Wednesday, November 10, 2010

The market of philanthropy advisers

I recently completed the cognitive juggling act of simultaneously reading Alliance Magazine's very thoughtful issue on philanthropy advisers while listening to the video stream of the Edge discussion on "What will change everything?" at the Genoa Science Festival.

The September 2010 issue of Alliance features articles from Melissa Berman, Felicitas Von Peter and Olga Alexeeva - three of the most accomplished, creative, and globally connected advisers in this space. They've all been instrumental in formalizing, expanding, and setting standards of practice for advising the wealthy about their giving in major regions of the world (the U.S., Europe, the U.K. and Russia). They raise important issues for the professionals in this space and the clients who will use their services.

Philanthropy advising as a service is becoming institutionalized, professional, and better. It will probably soon be held to certain standards, may become focused on impact rather than asset management, and there will be a move to professional accreditations. There will be a scandal or two. There are real ethical challenges - such as those raised by Caroline Hartnell in this article, in which the business interests of some advisers seem to be at odds with both the client's interests and what is "best" for the field. Ethical standards, clarity about the business interests of all involved (as with other financial advisers), and consumer education about what kinds of advisers do what can only help. There will be new tools and alliances that tie together the donor networks, the explicit data on change, and the trusted advisers. Philanthropy advising has been growing the way many industries do and the article in Alliance marks the moment in which it became publicly self-aware.

Which is somewhat funny, because the more I read in the magazine the more I kept thinking there was something missing from the story. In 2010 I shouldn't be able to read a snapshot of an emergent industry and come away feeling like the future of that industry is pre-ordained to follow the same trajectory that Michael Porter and others identified thirty years ago. The examples, practices, and issues raised in the Alliance feature section collectively sound as if philanthropy is still offline, only the rich, and only slightly concerned with investing. That's not where I think philanthropy is now or where I see its future, and so it's not where I think the future of advising will be.

I kept thinking that the future of philanthropy advising is peer-to-peer. (By the way, it's also part of the past of philanthropy advising). One of the amazingly underestimated elements of the Gates/Buffet Giving Pledge is the way in which it flat-out demonstrated what we've always known about giving - when a peer, a friend, or a family member asks you to give, you give. Gates and Buffet asked their peers to give (most of whom already were) and they did. In the model that has always been with us, and the model that the Giving Pledge brought to a new level, a person asked a person to give and they gave.

One of the few really big gifts this year - Mark Zuckerberg's $100 million to Startup:Education is classic peer-to-peer philanthropy advising. Zuckerberg turned to his Facebook COO, Sheryl Sandberg, who turned to her networks to find an opportunity that met the donor's interests. More formal versions of these peer network advisory structures include the programs of TPW-W, Legacy Venture, Synergos, Bolder Giving, Social Venture Partners, and Global Philanthropy Forum. There may be service providers, evaluation vendors and professional advisers in the mix, but the learning, ideas, partnerships, and even finding trusted advisers happens through these peer networks.

Peer to peer philanthropy advising is what is being built with social networks, many-to-many communications strategies, and globally connected datasets. It includes the "askers" and the advisers. It includes what I call the "doers" and the "donors." It includes the tweets and blogs on how to give to disasters, how to find the right giving vehicle, the data on nonprofits, the online communities talking about social entrepreneurship and re-creating social finance. At this moment, peer to peer philanthropy advising is a hodgepodge of smart folks and charlatans, of blowhards and thoughtful experts, of those looking to make a buck and those looking to make a difference. It will be these networks of peers that professional advisers - whether they are selling a bank's services or independent evaluation or research - need to service in the future.

The cost of entry to becoming an adviser - formal, institutionalized and working with the world's wealthiest - or informal, online, and iterating as you go - is almost negligible. While those featured in Alliance Magazine are going through the very important industrial life stage of maturation, the rest of the field is still a scatter plot of providers, practices, tools, advisers, and products. From the Alliance feature, we get one side of the story - the traditional narrative of financial innovations over time, in which the services and products developed for the wealthiest are first experimented with, than standardized, and then repackaged to trickle down to mid market when the costs are right.

But in our world today, where data are increasingly commodified and analysis/synthesis/expertise increasingly dispersed - the innovations from the bottom will - and should - affect the thinking of the top. Networks can generate more ideas, vet more ideas, and provide a more robust feedback process than any single adviser. They can mix experts and crowds. They can make sense of data in ways that individuals never will.

