In today’s socially-conscious age, philanthropic giving is at an all time high. In 2022, individuals gave $319.04 billion, representing 64% of total giving, and foundations contributed $105.21 billion, representing 21% of total giving. This can be attributed to an increased desire among individuals and families to make a meaningful impact on the causes they care about.
However, knowing how to maximize the use of your philanthropic dollars can be difficult, whether you’re just beginning your philanthropic journey or you’re a seasoned philanthropist. The giving landscape is constantly changing, and creating a well-designed giving plan is a time and resource-intensive process that not all individuals can tackle on their own.
This is where an experienced philanthropic advisor can help. In this guide, we’ll explore how a philanthropic advisor can support your dreams of a better tomorrow:
- Philanthropic Advising FAQs
- Types of Charitable Giving that Philanthropic Advisors Support
- How to Hire the Right Philanthropic Advisor
You deserve to give with the confidence that your donations will make the greatest impact possible. See how a philanthropic advisor can help you build a legacy and achieve your charitable goals.
Philanthropic Advising FAQs
Before we dig into how you can collaborate with a philanthropic advisor to become a more strategic donor, let’s make sure you have the basics down. Here are some common FAQs to get you up to speed on philanthropic advising.
What is a philanthropic advisor?
A philanthropic advisor is an expert consultant who supports individuals and families in developing a purpose-driven strategy for their charitable giving. From setting the groundwork for your charitable initiatives to revamping your existing giving plan, an advisor can meet you wherever you are in your philanthropic journey to amplify your impact.
How does a philanthropic advisor support your giving plan?
A philanthropic advisor is a trusted partner who understands the giving landscape and can identify strategies to bring your goals to life. Specifically, an advisor can work with you to:
- Establish your values, mission and vision. You may want to begin your philanthropic journey, but have you nailed down which causes you’re most passionate about? What about your priorities and vision for the future? As an individual donor or grantmaking officer at a foundation, having a strong understanding of your mission will help you focus your resources on causes and initiatives that truly matter to you. A philanthropic advisor will help you get to the heart of your purpose and ensure your charitable activities align with your goals.
- Set up grantmaking systems, priorities and protocols, including application, review and reporting processes. As part of supporting you through grantmaking, your philanthropic advisor will help to curate and vet nonprofit causes and organizations who fit the field of focus for your grants. If you’re already engaged in grantmaking, your advisor can help you understand whether your grants are supporting your goals and suggest ways to optimize your grant strategy.
- Develop an external communication strategy for your private foundation, including supporting you through public relations and digital media needs. Your foundation has many different audiences you need to communicate with, including the public, donors, policymakers, grant-seekers and grantees. A philanthropic advisor can help you develop branding guidelines for your foundation and establish a framework for communicating regularly and effectively with these distinct audiences.
- Strengthen your foundation’s leadership by facilitating board meetings, leading board training sessions and helping you navigate succession planning. A high-functioning board that has a clear understanding of their responsibilities and your overarching purpose will make it easier for your foundation to carry out its mission and navigate any challenges that may occur. A philanthropic advisor will also make sure your foundation is always in good hands by setting up a clear pathway for new leaders, such as future family generations, to govern your organization with confidence and strategic focus.
- Keep your entire team accountable and on track to achieving your philanthropic goals. Your philanthropic advisor will help you create a dynamic plan of action and identify key performance indicators so you can assess your individual or foundation’s progress. As part of the grantmaking process, your philanthropic advisor will monitor your rewards, including the steps your grantees have made since being awarded funding and the subsequent impact in the community.
Your philanthropic advisor will also work alongside your other trusted advisors, including certified public accountants (CPAs), estate attorneys and wealth advisors to ensure your goals align with your budget and your charitable initiatives are financially sound.
What type of donor needs a philanthropic advisor?
You could benefit from working with a philanthropic advisor if you fall under any of the following categories:
- You’ve come into a significant amount of wealth, such as through family inheritance, selling a business or signing a professional contract, and you want to create a structured philanthropic plan to ensure your newfound fortune is used effectively for charitable purposes.
- You’re a retiree who wants to leave a meaningful legacy by supporting causes you’re passionate about, but you’re unsure about how to best involve your children and grandchildren in charitable giving decisions.
- You’re a philanthropic-minded individual who wants to leverage your resources and network to address a specific social issue, but you lack the expertise to identify and collaborate with the most impactful organizations in that field.
- You’re part of a charitable family that already has a foundation, but you need help ensuring your philanthropic activities align with your overarching goals.
