Podcast: Speaking of Quality: Wealth Management Insights with Hank Smith
Season 1 Episode 4: Charitable Giving and You (Part 1)
Host: Hank Smith, Director, Head of Investment Strategy at Haverford Trust
Guest: Rebecca Moffett, President, Vanguard Charitable  

Podcast Description: 

In this podcast, host Hank Smith, Director and Head of Investment Strategy at The Haverford Trust Company, speaks with Rebecca Moffett, President of Vanguard Charitable, about best practices for donors supporting a nonprofit. The episode provides insight on restricted versus unrestricted gifts, planned giving, donor relationships, and explores the benefits and differences of donor-advised funds (DAFs), community foundations, and private foundations. They also discuss how individuals can ensure that their charitable giving has the greatest impact, trends in charitable giving, and advancements in technology in the charitable giving space. This is the first part of a two-part series on charitable giving.

To learn more about The Haverford Trust Company, please visit https://haverfordquality.com/ 

Episode Transcript: 

Maxine Cuffe: You’re listening to Speaking of Quality: Wealth Management Insights with Hank Smith. A podcast by The Haverford Trust Company.  

On Speaking of Quality, Hank chats with authors, influencers and wealth management experts to bring a sense of clarity and calm to the complexity and stress of personal finance. 

And now – here’s your host, Hank Smith.

Hank Smith: Hello, and Welcome to Speaking of Quality Wealth Management Insights. I’m your host Hank Smith, Director and Head of investment strategy at the Haverford Trust Company. On this podcast, we explore topics ranging from quality investing, retirement resilience, stock market trends, estate planning, behavioral psychology and more. This episode is the first of a two-part series where we delve into charitable giving and how individuals and families can make the most impact with their philanthropic dollars. Whether you’re just getting started with your charitable giving journey, wondering whether nonprofits prefer restricted versus unrestricted gifts or looking to structure your planned giving strategy, this episode should give you some great tips.

Joining me today is Rebecca Moffett president of Vanguard Charitable, one of the nation’s largest nonprofits, and grant makers and sponsor of donor advised funds. Rebecca is also the host of the Value In Giving podcast, which brings together leaders from nonprofit organizations and community foundations across the world. of philanthropy. Rebecca, welcome to the show.

Rebecca Moffett: Hanks, thank you so much for having me.

Hank Smith: Rebecca. Can you tell our audience a bit more about your organization and its mission?

Rebecca Moffett: Absolutely. Thanks so much. Hank. Vanguard Charitable is one of the top grant making organizations in the United States. And we achieved that through our sponsorship of donor advised funds. We have at this incredible mission, which is to increase philanthropy and maximize its impact over time. And over the last 25 years, we have given away more than 15 billion dollars to more than 100,000 different charitable organizations at the recommendation of our donors.

Hank Smith: That is, that’s absolutely great. I’ve always believed that. One of the secret sauces of what makes this country so great is philanthropy and charitable giving. The United States doesn’t like no other country, like no other developed country, or Western civilization, and we’re very, very unique in that way. And contrary to what most people think it isn’t just the Rockefellers, the Fords, the Gates, the big names, it’s actually the average person and doing it through church giving doing it through other charitable organizations and through organizations like yourself. It is just absolutely phenomenal. So let’s talk about exactly what a donor advised fund is. The acronym is DAF. So moving forward, we’ll be saying that and how does one set it up and just kind of give us a little bit of the mechanics?

Rebecca Moffett: Absolutely. And it’s a great question, Hank, because donor advised funds are one of the most popular and growing charitable giving tools, and so many people know so little about it. And so, in its simplest terms a donor advised fund or DAF, as you had mentioned, is a flexible and tax efficient way to give to your favorite charities. Essentially, it’s an investment account for charitable giving, that is designed exclusively to invest, grow and then give assets to charities, both today and tomorrow, tomorrow for meaningful and lasting impact.