In Genoa, Clay Shirky answers the question of "What will change everything?" with "coordinated voluntary participation." He uses an example from the Polymath mathematics community - where the world's smartest mathematicians are upending centuries of professional practice to solve their field's longest standing, unsolvable problems. The story is not about the math but about how the math is done.

For philanthropy advisers, the parallel is to think not just about the philanthropy but how the philanthropy is done. And philanthropy - the long tail that provides the bulk of the private resources for public good - is all about "coordinated voluntary participation." How can the on-the-ground wisdom of long tail influence the wealthiest givers? How can the expertise and research that the big foundations pay for be used by the rest of us?


ohana media said...

Planned giving and philanthropic leadeship are the need of the hour as many countries are crisis-ridden.

Lucy Bernholz said...

Sigh. Thank you for writing in. However I think it is a fallacy to equate anything you would describe as "crisis ridden" with "philanthropy" as a solution. Philanthropy is - by design - episodic, donor directed, temporal, fragmented, decentralized and disaggregated. Not what any people, society, institution, community should expect to be responsible in "crisis ridden" situations.

I think our expectations of philanthropy have gotten way out of whack with what it can reasonably do. Not only because of the relatively small size of philanthropic assets (even when all counted as one pot) but because there is not a country on this planet that has designed a set of rules for philanthropy that makes it a set of resources that can be directed, organized, targeted, sustained, or relied upon over time.

Depending on what you mean by "crisis," I'm afraid I think philanthropy is the wrong tool for the job. And no amount of estate planning or philanthropic leadership is going to change it - only changing the rules would change it.


Tutor Mentor Connections said...

The future you are describing is one we're trying to create through the work of the Tutor/Mentor Connection.

If enough of us connect on-line, and get our volunteers, students, alumni, parents, board members and current donors involved, we can create a weight of information that can be used by donors and advisers to support funding decisions in this sector.

We're still far from this reality but you've described the possibilities.

Dallas Social Venture Partners said...

Lucy, your response about our expectation for philanthropy is a great blog post in itself!

Your crowd vs. expert theory really resonated with me coming from the Social Venture Partner world.

Thank you.

Phil Cubeta said...

Deep and thoughtful post. Thank you, Lucy. It seems to me that there is a side of "philanthropy" in which farms, ranches, car dealerships, closely held stock, and other assets are turned into philanthropic capital, a side in which the philanthropic capital is managed as in a foundation, CLT, CRT or DAF, and a side in which it is disbursed. All three could fall under the phrase "philanthropic advisory services." In fact the three areas of expertise, and the business models associated with these three, are quite different. The professions associated with these three meet in separate rooms, read separate syllabi, and give little thought to the other two. How much time as Melisa Berman spent studying financial planning with charitable tools? Like zilch? And how much time do tax advisors spent on impact? Exactly zero. That is the state of "our" field.

Lucy Bernholz said...

No doubt about it - the philanthropy advising space is as fragmented as the industry it aims to advise.

Sofia M said...

Lucy, so true that philanthropists are hungry to learn from their peers - and often find them more trustworthy. In the December 2010 edition of Alliance, Paul Shoemaker at Social Venture Partners (where I work) shares an opinion about the need for standards for the effective philanthropy that would elevate the field even more - and benefit the nonprofits they fund.

Certainly at SVP we consider the actual on the ground experience of the engaged philanthropists in our network as informing the standards of what effective philanthropy looks like.

-Sofia Michelakis
Program Director, SVP Seattle

Joshua Mintz said...

Lucy: as you may know, MacArthur Foundation has an initiative called MacArthur Advisory Services which is intended to provide assistance to other donors in areas (programmtic and technical) where we have expertise and to connect donors to other resources (ncluding advisory firms) in the philanthropic field that may be better equipped to assist. This is a free service intended to address some of the questions you raise. More information can be found on our website under about the foundation. Josh Mintz (VP/General Counsel

Lucy Bernholz said...

Thanks for writing in. In fact, your reminder makes me think it's time for a blog post about private foundations such as MacArthur doing what you describe. Others that I know of, in different guises, include Annie E Casey, Ford Foundation, and Gates. Pew Charitable Trusts - once a private Trust now a public charity - also does this.



Bradford Smith said...


No extended comments today. This is a great post, period.

Brad Smith

Lucy Bernholz said...

Wow, thanks Brad.