Wall Street firms push to manage more giving

The newest niche for some Wall Street firms is an unusual one in the for-profit world: helping clients give to nonprofits.

Whether through donor-advised funds - similar to foundations without the legal hassle - or philanthropic advising teams, companies from Morgan Stanley to Merrill Lynch are banking on the fact that there's profit to be made in philanthropy.

The Fidelity Charitable Giving Fund, run by Fidelity Investments in Boston, is the oldest charity fund. Founded in 1992, it's now among the largest charities in the nation, collecting nearly $1.1 billion in donations last year, according to the NonProfit Times annual survey.

Nonprofits like community foundations have provided the same services for years, but without the marketing power or financial authority that Wall Street firms bring.

The trend is a mixed blessing for philanthropy, say many experts. The companies make giving convenient and more visible. As a result more dollars are likely being earmarked for charity.

But they also create another intermediary between the donor and recipient, and may not have the on-the-ground knowledge that, say, a community foundation would have.

"It's a different motivation," says Dot Ridings, president of the Council on Foundations in Washington.

She advises people interested in a donor-advised fund to look to those offered by community foundations first, since they may have better knowledge of the local needs and can connect individuals with charities in a more meaningful way. "That personal touch is largely missing [from] the financial funds."

Others, however, say the benefits of the commercial charity funds extend beyond just adding philanthropic dollars.

"All of this foment and change and for-profit incursion - it's hard to imagine it isn't healthy," says Joe Breiteneicher, president of The Philanthropic Initiative, a Boston-based organization that promotes philanthropy. "Why would we assume that the nonprofit sector is better or holier than anything else?"

The competition is certainly picking up in all aspects of commercial philanthropy. Charles Schwab Inc., T. Rowe Price, Vanguard, and Eaton Vance now offer gift funds. American Express and Morgan Stanley also unveiled funds this month, which they are outsourcing to the National Philanthropic Trust.

Meanwhile, Merrill Lynch, Goldman Sachs, and Deutsche Bank have recently formalized philanthropic advising for high-net-worth clients.

The appeal of donor-advised funds is easy to see. A typical gift fund operates as a charity to which individuals contribute assets for an immediate tax deduction, but distribute the grants when they like.

The companies offering the funds manage the money and require a minimum investment of anywhere from $5,000 to $25,000. The operating fees are typically around 0.5 percent.

They vary substantially in other ways, however, and experts caution that some firms may be better equipped for the realm of philanthropy than others.

"Getting into the softer skills is a challenge for [financial institutions]," says Siobhán O'Riordan, director of Giving New England in Boston. "Now they're having to get into values-based conversations. For advisers who catch on, this can be one of the most creative and rewarding parts of their work." But, "if it's only a business opportunity, it misses the point."

One fund better-equipped to match mission with profit may be the newly launched Calvert Giving Fund, offered by the Calvert Group, a socially responsible investment (SRI) firm in Baltimore.

The company began the fund, says strategic development director Timothy Freundlich, in part because it saw a real need.

Even community foundations, he says, don't offer SRIs as an investment option. Donors can choose to put their money in community investments, for instance, which finance low-income housing and microcrenterprises.

"[The money] has real impact," says Mr. Freundlich. "The fact that it will come back, as an investment, and be given out later - all the better."

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