And how it works is that once a donor opens up an account and contributes assets, a donor receives an immediate tax deduction. And then the donor can choose to immediately make grants to charities that you believe in, or they can invest those assets, allowing them to grow tax free over time and make a greater philanthropic impact. at Vanguard Charitable we provide an online platform that is incredibly easy to use, and enables donors to recommend grants to their favorite organizations really at any point in time. And we have had donors who you know here campaign here in need and within minutes can log in and then make that grant recommendation and have that grant go out for immediate support. It’s important to note that we do all of the research and due diligence on the grant recommendations. And that really ensures Hank that our donors are protected, that they’re not giving to any scam organizations. And then we send the payments and all of the details to the organization’s, so it’s a really tax effective way to give and it’s a really simple and easy way to give that enables donors to make a really planful and thoughtful approach to their favorite causes.

Hank Smith: So how many DAFs are you actually managing at Vanguard Charitable and share with us kind of the average size of a donor advised fund at Vanguard Charitable?

Rebecca Moffett: Yeah, so at Vanguard Charitable, we have about 28,000 accounts. That represents more than 50,000 donors because usually an account has a couple of people who are advising on that account. To  pen a donor advised fund here Vanguard charitable we have a minimum contribution of $25,000. But we see an average of a little more than a half million dollars in an account. Donor advised funds are extremely accessible across a number of different providers. I think it’s important to know you’re here at Vanguard Charitable we are a national organization that provides donor advised funds. You can also access them at community foundations, religious organizations, educational institutions, as well and I’ll have a little bit of a different setup.

Hank Smith: Go into that a little bit about how Vanguard Charitable differs from a community foundation or a private foundation?

Rebecca Moffett: Absolutely. So, Vanguard Charitable, as I had mentioned, we consider ourselves a national organization. And so we have a platform we were founded by Vanguard, the investment company 25 years ago, we are a legally separate charitable organization that does one thing right, which is to sponsor donor advised funds, and our investments that we offer to our donors in order for those charitable assets to be maximized, are primarily built off of the Vanguard investment platform and the Vanguard values of considering low cost, high quality investment options. We have a platform then that takes grant recommendations to any 501-C3 charitable organization across the United States and we are a national grant maker in that in that mode. Community foundations have much more of a community focus, they play a really critical role in the philanthropic sector and they’re able to work a little bit more closely with their donors on the specific needs of that community and really guide them in that way. private foundations have a bit of a different setup. And so often what we see is individuals who have private foundation could also have donor advised funds in order to be able to complement their charitable giving. So private foundations have a little bit of higher fees because there’s some management costs and ongoing administrative expenses that are required.

But with the price foundation you could include family members in that giving and have those family members be compensated. And you can also do some granting to specific individuals that you’re unable to do with donor advised funds. With a donor advised fund though, an individual is able to have access to some lower fees some easier administration because we take a lot of that on and they’re able to access some anonymous giving as well which you cannot access with a private foundation.

And so often we’ll have individuals who have a private foundation and use that foundation for some very cost specific needs. They have a board they come together they’ve determined the organizations that they’re going to support under that cause and then have some donor advised funds so they can do some off mission granting or do some anonymous giving so that they just aren’t being you know, noted by the public or by charitable organizations for something that may be a little bit different from their cause in the private foundation.

Hank Smith: So Vanguard Charitable has been in this field for 25 years you’ve seen growth, your national firm, how do you market to continue getting more momentum and continue growing?

Rebecca Moffett: That’s a great question. You know, a lot of it, Hank is in educating around the tool and the benefits of donor advised funds and helping individuals to really understand what those benefits are. And we do that both with individual donors who have the means to be giving to a donor advised fund into Vanguard Charitable as well as to financial advisors, lawyers, accountants, anyone who may be advising individuals as well.

And I think if we could take a moment maybe on what some of those benefits are, because they’re really incredible. And that’s what helps individuals understand what this philanthropic tool is and how they can use it over the long term. And there are so many benefits, but our kind of marketing strategy boils down to, I think, kind of three different points, that are really important.

