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Ron Ransom, host and American Endowment Foundation CEO, talks with a variety of guests to create a unified voice across the industry as they discuss best practices and smart strategies that can expand philanthropy for charities, build legacies for donors, and increase AUM for advisors.
(upbeat music)
- Good afternoon and welcome
to "Let's Talk DAFs."
My name's Ron Ransom,
chief executive officer
of the American Endowment Foundation,
and I'm joined today by my
good friend, Christine Gaze,
founder and managing partner
of Purpose Consulting.
- How are you?
- I'm good.
Great to be here.
Good to see you in person for once.
- Yep, great to see you.
We're no longer virtual.
I wanna chat with you about
lots of different things.
You know, here on "Let's Talk DAFs,"
one of the things that I
think is really important.
Actually, let me back up.
You know, we've known
each other a long time,
and one of the things I've
always appreciated about you
is the work that you've done,
and what Purpose Consulting does,
where it's based on research.
It's not, you know, "Oh,
here's what I think."
You are giving data-backed evidence
that you then take out to
your vast network of advisors,
and you come back,
and you really make some
really difficult topics simple.
And I very much appreciate that about you.
And so, I'm glad you're here,
because this topic of donor-advised funds,
and specifically how it ties
to wealth transformation,
generational wealth transformation.
I think that there are probably
some misperceptions out there,
and I know from dialogue
with you, you might agree.
What are you seeing?
What have you seen are
some of the misperceptions
around this wealth transfer
that we've read so much about?
- Yeah, Ron, I'm glad you asked that,
because I feel very
passionately about this,
as I do about most things.
I mean, we've been hearing
about the Great Wealth Transfer
for many years now, right?
It started with $41 trillion,
and then it was 84 trillion.
And in the December,
I think, of last year,
Cerulli updated their forecast,
and extended the timeframe a bit.
So the current projection from Cerulli
is that 124 trillion will change hands
through the year 2048.
And how this plays out
between heirs and charity,
according to their projections,
is 105 trillion will go to heirs,
and the remainder will go to charity.
So those are big, you
know, eye-catching numbers,
and they make for great headlines.
But, you know, I think the
myth or the misconception
that I think is important to talk about
is what's under the hood of these numbers.
And Cerulli did a little
work in that space as well.
I mean, basically the
road to wealth transfer
runs through women, right?
The majority of estate
are not passed directly to children heirs,
they're passed to the surviving spouse.
And Cerulli estimates that 54 trillion
will go to surviving spouses.
Now, what do we know about
men and women in marriages?
We know that 80% of men die married,
80% of women die single.
We know that women typically
outlive their husbands.
A recent French study estimated
that it was 10.4 years that
women outlive their husbands.
Now that's an average, right?
I mean, my grandmother
passed a few years ago.
She lived for 38 years
beyond the point at which
my grandfather passed.
So I think it's important
to acknowledge that,
because you do have a
significant wealth transfer
that's taking place,
and it will rest in the hands
of women for many years.
And so what are the
implications for investing?
What are the implications
for charitable planning?
And how do DAF sponsors,
how do broker dealers,
and financial advisors,
and frankly, how do nonprofits
need to think differently
about how they engage with, you know,
sort of the changing
landscape of wealth holders?
- Sure, sure.
Those are some pretty amazing statistics.
And if you think about the growth of going
from, I think you said it
was 40 to 80 to 120 trillion,
with a T, that's going to transition,
a large percentage to female investors,
what does this mean as far
as philanthropic giving?
What does it mean?
Do you feel, is there data that
shows that female investors
are more inclined for
philanthropy, less inclined?
What does that tell you?
- Yes, so women are,
you know, by and large,
a little more philanthropic than men.
Not by, you know, not by much,
but it also depends on whatever
study you're looking at.
They also care more
about purpose and values.
And I think that, you know,
we'll get into that in a bit,
but I feel like that's
a bit of a disconnect
in the, you know, in the marketplace.
