The outpouring of donations after the earthquake in Haiti was clear evidence that Americans have not lost their philanthropic inclinations, in spite of the recession. But  even the Bill & Melinda Gates Foundation, which now has an endowment of around $33.9 billion,  has seen its assets decline from a record high of almost $39 billion at the end of 2007. Many of the wealthiest Americans have either reduced their giving or revamped their approach to philanthropy in the past year. For most of these people, the aim is to give more strategically. Their efforts to measure the effectiveness of their philanthropy present an opportunity for wealth managers to offer added services, not just help clients set up charitable vehicles but also determine who the recipients should be and how to set up a philanthropic strategy that has as much impact as possible.

Philanthropic advisory services are an important part of the client service menu at many multifamily offices, private banks and wealth advisory firms. But there is also more detailed service that helps the client figure out what charitable causes would enhance his own life, then helps him find the best candidates for funding. "With the tools we have, wealth managers could be doing a lot better," says Rob Hanna, who runs the philanthropic consulting firms Social Wealth Partners and Social Wealth Investment Management. "There is a lot of opportunity to use the same skills we use for helping clients be successful and realistic in their investments, but giving them ideas about the best non-profits."

Bruce Bickel, senior vice president of PNC Wealth Management and head of private foundation management service, says ultra-wealthy philanthropists are becoming more mission-driven and governed less by emotion. What that means in practice is that they are less likely to write checks upon request, choosing instead to concentrate on specific charitable goals. Part of the reason is that people are becoming philanthropic at a younger age than they did a few decades ago, says Cary Grace, national philanthropic management executive for Bank of America Merrill Lynch. "With baby boomers starting to retire and seek second and third careers, many of them are deciding they want to make a significant philanthropic impact," she says.

Bickel's division provides management services including grant distribution for 23 family foundations, and also oversees PNC's annual Wealth and Values Survey, the latest of which was released in March. In that survey, PNC found that 24% of the ultra-wealthy respondents (those with $5 million or more in investable assets) said they had cut their giving, although 55% of all respondents said they felt they had an obligation to give back to their communities. "Many foundations are giving fewer grants, or smaller grants, but they want to be sure their money will have a strong impact," says Bickel. "That has put more due diligence responsibility on our staff." 

At Bank of America Merrill Lynch, the private bank division conducts its own survey of the philanthropic landscape every two years. The most recent survey, which came out in late 2008, (the next will be out in October 2010) found that the other seemingly important economic influence-tax treatment-did not affect philanthropic decisions as much as conventional wisdom might assume. Overall, high-net-worth households reported there would be very little change in their giving if there were no tax deductions for donations; just over 50% said their charitable giving would stay the same if they received zero income-tax deductions for donations. And just over 60% said the amount they would leave to charity in their estate plan would stay the same if the estate tax were repealed. 

The findings, says Grace, indicate that a large portion of high-net-worth philanthropists are motivated by deeper factors than tax breaks. Even so, the survey found that most high-net-worth people who seek advice on philanthropy turn to their financial advisors. One of the most striking changes from the 2006 survey to the 2008 one is a dramatic increase in donors' use of lawyers and financial professionals to help them in this area. While the 2006 study found that donors relied on non-profit personnel (40.2%) and their own peers (35.6%) more than any other source for philanthropic advice in this area, the 2008 data finds accountants (44.3%), attorneys (42.9%) and financial/wealth advisors (27.8%) to be among the leading sources of charitable advice.

"Part of the reason is that philanthropy is a maturing industry," says Grace. "As people move away from being check writers to being strategic donors, they go to the advisors they already have strategic relationships with."

Bank of America Merrill Lynch has 156 philanthropic specialists across the country, working with its wealth management teams. Philanthropic advisors reach existing clients of Bank of America Private Wealth Management and U.S. Trust through a variety of programs.  The bank hosts workshops on raising philanthropic children, sessions in which advisors help parents and grandparents explore their own philanthropic passions and provide exercises in how to introduce philanthropy to the next generation. "Raising Philanthropic Children" addresses issues that are of concern to those trying to promote philanthropic values within their families. A lunchtime workshop for women clients, titled "Philanthropy With Passion & Purpose," gives participants a chance to network and hear about ways to make the most effective decisions when it comes to charitable contributions. "Part of what they learn is how to say no when necessary," says Gillian Howell, national private philanthropy executive for Bank of America Merrill Lynch.  For young adults, the bank hosts a financial empowerment program, part of which is aimed at helping participants identify what they would like to do to change the world.  

How To Reach Clients
Any wealth manager can initiate a conversation about philanthropy and build a team of philanthropy advisors, estate and tax experts to help the client set up a complete strategy. But, says Hanna, it is relatively rare for a wealth manager to get into a conversation with a client about philanthropy as a part of wealth and expectations, legacies, generational wealth transfer and family relations. "It doesn't generally happen unless the wealth manager is personally interested in philanthropy," he says. "In that case they might even be meeting potential clients through serving on non-profit boards in their community."

