By Lauren Sigman, CFP®, Managing Director, and Karen McClintock, CFA, CIC,  Managing Director

March 21, 2022 – Several months ago, a director who sits on a number of nonprofit boards shared an eye-opening story with us concerning an organization’s recent fund-raising activity. A development officer from a board had received a bizarre call, possibly a hoax, last year from someone attempting to initiate a suspiciously high charitable donation to the board’s organization.

The development officer reported that the caller pledged to make the donation if the board met two criteria: It agreed to not ask for more money and that the organization briefly report on the stewardship of the gifted funds.  The board agreed to comply and, soon after, the money hit their coffers. It was from MacKenzie Scott.

The organization had become part of the roughly 780 charitable groups addressing issues such as racial, gender and economic inequality to benefit from the $8.6 billion Scott has doled out in the past two years—donating more than her ex-husband, Amazon founder Jeff Bezos, has in his lifetime.

With that, we gained a window into the growing force of women fueling a historic transformation of our philanthropic landscape, potentially changing how we donate, screen candidates, choose recipients, and ultimately build legacies.

Scott is joined by Melinda French Gates, who recently said she planned to direct most of her wealth away from the Bill & Melinda Gates Foundation she began with her ex-husband, Microsoft Corp. co-founder Bill Gates, instead slating it for a range of charitable endeavors. Both women emerged as power donors shaping new philanthropic identities after splitting from uber-wealthy husbands.

As financial planners, we have seen the impact of their ascension in our practice, inspiring female clients to think more about their own transformative power. For us, it’s an opportunity to help women build momentum for a new brand of charitable giving, while structuring vehicles to help maximize the impact of their donations.

Redefining how we give—and who we give to

Until now, men have primarily defined the charitable giving landscape. Women, who historically have had a vastly different relationship with money, often approach financial decisions with a different sense of purpose, shaped by their personal experiences with family care, income accumulation, professional opportunity, and social inequities. They assess risk and solve problems differently, and seek rewards based on their own set of motivations.

Women have only recently begun exercising full decision-making authority over their wealth. But they are quickly becoming a much larger source of investable assets, a trend that gained steam over the last few years during the pandemic.

According to a Fidelity Investments study, 67% of women reported investing outside of retirement last year, up from 44% in 2018. Additionally, since the pandemic began, 50% of women said they are more interested in investing, while 42% say they now have more to invest. American women are positioned to become the new face of wealth, expected to control much of the $30 trillion in financial assets accumulated by baby boomers by 2030, according to a 2020 McKinsey report.

Today, as we observe Women’s History Month, we mark the next manifestation of that progress as women begin to take the reins as philanthropists making large-scale donations. It is a pivotal moment as we channel more funds toward causes women are known to support, such as those associated with environmental, social, and governance (ESG) issues, and elevate a new strategic vision and execution-style for philanthropy.

Scott, for instance, embraces a new protocol that incorporates necessary screens but eschews time-consuming bureaucracy in favor of a less onerous grant-making process that doesn’t involve a foundation. It is a more pragmatic approach that unfolds under the radar, defined by an urgency to deploy funds and expedite change among grassroots organizations not typically considered for such awards.

Maximizing impact with the DAF

Some women, many of whom worked for years at successful corporate jobs, seek to emulate Scott with their own portfolio but assume they lack the assets to have a high impact. At Robertson Stephens, we are quick to assure them they don’t need to be multi-billionaires to make their mark on the world.

We point them to a vehicle called a donor-advised fund (DAF) to help efficiently manage their donations. We typically create a DAF for every new portfolio, using the opportunity to introduce the subject of charitable giving. Few women are aware of the tax benefits and convenience it offers, particularly where taxable investments and capital gains that have accrued over time are involved.

With a DAF, a client can create a flexible charitable giving fund that allows them to freely make grants to any 501(c3) organization and take full advantage of the charitable deduction. Clients don’t pay capital gains tax on contributions they make to the DAF, instead, they receive a charitable tax deduction equal to the value of the appreciated securities, recognized over 5 years at a maximum of 30% of AGI per year. In this sense, it’s tantamount to being paid to be charitable! They can use the funds for grants while diversifying their portfolio and redeploying their wealth in a more targeted direction.

It’s ideal for clients who have significant unrealized stock market gains and are reluctant to pay the capital gains tax. It’s also ideal for new donors because it holds grants in one place, ensuring they qualify for the charitable deduction. We can use the DAF to build targeted ESG mandates for the funds as well.

At Robertson Stephens, we have seen how DAFs can spark a desire to give by creating an outlet to pursue personal growth with an easy-to-manage platform. In the case of one client, a retired corporate executive in her 70s with a roughly $12 million portfolio and two homes, it minimized taxes and opened new doors.

We transferred appreciated securities into her DAF without recognizing them as capital gains, making her eligible to claim a 30% tax deduction rather than incurring a 40% capital gain tax, while creating a new source of donor funds and an unexpected outlet for personal growth.

Funding the DAF is an iterative process that is reviewed every year with our clients and allows us to potentially avoid realizing gains from other securities in the portfolio. We can move low basis shares out of the portfolio and into a DAF, transferring money to charity that would otherwise be consumed by capital gains taxes. It’s also a wonderful way to talk to clients about the issues and ideas that they are passionate about.

Clients can give as much or as little to the DAF as they want over time. Additional vehicles can be used in combination with a DAF, including charitable lead and charitable remainder trusts, to allow for even more flexibility. Clients can move along the spectrum of structures as their resources and spending habits evolve.

In our practice, we don’t see women plotting power moves or vying for buildings with their namesake. Instead, they are looking for a deeper level of personal satisfaction when it comes to giving. We see the DAF as a vehicle with a higher purpose, serving as a foundation for women who want to build powerful platforms as emerging high-impact donors. We believe Scott, French Gates and others like them represent the future of philanthropic giving and we applaud them every step of the way.

Lauren Sigman and Karen McClintock are Principals and Managing Directors at Robertson Stephens, a wealth management firm providing comprehensive and innovative investment solutions and wealth strategies through an intelligent digital platform.

Disclosures

Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. Please consult with your Advisor prior to making any Investment decisions. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2022 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere.

Print Friendly, PDF & Email