The first is that donor advised funds is charitable giving tool enables donors to separate their financial or tax driven decisions from their more emotional giving decisions. And so by using a tool where you can fund a donor advised fund during a time where you have a tax event, you can make the greatest decision on what assets to bring to the charitable sector through this donation to a donor advised fund. But then Hank, you could take all the time that you need to research causes, talk to trusted sources, and get to know organizations that you’re looking to support and really be able to spread that granting over time. And we find that that enables donors to make much more thoughtful giving decisions. So I think that’s the first point and helping donors to understand the power of separating those two decision points.

I think the second piece is to really help donors understand that we take all of the administrative burden out of giving, giving, it’s hard. It’s hard on a number of levels that decision making is hard, but a lot of the logistics are difficult as well. And by giving to a donor advised fund, you’ve one tax receipt, right? You can give a lump sum to a donor advised fund and receive one tax receipt for that so you’re not keeping a list of all of those different grants and smaller grants that you’ve given to charitable organizations. Then you have access to incredible resources to really help you with your giving. And then my team takes on all of the work to research grants to ensure that they are meeting all of the IRS guidelines, ensuring donors are protected. And so that takes all of the more logistical administrative work off of donors, so that they can really spend their time being thoughtful in how they want to make their philanthropic impact, which is an incredible benefit to individuals.

And I think lastly, Hank, is that we try to share the point that donor advised funds enable donors to give so much more over time. So, we have experts on a contribution side that can take more complicated assets and bring them into the charitable sector. And then we have this really low cost, high value investment strategy that enables those assets to be amplified over time in a tax-free way. As an example, we have one donor who started with us 25 years ago, who has been able to give away three times what they put into the death which is just incredible to have seen that philanthropic impact. So, we try to focus on those three messages to help individuals see the power that this tool can bring to them in their philanthropic impact.

Hank Smith: If you pick the right investments, they can grow faster than the amount of charitable giving you’re giving and it’s a win-win.

Rebecca Moffett: Absolutely. Absolutely. And the end of the day, it’s to charities who are benefiting and what an incredible benefit to those organizations to be able to get that sustainable support.

Hank Smith: What are some of the trends you’re seeing in charitable giving today? Maybe that’s a little bit different than when you started a number of years ago?

Rebecca Moffett: Yeah, so that’s a great question. So I’ve been at Vanguard Charitable for 19 years, nearly 19 years and when I entered this space, it felt like giving was fairly predictable. So donors tended to give to their alma mater of their religious organization that they were affiliated with in maybe a health or medical institution that impacted a family member in a really wonderful way. And over time, I have seen donors questions to us or their desire for greater access to information become much more sophisticated. They are taking the time to really understand the causes that exist, the gaps that are in our society, and how they may be able to impact those in a lot of different creative ways. And so, I think there’s really three areas and three trends that we see kind of emerging from those different behavioral trends. The one is simply a desire to have more access to information donors who maybe had their favorite set of organizations before are continuing to give to those but they want to learn about new organizations. And so we’re providing some more technology driven tools, like a tool called NAVI the nonprofit aid visualizer to help them fund organizations through some really unique mapping technology. I think the other trend we’re seeing in terms of that creative granting is how can I amplify my impact and so we have donors who are now engaging in some more creative types of granting options that we have.

One is called recoverable grants, where a donor can grants to an organization in order to bridge a timeframe where that organization may be waiting for funding. Whether it’s from the government or another commitment in order to help that organization get started on something, and then those grants can be recovered for further impact. We have a portfolio way of granting through our smart funds offering which is really interesting as well, and that enables donors to really focus on a cause area and know that their dollars are going to policymaking infrastructure as well as direct service. But then the last trend and this is a really important trend is we’re seeing donors really embrace this concept of unrestricted giving, for more trust based philanthropy, and this is one that’s really meaningful to the nonprofits, who nonprofits especially now want to be able to deploy their dollars in the ways that they see as most critical and by receiving funds from grant makers like Vanguard Charitable and other grant making organizations that don’t have a restriction around them, they’re able to really move the dial on those areas in their organization that they know best. And we have seen our donors really embrace that more than 50% of all grants going out from Vanguard Charitable are now unrestricted in nature, which is incredible.