- A significant event has affected your family, such as a birth, marriage or death, and you’ll need support restructuring your family foundation and charitable giving plan.
- You’ve been identified as the next leader of your family foundation, but you don’t have the amount of time needed to lead philanthropic activities and manage relationships with nonprofits.
The bottom line is a philanthropic advisor can be an ideal partner to navigate charitable giving, ensure your decisions are making a sizable impact and set up the right systems and internal structure to build a legacy. If you need help with any part of philanthropic giving, an advisor will be an invaluable asset.
Keep in mind that a philanthropic advisor will take a collaborative approach to maximizing your investment of time and money, meaning that you (and your team) need to be receptive to their expertise and willing to work closely to meet your goals. Before you start the hiring process, discuss with your trusted advisors or other family members whether they’re willing to readily engage with a philanthropic advisor and make the most of this commitment.
Types of Charitable Giving that Philanthropic Advisors Support
Philanthropic giving can take many different shapes and forms. Here are a few of the different kinds of charitable giving that a philanthropic advisor can walk you through to enhance your impact on the community:
1. Grantmaking
Grantmaking refers to the creation of non-repayable financial rewards for nonprofit organizations or individuals to advance various charitable causes. The amount awarded, application process and review process are all factors that are determined by the grantmaking individual or organization.
Philanthropic parties that engage in grantmaking and can benefit from philanthropic advising include:
Private family foundations
Private family foundations set up a framework for families across generations to engage in philanthropic giving with a unified vision. Typically, these foundations are non-operating, meaning that they achieve their philanthropic goals by distributing grants to nonprofits and charitable programs.
Grants issued by private foundations can be broken down into two main categories:
- Responsive grants, which are created with the intention of addressing a specific, urgent community need. For example, a private foundation might create a grant offering $5,000 to organizations working towards solving local homelessness or mental health crises. Responsive grants are favorable for new grantmakers who are still figuring out their philanthropic vision.
- Strategic grants, which are created to address a longer-term purpose that align with the grantmaker’s strategic initiatives and values. For instance, let’s say a private foundation has a strategic focus on improving educational outcomes in underserved communities. They may award a $20,000 grant over a three-year period to support the expansion of a nonprofit’s after-school tutoring program in several disadvantaged schools in the community.
Running a private foundation involves a lot of moving parts; in addition to adhering to IRS procedures, these foundations need to have systems and structures in place to:
- Guide their grantmaking, including deciding which causes they give to and which charities are eligible for grants.
- Manage their budget, including how much funding can be allocated to grants on top of other expenses like marketing costs and employee salaries.
- Smoothly facilitate the transition of new board members and foundation leaders.
- Establish an external communication strategy with grantees and the general public about available grants.
- Establish an internal communication strategy to ensure all team members are on the same page.
If you’re thinking of starting a foundation or have already launched one, you know that these organizations give you the opportunity to leave a long-lasting impact on the community and make philanthropy a part of your family’s ongoing legacy.
However, they are also a lot more hands-on than other philanthropic giving vehicles and require ample time, planning and energy to sustain and manage effectively. This is why many foundations seek professional guidance and support from philanthropic advisors, who are well-versed in grantmaking and will ensure your foundation’s grant strategy aligns with your purpose.
Individual donors or families with donor-advised funds (DAFs)
A DAF is a charitable investment account that serves to benefit the causes a philanthropist cares about and is managed by a sponsoring organization. Over time, an individual donor will contribute cash, securities or other assets to the giving account and receive an immediate tax deduction. When donors know who they want to give to, they can recommend grants from their DAF be donated to these organizations.
Because these giving accounts are managed by organizations such as a community foundation, charitable arms of financial service advisors and single-issue organizations, they are a flexible giving option for philanthropists. DAFs are also tax-advantageous and offer a largely hands-off approach to carrying out charitable plans.
As a result, DAFs are growing in popularity and are making waves in communities worldwide; in fact, it’s estimated that aggregate grant payout rates from DAFs have exceeded 20% in every year on record.
If you’re interested in creating a donor-advised fund or want support enhancing the impact of your DAF, a philanthropic advisor can help you design your grant strategy and identify the right sponsoring organization to trust your funds and charitable efforts with.
Community foundations
Community foundations are funded through the public and, like their name suggests, are designed to serve the needs of the surrounding community. Similar to private foundations, community foundations often engage in grantmaking to support local charities and address pressing issues in a certain geographic area.
