A community foundation can be an effective recipient of a client’s charitable giving, especially if the foundation is open to a flexible arrangement in which a donor client’s financial advisor has more control over the invested funds, according to Chris Winrow, an advisor with Assante Wealth Management (Canada) Ltd.
“When we’re dealing with some high net-worth clients, one of their concerns is control,” said Winrow, an advisor from North Bay, Ont., at a panel discussion at the eighth annual “Doing well by doing good” advisor philanthropy conference in Mississauga, Ont. on Thursday. “Community foundations have been very receptive to us opening up a specific account with rules applying to that account only.”
However, a community foundation is an option that is not well understood and, therefore, not used commonly, Winrow said. A community foundation is a registered charity that collects donations from individuals, families and businesses to support other non-profit organizations that serve a specific geographical area. Donations made to this type of organization are managed and invested by the foundation’s own investment team.
Nevertheless, some community foundations will allow an advisor to manage his or her client’s donated funds in an individual account as opposed to having their investment committees manage funds from multiple donors collectively.
If a community foundation is receptive to this type of arrangement, the advisor can decide how the funds will be invested, the level of risk involved and the specific charities those funds would benefit — as long as the charities are supported in that community foundation, Winrow noted.
Advisors should conduct their research to see if this level of flexibility would be possible under their clients’ chosen community foundation. That type of arrangement would depend on the decision of each foundation’s board of directors, said Aneil Gokhale, senior manager of development at the Toronto Foundation.
For example, Toronto’s community foundation has its own investment committee manage donated funds except in limited scenarios, said Gokhale. Specifically, this refers to the organization’s “Personal Investment Advisor” program in which donors who give $1 million or more can look to see if their advisors can make the investment decisions for those donations.
“The firm that wants to continue managing the money needs to be vetted and approved by our investment committee,” explained Gokhale.
The advisor’s investment philosophy would also have to be in line with the foundation’s investment strategy, he added.
Regardless of the advisor’s investment role, he or she still has an important role to play in managing the relationship with the donor and understanding that individual’s priorities in leaving a charitable legacy, said Gokhale.
There are other advantages to using a community foundation as a recipient of a client’s charitable giving.
One often-cited reason is that donating to a community foundation provides access to several non-profit organizations and avoids the cost and administrative work of creating a private foundation for a donor.
Also, there are smaller charities that serve worthy causes but may not be registered with the Canada Revenue Agency (CRA). If that charity is affiliated with a community foundation, an individual can run his or her donation through the foundation, said Winrow, and still get a tax receipt even though the end user doesn’t have a CRA number.