Martin Shenkman, an estate lawyer in the New York City area, happens to be an impassioned philanthropist himself, and when clients come into his offices they see magazine articles about Shenkman's philanthropy mounted on the walls. "That often starts a conversation," says Shenkman. If the office displays aren't enough to remind clients of what they could be doing, he also publishes a monthly client newsletter about philanthropy. And to show fellow professionals how they can benefit from helping clients do good, this spring Shenkman and his wife have begun a series of lectures around the country, on behalf of the National Multiple Sclerosis Society and the Michael J. Fox Foundation for Parkinson's Research,  in which he will speak to estate planners, financial advisors and accountants about planned giving. 

The philanthropic service division of Morgan Stanley Smith Barney's private bank also reaches clients with an in-house quarterly magazine called Perspectives in Philanthropy, which lets clients know what others are doing. Melanie Schnoll Begun, managing director of philanthropic service at Morgan Stanley Smith Barney, is particularly interested in helping clients of the bank determine how their money can have the greatest impact, and has given a presentation titled "Higher-Impact Philanthropy: Bringing Engagement to New Levels" at numerous advisor seminars. "My goal is to help advisors deepen their conversation with philanthropically minded families who want to achieve significant impact in their giving, however the family defines impact," she says.

Schnoll Begun and her team have also brought like-minded clients together to collaborative charitable ventures.  Her approach is very tightly tailored to the individual's interests and often begins with a one-on-one discussion in which she asks some soul-searching questions. As one example, she recalls a lunch several years ago with a client who wanted to start a philanthropic plan but wasn't sure where he wanted his money to go. She began by asking him, "If you were to go to a doctor for a checkup, what would be the scariest diagnosis you could receive?" The client said he thought nothing would be worse than being told he was going bald. It seemed like a strange answer, she says, but it turned out that he had suffered from childhood alopecia, or baldness that might be caused by virus, autoimmune disease or stress. The man decided to fund research into childhood baldness. Even then, the advisory team conducted research into where the funding would have the greatest impact and learned that one of the greatest needs was for the training of skilled weavers to make human hair into wigs. "So that is partly where his money is going," says Schnoll Begun.

She has also introduced art curators to families that want to fund art-related projects. One such family, after a number of meetings and multigenerational discussions, decided to focus their philanthropy in three areas: historical landmark preservation, bringing art to hospitals and a series of online virtual museums. The third area was something that younger family members wanted to do and, as Schnoll Begun notes, was not a project that would fit into a traditional definition of philanthropy. "But it has served another important purpose," she says. "It has created excitement within the young generation about using the family money for social purposes."

Achieving Family Harmony
Indeed, philanthropy can be a very useful tool for bringing together family members with diverse interests.  Bickel and his team often attend family meetings to facilitate that goal. "We help them hone a family mission statement, then figure out philanthropic areas that fit into their family mission," he says. "That way the charitable gifts are less emotionally driven." A family mission statement can be flexible enough to include gifts addressing various political and social causes or it can offer the family a way to find recipients that represent a middle ground. 

What Bickel advises most families to do is divide all non-profit organizations into five  categories: arts, education, health, religion and social services. "The family has to choose one to three of those categories to support," he says. "That leaves a lot of room, but if someone is interested in something the rest of the family considers off the wall-say, exotic art-I might suggest that they allow a small grant, maybe $5,000 to $10,000 in that area. That takes the pressure off the family to quarrel about it." He often suggests that the family reprioritize its philanthropic mission each year to accommodate a range of interests. "Say this year the family wants to give to arts, education and  health," he says. "And maybe in the education area they decide they will give only to K-12 Native American children." The next year they can select a new focus.

Economy-Driven Vehicles
While taxation might not be the prime motivator in philanthropy, this is an opportune time to help clients set up charitable trusts and other structured vehicles that take advantage of favorable tax treatment, particularly since high-net-worth Americans may be paying higher taxes under the Obama administration.

Shenkman has also been helping his clients set up vehicles that help make their money work effectively in the current economy. He has suggested making pledges to charities that will be paid over a decade or even longer. Traditionally, most large donors have spread their gifts over a period of three to ten years, but a deferred gift of any length can allow the donor to take tax deductions each year that he makes payouts, while the charity can publicize a large pledge to encourage other donors to give similar amounts. Another low-cost technique an advisor can recommend is for a client to take out a life insurance policy with a charity as the beneficiary. The charity will not actually receive the money until the donor's death, but the pledge can be helpful in fund raising. "Using some creative spins on basic charitable giving," notes Shenkman, "can enable a donor to continue giving at some level, but tailor the planning to fit current circumstances."