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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
with the American Endowment Foundation,
joined today by my good friend Sara Barba,
managing director at Integer.
Welcome.
- Thank you.
Thank you for having me.
- Good to see you, as always.
And thank you, in
advance, for your insights
on, you know, this topic
within the world of donor-advised funds
and philanthropy of sharing the wealth.
You know, the old saying of
"Rising tides lift all boats"
I think is especially true
when it comes to philanthropy.
I was hoping we could jump right in,
and maybe you can share your view
of how do donor-advised funds play,
versus private foundations.
What's the difference,
and how does that work
along the theme of sharing the wealth?
- Right, well, donor-advised
funds are interesting,
because sometimes they're the
single tool that a donor uses,
but in many cases they're one of several.
And when you see someone who
has a private foundation,
they very well could also be
using a donor-advised fund.
Probably not the same on the flip side,
there will be many DAF donors
who don't also have private foundations.
- Correct.
- But I see them as complimentary
to what is often a more
structured type of philanthropy
at a private foundation.
When you get over into the
use of a donor-advised fund,
you have a lot less overhead
as the donor to worry about.
So you could focus on the
giving and the impact.
But there are reasons that
people have private foundations,
to leave a legacy,
to have that infrastructure
for grant making
and programmatic support
among their staff.
And it's one of several tools.
I agree completely with
what you said at the outset,
that "Rising tides lift all boats."
I think the goal in our sector right now
should be to expand the
pie of charitable giving.
And if that grows certain
tools at different rates,
then all the better.
- Couldn't agree more.
Just to educate myself,
and others that might be
listening or watching,
share with me your thoughts
or your understanding,
which I know is great,
between the DAFs.
We talked about private foundations,
but what about community foundations
and other charitable options?
What does that look like?
- So DAFs are a tool, right?
This is, it's interesting,
because we often talk about
types of organizations,
and types of 501.c.3s,
which are the public charities,
the community foundations,
the private foundation 501.c.3s.
But donor-advised funds are
within those organizations.
They are used to both attract donors
to a specific mission or cause,
but then also used to plan
giving, smooth out-giving,
really increase the
ability for large, medium,
and, now, more and more smaller donors
to more thoughtfully
give their money away.
So as I look at the different
types of organizations,
and then considering donor-advised funds,
I see them as unique,
because they're not necessarily
what the entire structure of
the organization is about,
but they're a way for a charity
to achieve their mission
by enabling other donors
and generous people
to contribute to it.
- Right, so the element of it's a tool
versus it's the entity itself.
Alright, so we'll have
some fun with this one.
If you were gonna build your All-Star team
of charitable options, what would they be?
What would it look like?
Donor-advised funds, obviously,
are on that All-Star team,
but what does it look like?
What's that ranking?
- The donor-advised funds would be the MVP
- No doubt.
- of my All-Star team,
of course.
But more generally, it probably depends
on who is giving their money away,
and how much they have to give, right?
I would say that if it was
one of the largest donors in the country,
a combination of a private foundation
for very mission-specific giving
that could stand the test of time,
and that they would like to endow
to continue impact over the
course of years and decades,
combined with a donor-advised fund,
to have more nimble giving options,
where the donor recommend out
grants at the drop of a hat,
click of a button,
and don't have to go through
that entire grant making process
that you would see at
a private foundation,
as well as the private foundation
using a donor-advised fund, in some cases,
to collaborate with
other private foundations
or other individual donors
on really large-impact projects.
In addition to that, one of the,
probably, sleeper team members,
if that's what sports people call them,
would be planning through
retirement vehicles.
And not just some planned giving,
you know, life income gifts,
but also making sure
that any sort of current
philanthropic giving while living
is accompanied by utilizing an
individual retirement account
once a donor passes,
to have the greatest
impact, greatest legacy,
and probably most
efficient giving possible.