There's a lot of
charitable planning dollars
that are flowing without
much purpose and intent.
You know, there are many
people who are giving their,
it's, you know, checkbook charity.
They're writing a check here,
they're responding to an appeal there,
they're writing a check,
because they're on a board,
or their friend's on a board,
you know, sort of reciprocal charity.
But there's a whole host of
charitable planning money
that has not, doesn't have a real purpose.
And I think that's creating a bit of a gap
in the marketplace.
So a gap that, you know,
that all of the constituents
that I mentioned earlier should
be thinking about filling.
- You know, a lot of the
work that you've done,
and knowing your background
with, you know, financial advisors,
and how advisors, you know,
need to continually improve.
I know your background with,
you know, practice management,
and what that means for advisors.
What are some of the things,
and maybe not necessarily
specific to wealth transfer,
but what are some of the things
that you've seen that
advisors could, or should,
or are doing to be better
prepared for some of these gaps
that you're talking about,
or for this transition?
- Yeah.
Well, Ron, I mean, as a result
of some of the research that
I've done for, you know, AEF,
I've talked with dozens
of financial advisors
who really excel in the
charitable planning space.
And, you know, a lot of
really interesting tactics
and best practices have emerged from that.
You know, one just overall, you know,
commentary that, you know,
that I got from subject matter experts,
and, you know, sort of home office experts
that support advisors in the field,
is just the observation
that advisors in general
are becoming more and more comfortable
with the technical expertise required
to support charitable planning.
And so what I mean by that
is they're good at helping
address the questions,
you know, "Can I afford to give?
How much can I afford to give?
What do the kind of cash flow
and projections tell us?"
You know, "What should I give?
Should I give, you
know, appreciated stock,
or crypto, or cash, et cetera?"
And then, "How should I give?"
And this is really where,
you know, DAFs have emerged,
you know, as a very popular, you know,
vehicle that advisors are recommending,
because of all of the
benefits that you know, right?
Sort of the, you know, the flexibility,
the ease, you know, the
role that technology plays,
And sort of helping, you know,
kind of clients wrap their head around it.
So, but with many advisors,
the advice stops there.
So the DAP is funded, you
know, the trust is funded,
the will is completed,
and the conversation
stops for the advisor.
But where the really best advisors
are differentiating
themselves, and excelling,
is with the softer side
of charitable planning.
So-
- Say more about that, the softer side.
- Yeah, it's really,
I mean it's the warm and fuzzy.
It's helping clients
to identify their values
and their passions.
- What's important to them.
- Exactly.
And then helping them to synthesize
that into an actionable strategy.
What are the implications
for their investments?
What are the implications
for, you know, charity?
Giving them a rubric, you know,
a grounding and a foundation,
for which they can successfully
analyze nonprofits,
and, you know, charitable
giving opportunities.
And then the last thing I'll say,
I mean, it's basically the
planning process, right?
It's sort of what are you
looking to accomplish?
What's your purpose?
What's the plan?
Where are we going to give,
and how are we going to accomplish that?
And then we've gotta monitor that, right?
- [Ron] Sure, yep.
- So, and that's, you know, an area
where most financial advisors
are not checking in with clients,
and most clients are not
checking in with themselves.
Did it feel, you know,
good to write that check?
What did that nonprofit
organization accomplish?
Does that align with your values?
Are they on course, are they off course?
These kind of check-ins are important
for clients to feel the fulfillment.
- Great, the ongoing,
- The philanthropy.
- yeah, the ongoing
fulfillment, if you will.
- Exactly.
- Yeah.
Love the conversation,
love the dialogue.
I'm gonna shift gears.
So earlier we talked about, you know,
some of the misperceptions, misconceptions
within wealth transfer,
and kind of the flow.
I know you also think
that there are additional misconceptions.
What else is out there
that probably isn't what we think it is.
- Well, I mean, I think it goes along
with the first misconception.