Hank Smith: Based on the first part of your perspective, I would have said 19 years ago when you started Vanguard Charitable, the majority of giving was unrestricted, but then there was a trend toward restricted giving. And now you’re saying that it’s moving back toward unrestricted, which from the receivers point of view is the ultimate.

Rebecca Moffett: It is the ultimate that’s for sure. And especially in times where there’s economic uncertainty, they are these organizations are being hit with different challenges that didn’t exist 510 years ago, and so to have those dollars that they can deploy towards those to fill those gaps so that they can continue to achieve their mission, the unrestricted giving is just so critical.

Hank Smith: Serving on several nonprofit boards as I’ve had over many years and currently do, I can attest that unrestricted giving is very, very powerful and very optimal for the nonprofit. Although we will take restricted giving as well. And a lot of that, particularly with educational organizations is to support faculty salaries, to support financial aid, that is really critical for educational organizations. This is very interesting survey that was done by Harris Poll on behalf of Vanguard charitable recently 6% of American donors with charitable giving budgets have said rising inflation has had no impact on their giving, or cause them to increase their giving over the past 12 months. And in fact, nearly one and four have said they’ve increased their giving that just speaks so much to what we started talking about the secret sauce of what makes this country so great. That even with rising inflation, people are still supporting charities, and often increasing  that support. And I would say that’s probably true regardless of where tax policy I know there are some people that believe if you lower taxes, that’s going to impact charitable giving negatively because you’re not going  get the deduction. But I don’t think history of  bears that out.

Rebecca Moffett: I couldn’t agree more, as you stated so beautifully giving is built into the fabric of the American culture which is an incredible thing to see. And the tax incentives help to encourage individuals with how much to give but I don’t believe that it is the tax incentives that are what is creating, giving right as you suggested as well. It is certainly an important piece. That giving would absolutely still be occurring, but it does certainly help to enable the amount of giving enable individuals to take that sit back and say, What’s in my portfolio that I could be bringing into the charitable sector for the benefit of these charities. 

I do think what’s so beautiful about this survey that was done is it highlighted how many individuals are taking the step in their calendar year to put that plan or put that budget together of how much they want to give to charitable giving or just make that a part of their budget planning for the year and that has held so many individuals accountable to ensuring that even when times are really difficult, they are incorporating that as a core value that they have as a family and even when their own economic situations may have shifted. They’re not taking their eye off of the needs of the philanthropic sector. And so it’s really inspiring to see that behavior from individuals across the country. And we have seen that at Vanguard charitable on both the contribution and the granting side from the nonprofit point of view.

Hank Smith: I think they’ve done a much better job with a case statement as for why donors should be giving to them and really defining their mission and so probably a much better job than 25 years ago.

Rebecca Moffett: I couldn’t agree more and couldn’t agree more.

Hank Smith: Tell us how individuals can work with their financial advisors to optimize their charitable giving?

Rebecca Moffett: Well, I think it does start by really thinking about a plan. Right and the first conversation and sometimes this is a little bit more of an emotional conversation with our professional advisor is what are your philanthropic goals? What is the type of impact that you’re looking to make? And how like those goals be achieved over time. And I think once you have the conversation about your goal or your mission in your philanthropic legacy, then you can take a step back and say, Well, what given tool is best for me.  When I look at the tax strategies, I have the assets I have in the control I’d like to have what’s the right type of giving tool that might meet both of those. And once you can do that then with your financial advisor, you can take a look at your portfolio and identify the assets that you have. Hopefully some which are appreciated in nature and maybe some that are a little bit more complex that you can bring into the charitable sector and really benefit those charities and if you’re using a tool like a donor advised fund, again, we can make that really easy and taking those assets in making them liquid so that they can be easily rentable in the form of a check so that those organizations can put it directly towards their mission. And then the donor and the financial advisor can sit back and think about the investment strategy. What is the investment strategy that again aligns with that philanthropic mission that they have and how might they want to preserve some principle recommend grants from growth? What might that mix look like over time, and then blue last really two things are who might they want to involve in their giving? Just to have that conversation with your professional advisor? What experts do you want included in your giving decisions, what family members what friends might you want to include in those giving decisions both today, as well as have that plan for down the road as well in terms of succession planning. And then it’s what’s your cadence of giving? And how might you support your favorite organizations on a consistent basis? And how might you then support those organizations or needs that you become aware of maybe a crisis that’s occurring or a need in your community? And how are you going to use that commitment to philanthropic dollars over time