- As I listen to you,
I think about some of the
time we spent together
in your hometown, Washington,
and some of the, you know,
things that were on the table
from a regulatory or
legislative perspective.
You've done great work, you and Integer,
in helping create this voice
in the philanthropic space,
donor-advised fund space.
As a donor-advised fund sponsor,
and for others that are in the same seat,
what can we do to help
you and help Integer?
How can we be most beneficial
to you in this space
as you're telling the story?
- Thank you for asking that. (chuckles)
I'll share you my longer list
after this conversation.
(Ron laughing)
One of the things that we hear
the most from Capitol Hill,
whether it's from members
of Congress themselves,
or their staff,
is, "We need to know what you
are doing in our community."
We appreciate the high-level
national statistics
about how much money
is going in and out of
donor-advised funds,
what its payout rates are, all great,
but what is most helpful
in moving the needle
is more local impact stories.
So not only is it those anecdotes
about a donor-advised fund gift
that had an outsized impact
in a specific community,
or toward a specific issue or project,
but also the visual display
of all of that information, right?
So for example, I've had a
specific staff member say,
"I want a map.
I want you to show me on a map of my state
where you are making grants."
And that's the easiest
way for us to understand
what it would mean if those
grants pulled back in any way.
So that, and more engagement
with the stakeholders
who are closest to a donor-advised fund,
both the donors and the
charitable beneficiaries
who can speak to the value of the tool,
both from the incoming of the gifts,
all the way to the outgoing of the grant,
and what it means for communities
and the beneficiaries served.
- So, you hear that, DAF public?
These are ways that we
can help them help us.
So thank you for that,
and we'll do our best
to try to be beneficial.
That all makes sense,
and, frankly, can be done.
I know that we've on multiple
times, multiple occasions,
"Hey, who are we seeing today?
What impact have we made in that state?
What impact have we
made in that district?"
So the data's there,
we just need to pull it and build the map,
if you will, as an example.
- Right, and I've seen that
even in the annual reports
that staff sponsors put out, right?
A lot of those are aimed toward donors,
or toward the beneficiary charities.
But just shifting that
audience a little bit
to the policy makers
who are really determining the
future of donor-advised funds
could be a tiny tweak
that would move a lot of,
I think, move a lot of
needles, change a lot of minds.
- You've touched on this, and
we've talked about it before,
but how impactful would it be
to have narratives and
stories from the donor,
from that person that wrote
the check in the first place?
What would that look like for you?
- It would all have to
be very genuine, right?
- Yeah.
- There is this
misperception in Washington
that donors choose any
sort of giving tool,
because of a tax reason.
And we acknowledge that
there are marginal effects
of tax incentives,
and how a gift is going to be treated
at the end of the year in April.
- Sure.
- But we also know that most folks
who are giving their money away
are generous in nature, right?
There're a lot better-
- They're giving it.
- Exactly, there are a lot better ways to-
- Get rid of the money.
- to withhold your dollars
from the government,
than to give them away to an organization
where you no longer control them.
So to me, the story from donors
has to come from that genuine
place of desire for impact,
and understanding both what
their mission was as a donor,
why a donor-advised fund allowed them
to achieve that charitable mission,
and the follow onto that,
which is the most important part,
is what was achieved,
and how did they get
to follow that impact,
and see it in their community,
which serves, in most
cases, the constituents
of the member of Congress,
or senator that we're talking to.
- Right.
All right, let's stick with the DC theme.
Lot of activity, work
being done around tax code,
tax implications.
What do you see happening?
Just kind of prognosticate for me,
but what do you see happening
in DC from, you know,
changes in tax bill, tax
implications going forward,
as it would impact philanthropy?
- Well, the current tax bill
that's being negotiated,
which is being negotiated as we speak,
- Right now
- Kinda takes aim at a lot of
charitable dollars and tools.
And DAFs, so far, have been spared
from being specifically targeted.
