3 Things Your Community Foundation Should Communicate Now
Posted by Zach Hochstadt on August 15th, 2018
Posted in Blog, Foundations, Fundraising Case, News, Storytelling Tags: communication, communications, Foundations, story
Recent articles in the New York Times and Fast Company about the excesses of some Donor Advised Funds point to a likely new reality for community foundations: that when a more reform-minded Congress is next seated, new rules will likely be put in place that will dramatically change the landscape for community foundations.
We have worked with various community foundations over the past 15 years and know that Donor Advised Funds offer a number of benefits. They simplify giving for large philanthropic donors, create opportunities for inter-generational giving, offer tax benefits for those who may have received a large windfall, and enable someone who may have received a large one-time payout the capacity to become a life-long philanthropist.
Critics argue that Donor Advised Funds hold dollars outside the philanthropic system and that because those monies are often invested in mutual funds, through interest and fees they benefit investment firms and fund managers far more than those who need it most. They contend that Donor Advised Funds are simply a tax dodge, a profit center for investment firms like Schwab and Prudential, and a threat to community institutions like the United Way.
If you lead communications for a community foundation, here are three things you should be doing right now to ensure you shape the future reputation of your organization.
1.Differentiate
Traditional community foundations would be well served by differentiating themselves from those created by investment firms. Begin referring to the Prudential and Schwab philanthropic funds as “profit-driven donor advised funds,” as opposed to “donor advised funds focused on community needs,” and correct journalists and others who seek to lump you all into the same bucket. Maintain a (rightful) differentiation between those institutions that were created by their communities for their communities (like yours!) and those that were established by corporate investment firms in order to continue to hold on their client’s fortunes.
2. Educate
Many Americans have lost sight of the importance that communal institutions play in directing large-scale change in our communities. Research shows that while Greatest Generation givers were highly likely to support intermediary institutions like the United Way, younger givers, particularly Millenials, want to be more connected to their giving. They want to give as directly as possible and see the impact of their gift.
Yet with increased communication and opportunities for participation (particularly for those younger givers) your community foundation can make the case for its importance in your communities. It takes large communal institutions to shape agendas, guide policy, and bring together diverse voices.
Now is the time to invest in improving your annual report, newsletters, video storytelling, social media, and in-person outreach. Show how your institution is driving the agenda to address large-scale issues like poverty, homelessness, and social equity. It’s one of the key ways you set yourself apart from the “profit-driven” institutions.
3. Lead
There’s an old axiom that if you aren’t at the table, you’ll be on the table. If you want to avoid being the target of criticism, lead that criticism.
Lead the discussion about the excesses, failures, and drawbacks of Donor Advised Funds. Guide the agenda for change by requiring fund holders to invest a portion of their dollars in community loan funds, social impact bonds, and other community-investment tools. Encourage faster pay-outs from funds, and highlight opportunities to trade larger financial investment returns for stronger social investment returns.
I believe in the positive role community foundations can play in guiding large-scale change in our communities. Yet, without strong leadership, great communications, and careful differentiation, community foundations will be lumped together with those who may be using the same tools for the wrong reasons. Let’s not let that happen.
Zach Hochstadt is a Mission Minded Founding Partner and runs Mission Minded’s Denver office, leading the company’s creative teams in the areas of message development, writing, graphic design, and web design and development.
See all posts by Zach Hochstadt
Zach, you make some thoughtful points.
However, given my many years in the community foundation sector, I have a few thoughts that you might find interesting to consider.
1. In terms of differentiating community foundations (c.f.’s) from the larger charitable financial services funds – this is certainly something c.f.’s do when they market themselves to potential donors, and I think it is important. However, in what I’ve seen on the policy front, lawmakers have not been interested in the differentiation. DAFs are a financial product to them, no matter who they are offered by, and it would be an uphill battle to shift this perception. Is it a battle worth fighting? Possibly, though I weigh this against the value of presenting a united front in favor of the product itself, with the resources of Fidelity, Schwab, etc. to help make the case. Over the years, traditional community foundations have been relatively ineffective at working together to lobby.
2. In terms of leading the criticism – if c.f.’s were able to take this kind of calculated risk as an organized group on the national level, I think it might be successful. But as I said, they have been ineffective at joint efforts. And they often disagree among themselves about the importance and positioning of DAFs within the role of a community foundation. The largest community foundation is Silicon Valley – and they could be described as one of the biggest “offenders” in terms of having huge tech money “parked” in funds. For instance, I believe Mark Zuckerberg has over $500 million there. (FWIW, I would personally disagree with this assessment of Silicon Valley CF and its donors – my sense is that Mr. Zuckerberg has ideas about how to deploy those dollars and will be doing so in short order – he being someone who makes big bets on social issues.) My other thought on this topic is that the “excesses, failures, and drawbacks” to which you allude are a subject of debate. If you compare DAFs to private foundations, they average triple the payout rate (around 15% vs. 5%) and for most of these big donors who draw attention with mega-gifts, private foundations are the other form they would have used. In that case, it’s not just financial advisors but also lawyers and tax accountants who receive a portion of the charitable assets (as you can count all of those expenses within your 5% payout for a private foundation). In my mind, let’s keep these charitable dollars as close to liquidity as possible – and do a MUCH better job of making the case that they could make a difference in the community. Which leads to my final thought…
3. If I were advising a community foundation on this topic, I’d do a couple of things. First I would tell them to get in communication with their donors about how and where to deploy their resources to meet community needs – now and in myriad interesting and impactful ways. Not just as you describe in #2 – by telling the foundation’s own story – but in direct conversation with those donors about opportunities to make a difference in areas they care about. Then, I’d encourage the community foundation to educate their donors about how to respond to criticism on DAFs. These individuals could become the most effective lobbyists for DAFs if provided with the right messaging.