Along with issuing grants, community foundations typically:
- Help manage donor-advised funds (DAFs) for philanthropists
- Provide assistance to nonprofits, such as training programs
- Establish scholarship funds for students in the immediate geographic area
- Run community programs to support their mission, such as education initiatives like adult literacy classes
Community foundations oversee a wide range of charitable funds contributed by individual philanthropists, families and businesses, with some of the funds being restricted to certain purposes or causes while others are unrestricted. The board of directors are therefore responsible for ensuring that they disperse these funds in accordance with all laws and IRS policies.
Grantmaking officers and board members of a community foundation can benefit from the insight of a philanthropic advisor as they offer strategies for enhancing the foundation’s overall impact and provide expertise in identifying high-impact grant opportunities. Philanthropic advisors can also assist in facilitating effective collaborations with local nonprofits so public foundations can better support their communities.
2. Legacy giving
Along with grantmaking, legacy giving is another type of philanthropy that is increasing in popularity. Also known as planned giving, legacy giving is a way for donors to give contributions to charitable causes after they pass. These are often large contributions that are incorporated into a donor’s financial or estate plan.
Let’s take a closer look at the most common types of planned gifts:
- Bequests: Charitable bequests are contributions that are set aside to a nonprofit or foundation as part of a donor’s will or trust. This form of legacy giving accounted for an estimated $45.60 billion in 2022, increasing by 2.3% since 2021.
- Retirement plans and life insurance: Donors can choose to donate unused retirement assets to a charitable organization and name the nonprofit, foundation or other charitable organization as the beneficiary of their life insurance policy.
- Charitable remainder trusts: With charitable remainder trusts (CRT), donors donate assets to charity via an irrevocable trust. While the donor is alive, they receive income (which varies with the type of CRT). Upon their death, the remainder of the assets transfer to the nonprofit.
- Retained life estates: Retained life estates refer to the transfer of property from a donor to a charitable organization after the donor passes. These properties can be used for various purposes, such as expanding an existing program, reselling the property to generate funds, or using it as a facility for the organization’s operations.
Among many benefits, including the opportunity to leave behind a meaningful charitable footprint and reduce estate taxes, most planned gifts are inherently flexible and allow donors to make a significant impact on the causes they care about without affecting their current financial status.
With so many types of legacy giving available, you might struggle to pick out the one that makes the most sense for your philanthropic vision and financial situation. Philanthropic advisors can support you through planned giving by helping to identify the right giving vehicle for your goals and vet charities to ensure your donations will be going to a worthy cause, effectively cementing your personal legacy.
3. Direct Financial Contributions
Direct financial contributions refer to donations that are given to nonprofits on a one-time or recurring basis. This form of philanthropic giving is straightforward and allows nonprofits to gain immediate access to your funds.
You might choose to give direct financial contributions in the form of:
- Cash
- Checks
- Online transactions using credit or debit card
To amplify your impact, you can become a major donor for an organization and contribute significant funds on a regular basis as part of their annual campaigns. Major donors also play an especially critical role in capital campaigns. During the quiet phase of a capital campaign, nonprofits aim to generate about 75% or more of their fundraising goal solely through the generosity of major donors.
Many donors, especially younger-generation philanthropists, are turning to more modern ways to give back to the causes that they’re passionate about. These include:
- Stock donations: Philanthropists might choose to donate stocks that have appreciated for over a year to their favorite charities. Stock donations are typically larger than cash gifts and come with a variety of benefits for the donor. For one, they allow donors to avoid paying capital gains and state income taxes that they otherwise would have to cover if they turned the stock into a cash donation. In addition, donors can claim a charitable deduction for the value of the stock at the time of the donation and strengthen the health of their stock portfolio.
- Cryptocurrency gifts: Similar to stock donations, donating cryptocurrency, like Bitcoin, is a tax-savvy option that allows charities to receive the full value of your gift. However, keep in mind that many nonprofits do not have the ability to accept direct cryptocurrency donations, so you may need to first invest the gift in a donor-advised fund and then recommend a grant to a charity of your choice.
A philanthropic advisor can help donors pinpoint their giving preferences and ensure that their cash or asset contributions match up with their priorities and philanthropic philosophies. Based on your goals, your advisor will walk you through prospective charities that would be a good fit for your giving strategy and make the best use of your funds.
Now that you have a better understanding of how a philanthropic advisor can integrate your giving goals into a variety of different financial plans, let’s explore how you can hire the right advisor for your specific needs and interests.
