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PHILADELPHIA FUNDRAISER CALLS FOR END TO KICKBACK SCHEME IN DONOR-ADVISED FUNDS
Dateline: July 20, 2005 ... Philadelphia, PA
Contact Name: Bruce Makous
Contact Phone: 267-251-9060 or 215-440-9300 x204
E-mail: bruce@brucemakous.com
Web Address: http://www.brucemakous.com
Bruce Makous Says Charities' Payments to Donors Financial Advisors
Violate Donors Rights and Seeks Reform
PHILADELPHIA, PA - July 20, 2005 Today, it is increasingly common
for donors' financial advisors to be paid commissions by charities in
return for bringing their clients' funds into the charities' donor-
advised fund (DAF) programs. Bruce Makous, a professional fundraiser
based in Philadelphia and a noted novelist ("Riding The Brand", 2004),
has authored a paper, "DAF Kickbacks", published in the July issue of
"Trusts & Estates" magazine in which he exposes this practice and
asserts that it creates obvious conflicts of interest that violate the
rights of donors. He calls on charities and financial firms to reform
this practice, and is establishing an organization that will teach
donors about their rights and advocate on their behalf.
Since the early 1990's, DAF programs have been established by
commercial financial management firms with a key goal of retaining
assets under management. When an investor in the commercial firm makes
a charitable contribution, the investor's advisor places the funds
with the commercially sponsored charity, but that charity then retains
the same commercial firm to manage those funds. The advisor receives
credit for the transaction fee for the sale, and may also receive
compensation to continue to manage the funds with the charity. Today,
many non-commercial DAF programs such as those at community
foundations nationwide, are being set up by charities in partnership
with financial firms to emulate the commercial DAF model by utilizing
the same types of asset retention methods.
The problem with these schemes, Makous points out in "DAF Kickbacks",
is that donors do not like to see a specific portion of a charitable
gift going to commercial sales. According to ethical standards for
fundraisers and charities established by the National Committee on
Planned Giving and the Association of Fundraising Professionals,
commissions for solicitation or referral have long been considered
unethical because they create a bias toward one particular charity and
destroy the independence of the advisor.
Some firms and charities have begun to address the problem by reducing
sales fees and charitable fund management commissions. But, according
to Makous, these measures to not go far enough and government
intervention may be needed.
In the article, he says, "Everyone — the general public, charities,
the Internal Revenue Service and the financial profession — has agreed
for years that the donor's voluntary, independent, philanthropic
intent is the precious commodity at the core of philanthropy, both
legally and morally. When that intent is ruined, the charitable tax-
deduction doesn't apply. Providing kickbacks to the donor's advisor
can certainly ruin philanthropic intent."
A body of concerned donors, fundraisers, and financial professionals
is being formed with the mission of providing public education on the
rights of donors, training volunteers and professionals in ethical
fundraising, and developing mutually beneficial relationships between
donors and charities. To learn more about this organization, send an
e-mail to contact@brucemakous.com.
For a PDF version of the full "DAF Kickbacks" article, visit
http://www.brucemakous.com and select "Non-Fiction" on the menu or go
directly to the download with the following link:
http://www.brucemakous.com/Page.asp?ID=125
About the Author
Bruce Makous, MA, CFRE, CLU, ChFC, CAP is Major Gifts and Planned
Giving Officer at the American Association for Cancer Research in
Philadelphia, PA. He has chaired a task force for the Ethics Committee
of Association of Fundraising Professionals International, addressing
the issue of asset retention, and has served on the Board of AFP
International and as President of the Greater Philadelphia Chapter of
AFP. His publications include many articles on fundraising issues.
According to "The Wall Street Journal", Bruce Makous' first novel,
"Riding The Brand", a commercial thriller released in 2004, raises the
question of how much the venture capital fundraising industry
resembles organized crime. He is a native Philadelphian and lives in
his home town with his wife and two daughters.
For more information or to schedule an interview, please contact:
Bruce Makous
267-251-9060
215-440-9300 x204
bruce@brucemakous.com
http://www.brucemakous.com
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