Novel investment contract features automatic charitable giving

Cornerstone is offering 25% off its fees as an incentive; helps clients ‘keep control of their assets'

Aug 12, 2011 @ 4:02 pm

By Liz Skinner

Cornerstone Investment Services LLC has created an investment contract that allows clients to contribute to their favorite charities automatically, making it easier — and more appealing — for clients to contribute.

The company is offering 25% off its fees for investors in its new Legacy Contract, an actively managed portfolio of investments that will send 2% of each account holder's portfolio each year to one or more charities that the investor chooses.

“Over the years, we've seen a number of people looking for a type of structured way to give charitably,” said John Riley, president of Cornerstone, a registered investment adviser with $125 million in assets under management. “Charitable giving can be very haphazard.”

The benefit of giving philanthropically through this contract is that Cornerstone Legacy clients still own the assets and can at any time transfer them to the traditional investment contract, Mr. Riley said.

“People have trouble giving up control of their assets,” he said. “Here they keep control of their assets.”

Investors can choose one of 16 charities that the company has already researched and determined that they use 90% or more of donations for the cause, as opposed to operating expenses. The charities, which include Global Links, MedShare International, Oxfam America and Save the Children, are mostly global groups that focus on targeting hunger and poverty.

Investors also can direct the 2% donation to another charity that they stipulate.

Cornerstone is hoping to be giving away $1 million a year to charities through the contract by 2016.

Achieving that would require about $50 million in assets, Mr. Riley said.

The firm, which has nine advisers, is just rolling out the contract.

“It's a traditional money management contract, but they are making an agreement to do something for people around the world,” Mr. Riley said. “If someone is philanthropy-minded, this is something they are going to want to do.”

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