May 05, 2008

Recession and Donor Advisors

by Tim Ogden

This week I’m attending the Council on Foundations annual summit being held just outside Washington, D.C. I’ll be attempting to make several short posts about the more interesting topics discussed.

The first session I attended examined what was termed “the rapidly growing field of philanthropic advisors.” Amongst the speakers was Melanie Schnoll-Begun, Managing Director of Citi Family Office Philanthropic Services. She addressed the field of donor advisory services from the financial services industry perspective, noting that one of the key roles being played by advisors these days is helping clients stung by the global turmoil in financial markets to rethink, renegotiate and retrench on philanthropic commitments they have made. According to Ms. Schnoll-Begun, when people begin worrying about the solidity of their assets, the first thing they cut back on is their giving. Of course, what is true for donors is also true for the financial institutions. Most of the larger private banks are owned by global finance firms which have suffered the most serious (and self-inflicted) wounds from the current turmoil. Just as some donors seem to be retrenching their philanthropy, many private banks are being hit by budget cuts driven by their parent firms and one of the first areas to be cut is philanthropy services. “Budget cuts in the finance industry are real. We unfortunately have lots of company at that unpleasant table.” But she also noted that while “philanthropy is often one of the first to be cut, it’s also one of the first to be refunded” when times appear to be improving.

What makes this situation so interesting is that the session was anchored by the release of a study of philanthropy advisors by Thomas Backer of the Human Interaction Research Institute and underwritten by the Hewlett Foundation. Mr. Backer said that one of the key findings of the study was the importance of continuity and trust-building between donors and advisors. In the current circumstances it would seem that managing continuity and building trust will be a major challenge for private banks who are seeking to engage their clients in their philanthropy.