Advisers help find donor advised funds for clients' charitable dollars

The funds provide donors an immediate tax deduction and an opportunity to guide the funds' investments and their eventual dispersal to charities

Dec 14, 2016 @ 12:13 pm

By Liz Skinner

Financial advisers with clients interested in impact investing may want to help them put their philanthropic dollars to work supporting their social missions before they commit resources designed to secure their financial futures.

One way to use charitable dollars to invest in projects that promise positive social or environmental impacts as well as a monetary return, is through donor advised funds, which provide donors an immediate tax deduction and an opportunity to guide the funds' investments and their eventual dispersal to charities.

(More: A donor advised fund can benefit clients as well as charity)

Donor advised funds, the fastest growing charitable vehicle in the country, don't require 5% annual grant distributions like charitable foundations do. They offer the biggest tax benefits and also allow for anonymous donations.

Certain companies that provide donor advised funds have more experience supporting impactful projects, such as Impact Assets, RSF Social Finance and Tides. The first two of these have low $5,000 minimums.

“Many of our clients are very charitable and get excited about using their donor fund in such a way to further the impact they want to have on the world,” said Michael Lent, founding principal and chief investment officer of Veris Wealth Partners.

It's specific to the particular donor advised fund, but the investment options range from investments that consider environmental, social and governance criteria of public companies to community investment notes and other private investments, he said.

The largest DAF is Fidelity Charitable Gift Fund, which has about $15 billion in assets. It offers one impact investing pool with TIAA-CREF Social Choice Equity fund as the underlying investment.

Scott Nance, head of business development at ImpactAssets, a nonprofit financial services firm that spun off the Calvert Foundation, said people often view their capital differently once they've contributed it to charity.

They want to make sure the funds are secure and have some growth before they are ultimately granted to non-profit organizations, but they aren't focused on attaining a particular rate of return. It seems easier for them to think about investing that capital for good, he said.

GATEWAY TO IMPACT

The experience can yield further interest in impact investing.

“Once investors have opened that fund and have seen the returns they can get, and have seen the opportunities available, they often want to do things differently in their taxable portfolio,” Mr. Nance said.

Helping clients align their charitable gifting with their personal values also can help advisers deepen their relationships with these clients and give advisers more experience with impact investing, a growing space being driven by demand from women and younger investors.

(More: RIAs making investments to attract socially responsible clients)

Assets in sustainable, responsible and impact investment strategies equal about $8.7 trillion in the U.S., according to a US SIF Foundation report released last month. That's up 33% from $6.57 trillion in 2014.

Matthew Weatherley-White, managing director at the Caprock Group, said several of his clients have used DAFs to fund impact investments, and that “experimenting with charitable capital helps expose investors to what impact investing offers."

One of his clients, an 80-year-old widow, collapsed her family foundation into a DAF that is focused on improving the environment and boosting the empowerment of women.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Mar 13

Conference

WOMEN to WATCH

InvestmentNews is honoring female financial advisers and industry executives who are distinguished leaders at their firms. These women have advanced the business of providing advice through their passion, creativity, inclusive approach and... Learn more

Featured video

INTV

Why some retirement plan advisers think Fidelity is invading their turf

InvestmentNews editor Frederick P. Gabriel Jr. and reporter Greg Iacurci talk about this week's cover story that looks at whether Fidelity Investments is stepping on the toes of retirement plan advisers.

Latest news & opinion

Is Fidelity competing with retirement plan advisers?

As the Boston-based mutual fund giant expands the products and services it brings to the retirement market, some financial advisers say the firm is encroaching on their turf.

Gun violence hits investment strategies, sparks political debates with advisers

Screening out weapons companies has limited downside.

Whistleblower said to collect $30 million in JPMorgan case

The bank did not properly disclose that it was steering asset-management customers into investments that would be profitable for JPMorgan Chase.

Social Security underpaid 82% of dually entitled widows and widowers

Agency failed to tell survivors that they could switch to a higher retirement benefit later.

If Finra eases firm oversight of outside business activities, broker-dealers could lose revenue

Brokerage firms would no longer be able to charge reps for supervising nonaffiliated RIAs.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print