. But for sure payrolls remain flat. Government funds have been taken away from charitable enterprises. Whether that  money will ever come back is problematic at best. Philanthropy cannot make up the $200-300 billion difference. And  philanthropy does not reach the poorest people who need it the most. It benefits the middle the most and its benefits are skewed toward charities who serve them, not that it shouldn't. Each year's list of gifts at $100 million and up go primarily to higher education and health care. The  only significant major exception I can think of was Joan Kroc's multibillion dollars to Salvation Army.

Takeaway: The rich by and large are not generous.

GO GLOBAL

The reason to be a Giving Institute member should be because we can and should be seeking to advance philanthropy globally. Those of us who come from outside the US and those of us who have served charities internationally recognize that the profile of philanthropy and world demographics are changing rapidly. I was an early  incubator of Giving Tuesday whose Thomas Edison - Henry Timms - will be at the summer symposium next month. He's told me and my students that one of the major challenges for GT now is how to take it global. And that's the challenge for all of us.

Though US giving may still be the world's philanthropic driver this is not necessarily a permanent condition as the global economy increasingly displaces the purely domestic. In my view G.I. can be the deus ex machina here, get it started, and then get out of the way. My vision is  patterned on One World Alliance, a congeries of airlines who code-share, cooperate as well as compete and generally strive for  a more seamless if far from perfect travel experience.

Takeaway:    www.givinginstituteglobal.org. The domain is available. I own it.

NON- PROFITEERS!

Many  of you know I have been teaching management of  nonprofit corporations at Milano/the School for Public Engagement at New School University for over 20 years and  in that long run have overseen some 325 to 350 "capstone" papers - i.e., studies of some aspect of a challenge confronted by a nonprofit.

My students work as consultants, undertake a very professional assessment, develop findings, conclusions and recommendations; and present their work in class to the other students and me and finally, at the midnight hour, mainly, each turns in a paper.

This capstone paper ( at Milano we call it a PDR - i.e. professional decision report) is required of all MS candidates. This seminar is all that stands between them and their graduate degree. The result is a close, intense, working relationship.I spend a  lot of time outside the classroom with each student individually, face to face, by phone and by email because I think that's a great way for me to learn from them and to teach.

This year's roster is a terrific group of young people. I have hopes that they will remain in service to nonprofits. One is perhaps law school bound. I congratulate them on their hard work. But even more important as the nonprofit sector in the US and the world continues to expand we will need an  increasing supply  of trained professionals. Gone are the days when there were no schools, no courses, no degrees, just the inside of the slippery tank. This is by far a better way for a body of  knowledge that has codified and developed the earmarks of a real profession - pretty much since WWII..




Pictured:

L to R (Top): Matt Turkheimer, Meghan O'Keefe, Hank Goldstein,
Julia Bates, Jami Goodman, Caroline Lefaivre; 
(Below): Michelle Grazi,  Lauren Silver, Lauren Hunt, Lakeisha Jefferson
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The Provenance of Money

I've written before about how the blessed use of tainted money purifies it. A recent case in point: Memorial Sloan-Kettering Cancer Center takes  money indirectly (through an auxiliary) from drugstore chain Walgreen's. They sell tobacco products. Tobacco causes cancer; MSK fights cancer, helps prevent it, treats it and - if you're lucky - cures it. Should MSK take their money?

Charities and their boards can struggle mightily with the moral, practical and p.r. consequences of the dirty dollar. Dirty money is cleansed in no more than two generations.Or as they say in Brazil "money whitens the skin." No one in their right mind turns away Rockefeller or Carnegie funding.What other than time purified the taint of killing coal miners in Colorado or spewing filth from smelters in Pittsburgh? The politically controversial Koch brothers' companies are major polluters - but David Koch is an expansive philanthropist generously supporting cancer research and the performing arts. Though there are no doubt situations of which I am blissfully unaware most great fortunes are not made by nice guys

Yes I know: Google, Apple, Intel and putatively  most of Silicon Valley don't pollute like the extractive industries. But they're now in court accused of cheating their software engineers out of higher wages by entering  into collusive no-raiding arrangements.Should I tell you not to take their money?

"Corporate philanthropy" is an oxymoron that has entered the lexicon. There is little altruism in company giving; nor should there be I would argue. It's the shareholders' money they're giving away. Corporate gifts are good cover. In the Walgreen's-MSK kerfuffle, for example, who benefits most? For MSK at best it's a poke in the eye p.r.-wise; for Walgreen's it's a win.

Bottom line: we live in a capitalist society. Take the money. Do good.