Hank Smith: Speaking about the future of charitable giving, we are at the cost, or at the start of with the aging of the baby generation of witnessing the biggest transfer of wealth in world history. And so, one has to be very optimistic about the future. And hopefully, organizations like Vanguard Charitable are engaging those younger generations with this transfer of wealth that have some of that go to the nonprofit community.

Rebecca Moffett: Absolutely. Interesting, Hank, I just had a conversation with a donor who has some adult children who are very involved very involved together in their kind of philanthropic strategies. They have different cause areas that they’re focused on. But we spent nearly an hour talking about the difference in philanthropic behavior behaviors amongst the generations of individuals and a couple of things that are important to the next generation who are coming into all of this wealth is ease of giving. They need it to be easy and donor advised funds plays a critical role and being able to solve that need and ensure that these individuals can give and they can give quickly and they can give with access to information.

The second is really ensuring that there are enough resources out there so that individuals can research different organizations, what they’re doing, how they’re approaching their goals and ensure that individuals can monitor impact in a number of different ways and they have access right to the numbers or goals or subjective information so that they can evaluate how they may want to make an impact later on. But it is absolutely an important generation that we continue to be in front of.

Hank Smith: Are there any advancements in technology in the charitable giving space that we should keep an eye out for and then specifically with all the attention being given to AI maybe it’s too early to have a view as to how AI might have an impact, positive or negative. But there’s got to be a lot of technology, that is helpful.

Rebecca Moffett: Absolutely There’s a huge focus on how grant making organizations can continue to provide information to their donors and to the charities through technology. Two ways that we’re really looking at this is one we have been actually testing out this tool called NAVI a nonprofit aid visualizer which is a mapping technology and it enables donors to find organizations right now it’s a tool based on the cause hunger and homelessness. And they can search for organizations across a number of different sub cause areas in geographic regions that are really meaningful to them. Once they find the organization then there’s ways to do additional research as well on those organizations and so more tools like that are being requested so that donors can just become more aware right of what their options are and then begin the relationship building side with the charity as well.

On the grantee side, Vanguard Charitable, recently went into a partnership with Pay Pal to create a sector wide solution to deliver grant payments electronically and so to date, many grant making organizations have been sending checks to grantees, and we will continue to send checks for those grantees that prefer them. But what we learned especially during COVID is we needed another scalable way to send payments to the grantee organizations. And this relationship with Pay Pal has really been wonderful. And it’s like I said something that many different grant makers are going to be taking on in order to get those payments much more quickly. So, I think we’ll see technology advancements in both the information side and helping to guide donors with their giving decisions, and then the information that we’re able to provide our grantee organizations as well.

Hank Smith: Well, Rebecca, thank you so much for joining us today and in sharing your insights on charitable giving and helping educate our listeners. T his has been a fantastic 30 minutes.

Rebecca Moffett: Well, Hank, it’s been an absolute pleasure. Thank you so much for having me.

Hank Smith: Until next time I’m Hank Smith, stay bullish!–

Maxine Cuffe: Thank you for listening to this episode of Speaking of Quality, Wealth Management Insights with Hank Smith.  

To hear future episodes of Speaking of Quality, please subscribe on Apple Podcasts, Spotify, Google Podcasts, or wherever you listen to podcasts.  To learn more about The Haverford Trust Company, please visit www. Dot Haverford quality dot com

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