So, you see these headlines, you know,
"124 trillion, start paying
attention to millennials."
- Right.
- And it's like, "Hmm."
I think we talked about the important role
that surviving spouses play.
I think there's a misconception
that millennials and
Gen X will be, you know,
the big winners
in the wealth transfer.
- They receive, right.
- And, you know, the short
answer is, they will.
So the projections are that
Gen X will inherit $14 trillion
over the next 10 years.
Millennials will inherit 8 trillion.
You extend that timeline out.
Millennials, a bigger generation,
are getting more and more.
So there will be a wealth
transfer that happens.
But if you look under the
hood of those numbers,
which you know I am want to do,
the CFA Institute put out a
really good piece recently.
And they highlighted that, you know,
80% of the wealth in our population
is, you know, kind of
concentrated among 20%
of, you know, of people.
- The old 80/20 rule.
- Exactly.
And then as you consider,
this is research from the Federal Reserve,
if you consider inheritances,
one in five Americans, you
know, receive an inheritance,
and the average inheritance
is about 266,000.
So you're like, all right's,
it's a decent amount of money.
That's a decent chunk of change.
But then you kind of dig into
those numbers a little more.
And so if you remove the
top 10% in that data set,
the remaining, the 90%, are
inheriting close to zero.
- Oh, my gosh.
- So one in five are getting something,
you know, 90% are getting close to zero.
So it just really highlights the fact
that the transfer of wealth
is really concentrated among
sort of the uber wealthy.
And so, you know, I always think about
what are the implications
for financial advisors,
'cause that's the audience
that I'm typically
speaking to or educating
in our programs.
And so if you look at
a sort of average
wealthy, you know, client,
you know, they have maybe $5
million in investible assets,
and maybe they have, you
know, a couple of kids.
So if you are, you know,
basing your courtship
of that next-gen child,
you know, based on what, you know,
you're kind of divvying up
of the assets right now,
you know, I just think that's
a bit, you know, foolhardy.
In my mind, you've gotta place your bets
on the horses that will run, right?
- Right.
- So first, who knows how
much is gonna be in the pot,
you know, at the end of the day?
So that's kind of thing one.
You know, but thing two, you know,
when you think about a client,
it's really important
that a client, you know,
if you're talking about
holistic wealth management,
that a client has the
acumen and the interest
and a planning mindset.
They're gonna engage with
you in effective planning.
They're not a spend thrift.
You know, they are earning
and saving in their own right.
Because if those elements don't exist,
that money is gonna run
through their fingers
like water in sift.
So I feel like that's, you know,
those are a few of the, you know, rants
that I particularly enjoy.
- Well, I love it.
And I love the fact, I mean,
you've quoted everything
from the Federal Reserve to CFA Institute.
I mean, this is all based
on data, this is the real.
You know, when we think
about this wealth transfer,
and what's the real elements,
and where's it going to land and to whom,
and you go back to the dialogue
around, you know, truly
those that will receive,
the female investor.
And you touched on this just a bit.
I wanna go a little bit deeper.
You talked about how,
and you used your
grandmother as the example,
she was, you know, outlived
your grandfather by 38 years.
Let's talk about some of the more work,
the work on longevity.
Where does that really come into play?
What are some sound bites on longevity
that an advisor should really think about
as they're incorporating
dialogue, planning dialogue,
into their client conversations?
- Well, longevity plan,
I mean, as you know,
lifespans have been, you
know, have been growing.
Unfortunately, and I got this
term from Peter, Peter Attia,
who wrote a really terrific book,
I think it's called "Outlive."
Lifespans are growing,
but health spans are suffering.
And so the, you know, kind of the quest is
how do you live longer, but
also, you know, live healthily?
You know, the last four years
of someone's, you know, life
are typically, you know, statistically,
the most expensive years, right?
- And what are they spending the money on?
- Healthcare, right?
I mean, I can speak to this personally.
You know, we just,
my father-in-law just went into, you know,
assisted living in a memory care unit.