But the general theme
and tenor of Congress
being willing to tax the nonprofit sector,
and charitable dollars,
to, in some cases,
derive revenue from them,
but in other cases to chill behaviors
that they don't necessarily agree with,
is clear and present.
I do not believe that it's going away
after this tax bill is finalized,
it will rear its head in different ways,
and potentially in bipartisan ways,
now that we've been able to identify
some of the folks on the Republican side
who are comfortable
with taxing the sector.
So looking ahead, I
foresee several attempts
to re-legislate the nonprofit sector
to fit it into more of a box
that the current power
structure approves of.
- And that would be after
the current tax bill,
whatever is going to happen, passes,
you still think that there's more to come,
as far as donor-advised
funds, charitable giving,
philanthropy being on that hot seat?
- Absolutely.
Like I said, donor-advised funds
were spared in this current bill.
Which says to me that
a lot of their critics
will acknowledge that,
and then try to right that, in their eyes.
The current bill that
is likely going to pass,
I would be remiss if I didn't talk about
the impacts of that bill
on charitable giving,
because even though they're not directly
targeting donor-advised funds,
they are targeting some
of the largest donors,
and in turn, that will
impact donor-advised funds.
They're capping the benefit
that you can receive
from itemized deductions,
including the charitable deduction,
for those in the highest income bracket,
which we know
are the largest donors.
- Donors.
- Yeah, donors, philanthropists.
They're also limiting the
deductibility of the first dollar.
So if you are an itemizer,
an itemizing taxpayer,
your charitable deduction will not kick in
until you give at least
half a percentage point
of your adjusted gross income.
So your first dollar, $5, 5,000, $500,000,
won't be deductible.
And that doesn't mean people won't give,
because they're often giving
beyond that 1/2 percent
of their AGI,
but it does mean that there
will be some marginal impacts
on their giving,
or some potential planning
where donor-advised funds may come in.
- So, let's stay with that,
just because I wanna pretend I know math.
If you make a,
your adjusted gross income is $100 000,
and you said 1/2 of a percent,
so 50 basis points on $100,000 is,
so 10%, is 10 grand, one,
okay, so basically $500.
The 501st dollar is what
would be deductible.
- Exactly.
So say you gave $1,000-
- First 500 doesn't matter.
- Exactly.
- You gave 1,000, you
get 500 of deduction.
- Exactly.
- That's a big change.
- Yeah.
And it will trickle into tax planning,
and people's CPAs and financial advisors
will make recommendations
to adjust giving,
to stay consistent with
the cost of giving.
And so how we view it in tax policy,
is any change you make
to the deductibility,
or the incentive to give your money away,
either increases or decreases
the cost of giving a dollar.
And right now, if you are an itemizer,
the cost of giving a dollar away
at the federal level is 63 cents,
because you would have paid
those 37 cents.
- 37 in taxes.
- And now, you'll just
have to adjust that cost.
- Yeah.
Wow, you know, there's
a movie quote that says,
"I was told there'd be no math."
This has quite a bit of math in this.
But it just speaks to the
importance of the topic, right?
And the importance of a voice,
or the voice of charity and philanthropy
for the lawmakers that are making change.
- Absolutely.
And there's many voices right now, right?
There are many tools, there are
many types of organizations.
And what's the beauty of the
nonprofit sector, in many ways,
is that there is a tendency to associate,
and create new groups and coalitions
and associations and
formal industry groups
to represent different
cohorts of the sector.
And where I see a lot of potential
is in these growing areas of use,
like donor-advised funds.
- Well, Sara, as always,
thank you so much for all
of your help and support,
and for helping educate us
on the ways of Washington
and what we need to be doing.
We touched a lot of topics today,
from, you know, the
different types of options,
to the best options, to the impact of DC.
There's a lot of work here,
and a lot of work still left to do.
And thank you for leading the way.
- Absolutely.
It's a great story to get to tell,
so thank you for having me.
- It's plenty fun.
- Thanks.
(upbeat music)