How to Hire the Right Philanthropic Advisor
Once you’ve established that you can benefit from the expertise and partnership of a philanthropic advisor, you’re ready to begin the hiring process. However, you don’t just want to hire any philanthropic advising firm or consultant; you need to make sure that they have the necessary skills, background and experience to push forward your personal or family philanthropy.
Consider these tips as you launch your search for an advisor:
1. Research firms that are the right fit for your needs
It’s critical that you take the time to get a feel for prospective philanthropic advising firms by taking a look at their services and past experience. This will give you immediate insight into whether a particular advisor would be best equipped to elevate your charitable impact.
For example, if you’re interested in strengthening your family foundation’s grantmaking strategy, but a philanthropic advisor doesn’t list supporting foundations as a core service on their website or doesn’t have any foundations in their client portfolio, you can scratch this one off the list.
You should also consider the following factors:
- Founding philosophies: A philanthropic advisor’s mission and values should align with your own philanthropic philosophy. If they’re at odds, this likely wouldn’t make for an effective partnership and you might struggle to bring your ideas and vision to life.
- Location: Many philanthropists prefer giving back to causes in their immediate area. Therefore, it can be helpful to partner with a philanthropic advisor who is based in your location and has some familiarity with nonprofits and charities that you can support. On the other hand, a remote advisor can bring a fresh perspective to your philanthropy and point out ways to expand your charitable giving plan. Consider your specific needs and whether a local or remote consulting firm would best support them.
- Testimonials and references: Testimonials are powerful social proof that not only clues you into the quality of an advisor’s service, but also lets you gain a better understanding of the type of work they’ve done in the past. Ask a prospective advisor if any of the individuals who left a testimonial would be willing to talk more about their experience in working with them or if they have any other references.
- Past projects: Philanthropic giving can quickly get complex, and if an advisor doesn’t have the necessary experience to support your giving plan, you’ll be ill-prepared to execute your charitable goals. Ensure that an advisor has the necessary background—such as experience with grantmaking, setting up the fundraising infrastructure for foundations or guiding donors through planned giving—to support your intended giving vehicle and strategy.
- Chemistry: This often underrated factor can have a huge impact on the success of your relationship with your advisor (and therefore your philanthropic giving). Ultimately, your advisor should have a communication and working model that makes collaborating with them a positive experience on both ends. Chemistry is especially important to consider if you’re a part of a family foundation or organization where multiple members will be engaging in decision-making with your advisor.
You might also consider what other broader services are offered at a philanthropic advisor’s firm when researching prospective hires. For example, if a consulting firm that offers a philanthropic advising service also has its hands on fundraising consulting for nonprofits, this would indicate that the firm has preestablished connections with community partners, making it even easier for you to set up a grantmaking structure with high-impact charities.
2. Meet with your top candidates
After you’ve done preliminary research, you should have a list of philanthropic advising firms that meet your basic qualifications for a partner. Meet in-person to get to know them better and ask questions that may have popped up as you scanned through their website, read through reviews or spoke to references.
It can also be helpful to have a few guiding questions lined up so you can learn more about their style, expertise and experience. Consider asking:
- What is your background and experience in philanthropy?
- What is your perspective on ethical and responsible giving and how do you help your clients achieve this?
- What giving vehicles and plans do you specialize in to help philanthropists achieve their goals?
- What is your approach to aligning philanthropy with my personal/family’s values and goals?
- How do you assess the impact of philanthropic initiatives?
- Can you provide examples of successful philanthropic strategies you’ve developed for other donors with similar goals?
- What is your pricing structure for philanthropic advising services?
Along with asking prospective advisors questions, use this opportunity to discuss your philanthropic ambitions and any challenges that have come up in your current approach to giving. This will give your advisor an understanding of the type of services you’re seeking and provide them with the necessary background to lay out an initial proposal.
3. Request a philanthropic advising proposal
A proposal is a document that overviews the advisor’s approach and any associated costs to achieving your philanthropic goals. You can request a proposal from all of your candidates, or just the ones who stood out to you during your initial research and conversations. A strong proposal should demonstrate an understanding of your philanthropic needs and include the following elements:
- An explanation of the advisor’s process and project deliverables
- A projected timeline for how long it will take to accomplish a particular project or see your giving plan through
- Estimated costs and project scope, including how travel, printing and other potential costs are handled
Make sure to provide your candidates with a reasonable deadline for completing the proposal and include instructions for information you’d like to see covered. This includes references from clients who have completed similar projects and bios for the advisors who would be assigned to your project.
