Lynn Dunston CFP®, EA, AEP®

Wealthy families often receive public criticism for amassing large fortunes, particularly when so many Americans of lesser means have fallen on hard times due to the Great Recession and now a global pandemic. One doesn’t need to look far to find stories of corporate greed and excess, stories that range from price-gouging “pharma-bros” to deceptive opioid practices that have resulted in a national drug epidemic and have contributed to the death of more than a million Americans. Criticism of the wealthy is often warranted, but what these headlines overlook are the many successful families who belie stereotypes of the rich and who actively make the world a better place through generous philanthropic efforts. Some of the world’s billionaires, for example, have united to give away vast sums of their fortunes for good causes, an example of which is known as “The Giving Pledge.” But philanthropy involves more than billionaires giving away fortunes through corporations and foundations; 71% of donations—the vast majority of philanthropic giving—comes from living individual donors. In the midst of such a spirit of charitable giving, wealthy families, philanthropists, and the advisors who serve them are well-served to remember that not all giving is effective giving and that examples of philanthropic failure abound. In an effort to assist the philanthropist in achieving better philanthropic outcomes, this article seeks to revisit two fundamental principles espoused by leading philanthropic advisors and that contribute to effective philanthropy.

Philanthropy Is a Verb

Stephen Covey taught us over thirty years ago that effective people “Begin with the end in mind.”[1] This mantra still holds true today, and when it comes to achieving successful philanthropic outcomes, the first and most important aspect of effective charitable planning is to begin with a robust definition of philanthropy that has such an “end in mind.” Seminal thinkers and advisors in the field of strategic philanthropy, Thomas J. Tierney and Joel L. Fleishman, put it this way: “Thoughtful philanthropy means not only having a clear focus on the challenge you want to tackle, but also having a clear vision of what change you want to see. Whether you call it a goal, an outcome or a solution, it’s important to define the desired end result.”[2] Some philanthropy, while certainly appreciated by grantees, does not effectively ameliorate any real-world problems, achieve an outcome, or change the world for the better, and one could argue that it does nothing more than make a donor feel good.

One common contributor to ineffective philanthropy is what is known in philanthropic advisory circles as “peanut butter philanthropy”—i.e. giving that is so thinly spread across such a wide number of grantees that it fails to effect lasting change. Is this still philanthropy? Yes, and any organization is grateful for even small charitable bequests, but this kind of giving can fail to mobilize resources in such a way that it creates the lasting change the philanthropist might desire. Similarly, Tierney and Fleishman maintain that “Great philanthropy is distinguished not by the sheer size of a gift or grant, but by what it accomplishes.”[3] Great philanthropy, therefore, can be thought of as a verb—i.e., it does something; it gets results. Starting with a substantive definition of philanthropy, one that focuses on a defined outcome, is the first step toward effecting successful philanthropic outcomes.

The Question Is the Answer

A definition of philanthropy that focuses on getting results—what is to be achieved—is a necessary genesis, but the philanthropist might not yet have clarity on what exactly she wants to achieve. To aid in gaining such critical insight, an equally important question is, Why do you want to achieve it? All too often, advisors to successful families want to start by answering How related questions: Should we give through a charitable remainder trust, a family foundation, or a donor advised fund? But the “Why” question is more important, and it is the key question that will aid the philanthropist in discovering what is to be accomplished. In fact, the philanthropist’s “Why” strikes at the very heart of who a person or family is, and it often represents a highly individualized reflection of identity:

Whether you are giving away your money or you are a steward of another’s money, your philanthropy is fundamentally about your values, your life, and your legacy. How you approach your philanthropy offers the most unfiltered manifestation of who you really are as a human being. Generous or selfish. Wise or naïve. Humble or arrogant. Smart or impulsive. For better or worse, philanthropy is a defining act, one that can generate immense joy and a deep sense of personal fulfillment. [4]

Everyone comes to philanthropy with a personal story, and that story is often pivotal in shaping one’s values and beliefs. For the young person who grew up in poverty, overcame street violence, and struggled against family addiction to become the first in the family to graduate from college, deeply held beliefs might involve a high value placed on education, safe housing, and access to addiction treatment facilities. For the entrepreneur who had little support in starting a successful technology business, a personal value could relate to entrepreneurial education and easier access to start-up capital. To assist in discovering one’s personal “Why”, Charles Collier, retired senior philanthropic adviser at Harvard University and nationally recognized expert on planned giving, family philanthropy, and family wealth advising, encourages philanthropists to reflect on the following important questions:

  • What is really important to your family?
  • What are your family’s true assets?
  • What should you do to guide and support the life journey of each family member over time?
  • How wealthy do you want your children to be?
  • Do you feel you have a responsibility to society? [5]

Regardless of one’s personal story, the philanthropist who understands who she is and why she’s motivated to give will find the right causes, more personal philanthropic joy, and will ultimately have a higher likelihood of successful philanthropic outcomes.

Summary

Not all philanthropy is effective. Some philanthropy does more to make a donor feel good than it does to enact change. Effective philanthropy begins with a definition of philanthropy that focuses on results. Philanthropy is a verb—it does something. To accomplish better outcomes, however, one must first come to a deep understanding of the personal values and beliefs that undergird and motivate one’s philanthropy, reflections which will help the philanthropist define the outcomes that best define personal success. Only after these fundamental “What” and “Why” questions are satisfactorily answered should the philanthropist and her advisors proceed to the tactical decisions of how best to implement the philanthropic plan. 

About the Author

Lynn M. Dunston is a recognized expert on financial planning for family business owners. Lynn is a CERTIFIED FINANCIAL PLANNER™ professional, an Accredited Estate Planner®, and an Enrolled Agent of the IRS. As a partner with Moneta, an independently owned wealth advisory firm, Lynn is a business owner himself, and he enjoys creating bespoke estate, tax, and wealth advisory solutions for successful family businesses.

References

[1] Covey, Stephen R. The 7 Habits of Highly Effective People. Provo, UT: Franklin Covey, 1998.

[2] “Your Philanthropy Roadmap,” Rockefeller Philanthropy Advisors, October 18, 2017, https://www.rockpa.org/guide/your-philanthropy-roadmap/.

[3] Thomas J. Tierney and Joel L. Fleishman, Give Smart: Philanthropy That Gets Results (New York, NY: PublicAffairs, 2012), 22.

[4] Tierney and Fleishman, Give Smart: Philanthropy That Gets Results, 220.

[5] Charles W. Collier, Wealth in Families (Cambridge, MA: Harvard University, 2012), 5.

 

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