It's 10 grand a month,
right?
- Oh, my God.
- And so his, you know, his
spouse, my mother-in-law
is living separately.
She has her own expenses.
It's 10 grand a month, you know, for this.
We occasionally, you know,
bring in healthcare aids
on top of that to support him.
So, you know, thankfully
they have, you know,
worked and saved, and done a great job.
But they may run their
assets down to zero.
And that is, you know, it's funny,
my mother-in-law was a CPA,
like, you know, during her life.
He was a, you know, PhD in chemistry.
I mean, really bright and smart people.
And they did all the right things.
But she can do the math and
she's, you know, fearful.
You don't know how high
these healthcare costs are gonna run,
and what additional services,
you know, are gonna be needed.
So when I was interviewing
an advisor, actually,
for the AEF project,
this was someone who was
the director of philanthropy
for a religious, a very
large religious organization,
for 14 years.
But, he shared with me
this interesting anecdote,
is that 4 in 10 of the legacy
plans that clients set up,
so for the church to inherit
after both spouses pass,
did not come to fruition.
- 40%?
- 40%
- Wow.
- Due to healthcare costs,
its longevity.
And so, you know, you look
at the stats on women,
you know, they're going to,
you know, to live longer,
so before you get to
philanthropic planning,
or charitable planning,
you know, most women need to be assured
that they're just not
gonna run out of money.
That everything is going
to, you know, to be okay.
I could say a lot more
on this, but I will.
- It's staggering to think about.
And you know, it touches everyone.
And this is one of those topics
where people just, yeah,
people are living longer,
but then you get to a point
where quality and the expense,
you said the last four years,
the greatest expense is all in healthcare.
- Yeah.
- That's really staggering.
And that's really important.
And it ties back to,
and maybe we can kind of
conclude with this, you know,
the work that you've done on longevity
and some of the research that you've done
on behalf of American
Endowment Foundation.
What are some of the things that,
from a best-practice perspective,
like you're hearing from
those subject matter experts,
those advisors, those
philanthropic advisors,
what are some of the best practices
that could be incorporated
in dialogue, in conversation,
that says, you know, here's what it means
from a wealth transfer perspective,
or here's what it means
from a planning perspective,
from a longevity perspective.
What should we do?
What are some best practices
that you're hearing?
- Yeah, so one of my big
takeaways from that research,
advisors that excel in this
space, focus on this space.
And what I mean by that,
Cove Edwards-Pitt, who's
written three books,
the first one, "Aged," or
"Healthy, Wealthy & Wise"
she's a partner at Ballentine Partners.
And her observation was,
you have to forcibly
put charitable planning on the agenda.
Because it's usually the
eighth agenda item on the list.
And it's not always top
of mind for a client.
But she works with clients
who have 25, 50, 100 million dollars.
So they have real excess capital.
And she views it as her mission
to ensure that clients don't, you know,
have deathbed regrets about the impact
that they could have had in the world.
And so I think that takes
courage and conviction,
and it takes a personal passion.
So the advisors that excel in this space,
really have a charitable
mindset themselves,
and they really understand that clients
who have a significant
amount of excess capital.
It's, you know, it's
that "Spider-Man" quote.
Like, "With great power
comes great responsibility."
So with great wealth
comes the responsibility
of doing your part for your community,
or the causes that you care about
to leave the world a better place.
So it's a little "Kumbaya,"
but I truly believe that,
and that was a thread
that ran through many of
the charitable planning,
you know, expert advisors
that I spoke with.
- Christine, I cannot thank you enough.
You know, we brought in "Spider-Man."
I think if you can end
on a "Spider-Man" quote,
"With great power comes
great responsibility."
That's what the audience wants.
We just nailed it.
We hit home.
Always enlightening, always
a treat, always educational.
I love spending time with you.
Thank you so much for being here.
- Thank you.
It was great to see you, Ron.
- Take care.
(upbeat music)