Are you a strategic or a sporadic philanthropist?

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The last quarter of the year is when most charities ramp up their appeals for donations and we all start thinking about making our charitable donations, primarily to ensure we get our receipts before the end of the year to be able to use them for our current year’s tax returns.

While for most people philanthropy involves donating money to their favourite causes and organizations, with the end result of promoting the welfare of others (no matter how or the frequency with which the donations are made), the majority of donors approach philanthropy on a spur-of-the-moment fashion rather than strategically.

While you often hear about strategic philanthropy in the context of corporations doing cause marketing and aligning their brand with charitable causes, strategic philanthropy can also take place on a personal level. In this context, strategic philanthropy consists of creative, tax-smart and well-informed giving strategies, and deciding on where and how to channel your philanthropy to maximize a return on your investment. Strategic philanthropy involves having a long- term vision and approaching philanthropy as a long-term investment in causes that can produce the kind of impact that is meaningful to you and your family.

Top ten considerations for a strategic philanthropist

A sporadic philanthropist generally acts purely based on emotions and short-term goals and will donate without giving much thought to the best approach to giving. A strategic philanthropist, on the other hand, will consider the following:

  1. What causes appeal most to me and can make a bigger impact on society or my community?
  2. How many causes do I want to support each year?
  3. What should my annual donation budget be?
  4. What sort of involvement do I want to have with the charity that I donate to?
  5. Do I only want to donate money or do I want to donate both time and money and serve as a volunteer or board member?
  6. Should I donate personally or through my corporation or family trust?
  7. Should I donate now or make a bequest, or do both?
  8. Should I set up a donor-advised fund or a private foundation?
  9. Should I donate cash, securities, art or environmentally sensitive land?
  10. Should I donate anonymously, or do I want to be recognized for my donation?

Here are some tips for you if you do not want to be a sporadic donor and want your charitable donations to have more meaningful impact.

Define the impact you want to have

You need to define for yourself the kind of impact you want your donation to have. Do you want to improve lives in your community, do you want to alleviate poverty, do you want to promote human rights, or do you want to help save the environment? Finding your passion and defining the social impact that appeals most to you will help you focus your philanthropy on causes and organizations that can produce the impact that is most meaningful to you.

Build long-term relationships

Charities need your monetary donations but they also need volunteers, board members, and champions. You can give time, talent or treasure. Whichever one you donate, the impact can be much more meaningful for you and the charity if you build long-term relationships with the organizations you care about.

Be an investor

When you invest in a business you need to have a long-term outlook and a vision for the success and growth path of that business. As an investor, you will also want to know how financially sound the business that you want to invest in is and what is the quality of management. You will want to know how efficiently the business is allocating its resources and what its profit margins are. You need to apply the same discipline and criteria to the charities that you donate to. Of course, I say this with the caveat that charities do many things for our society and community that are not necessarily measurable with the same yardsticks that apply to business. These immeasurable impacts need to be taken into account in your decision to support them.

Use tax and financial planning to multiply the impact of your philanthropy

There are a multitude of financial planning strategies that can allow you to take advantage of tax incentives for making charitable donations, which can multiply the amount of donations you can make during your lifetime as well as your bequests. Make sure you consult a financial planner that specializes in charitable tax planning to explore your best options for converting your taxes to charitable donations.

Find a focus and do not over diversify

When it comes to investing, diversification is a good strategy and will reduce the overall risk of your portfolio but over diversification can drag down your returns and can backfire. The same applies to your charitable donations. By donating $500 per year to 20 different charities, you cannot build an impactful long-term relationship with any of them. However, if you donate $10,000 per year to two different charities, not only will you be among their most valued donors, but you can also direct your donation to a specific program that really appeals to you and can produce the meaningful impact that you desire.

Evaluate the outcomes

When you invest in a business or the stock market, you monitor your investment and periodically evaluate your returns. You should apply the same discipline to your philanthropy and periodically evaluate the outcome of your donation of time, talent and money. Has the organization fulfilled its mission and made the impact on society that you expected or could your donation have gone farther and been more impactful at another organization? Has your involvement with the organization enriched your life and made you feel like you have promoted the welfare of others? After all if you look up the definition of philanthropy in the Miriam Webster dictionary, it is defined as goodwill to fellow members of the human race; especially active effort to promote human welfare.

Tina Tehranchian, MA, CFP®, CLU®, CHFC®, is a senior wealth advisor and branch manager at Assante Capital Management Ltd. in Richmond Hill Ontario and can be reached at (905) 707-5220 or through her website at Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and is registered with the Investment Industry Regulatory Organization of Canada.

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