4. Review proposals and select the right fit
Upon receiving these proposals back, note your questions and any changes that you’d like to be made, and then schedule a time to discuss them with your candidates. For example, if the timeline seems too tight (or too long), you could ask how they came to it and find out if there are ways to accommodate your needs. If a price exceeds your budget, you could ask how you might still accomplish the key initiatives while bringing the number down to one you can better afford.
Ultimately, you should walk away with a plan that’s satisfactory for both you and your philanthropic advisor. If there are multiple parties involved in your charitable giving, such as the rest of your family, make sure their input is reflected in your proposed partnership model.
After you’ve taken the time to go through all of your proposals and meet with your candidates again, move forward with the philanthropic advisor who has the right level of experience for your goals and will be a compatible fit.
Then, once they start working with you or your organization, trust their advice and establish a collaborative working model that will benefit both you and your advisor in seeing your goals through. A smooth partnership will increase your chances of success and make it easier for you to achieve your charitable aims.
How Aly Sterling Philanthropy Can Help You Navigate Philanthropy
If you’re hoping to create a purpose-driven strategy from scratch or revamp your existing charitable plan to maximize your impact, Aly Sterling Philanthropy is the consulting firm for you. At Aly Sterling Philanthropy, our mission is to help individuals and families determine what giving vehicle is best for them and enhance their philanthropic efforts by establishing a well-organized structure for giving.
We offer the following core services to focus your giving strategy and improve charitable outcomes:
- Thoughtful planning and research to understand your philanthropic motivations and pinpoint ways you can bring your charitable dreams to fruition in today’s giving landscape.
- Guidance on establishing your vision for the future, including your philanthropic values and mission. Plus, we’ll help to build and structure charitable activities that align with and push forward your strategic goals.
- Assistance with setting up high-impact grantmaking through assessing the results of your current grant structure (if applicable) and suggesting tangible improvements, or helping you create a simple system for generating grants, reviewing grant applications and issuing grants to worthy causes.
- Curation and vetting of charitable organizations that meet your philanthropic interests and will make the biggest impact on your focused cause area when given donations or grants.
- Consultation on external communication, public relations and digital media needs to establish your foundation as a reputable grant-making organization and attract the right candidates to apply.
- Facilitation of board meetings as well as board training to strengthen your foundation’s leadership. We’ll help to keep your board members involved in your foundation’s mission by engaging them in strategic planning and setting the framework for productive working relationships.
- Succession planning to prepare the next generation of family leaders to oversee your giving. Our team provides multigenerational advising to help participating family members play a defined role in your shared legacy and ensure everyone’s values are reflected in your charitable activities.
- Access to strategic coaching and mentoring to support your charitable efforts, whether we’re working on a short-term project to enhance your existing philanthropy or building a multi-year philanthropic giving plan.
To build a better tomorrow, you have to first start by taking tangible steps today. Our expert philanthropic advising team can help you develop a comprehensive plan toward making a difference in the causes you care about. Then, we’ll walk you every step of the way through realizing those goals.
Wrapping Up
Philanthropic giving is one of the best ways to give back to your community. To effectively turn your philanthropic dollars into impact and streamline your charitable giving plan, partner with a trusted philanthropic advisor like Aly Sterling Philanthropy. Using our knowledge of today’s best practices, we’ll connect your philanthropic dreams with an actionable plan that advances your mission, leaves a lasting legacy and charts the course to a brighter future.
If you’re interested in beginning or strengthening your philanthropic journey, reach out to Aly Sterling Philanthropy today to see how our partnership-driven approach can increase the impact of your giving.
Eager for more information on how to get involved in philanthropy? Check out these additional resources:
- 10 Easy Steps to Supercharge Your Fundraising Strategy. If you’re hoping to set up grantmaking systems with nonprofits or give back through donating, it can be helpful to understand how organizations create a fundraising strategy and use donations from philanthropists like yourself to propel change in the community. Use this guide to start your research.
- 30+ Best Fundraising Consultants for Nonprofit Organizations. Many nonprofit consultants also serve individual and family philanthropists in achieving their goals. Take a look at our roundup of the top consultants and check out whether they can support your charitable giving.
- Nonprofit Feasibility Studies: 9 Tips to Maximize Results. Are you interested in helping nonprofits reach their capital campaign goals? Read how you can play a role in the feasibility study to assess the viability of a projected project.
