Morgan Stanley: Creating a Mindful Approach to Charitable Giving

My phone has been busier than usual lately. It’s more than the post-Labor Day rush though. It’s due to the article, “Directing Philanthropy to Do the Most Good” that appeared in the September 7th edition of The New York Times. The article is about Princeton professor Peter Singer, who won the 2021 Berggruen Prize, and his philosophy that “encourages people to have reason, rather than empathy, guide their philanthropy.” My clients want to know my opinion on his viewpoint.

People are calling me because they know that helping clients create a mindful approach to charitable giving is a part of our standard of care. In my 30 years as a financial advisor, I’ve watched hundreds of clients give away generous amounts of their money, without any type of strategic plan. They write a check for a couple of hundred dollars, buy a table at a fundraiser, or bid generously in a silent auction.

While “every dollar counts” to many organizations, like Singer, I believe that donations should not be ad hoc. Instead, philanthropy should be approached with forethought, and it should be part of an overall wealth-management strategy. I believe that families or individuals who are fortunate enough to be able to make sizable donations should do so mindfully and with reason.

How to Identify Your Reason

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What are your personal values?

Giving to charity is a direct reflection of your personal values. Therefore, spend a few minutes identifying those values. Some might be health, education, leadership, creativity, justice, family. A web search can lead you to a multitude of worksheets that help people identify their values.

What cause supports those values?

If protecting children is your top value, then decide how to help. Consider if you’re most interested in providing healthcare, early learning, a safe after-school environment, food, scholarships, etc. Then, evaluate the various organizations that support those goals.

What impact do you want to make?

Let’s be reasonable. We don’t all have the resources of the Bill and Melinda Gates. Start by thinking about who you want to help and the scale you want to provide.

For example:

  • Supporting families at a local shelter vs. building and staffing a new shelter.
  • Providing a scholarship for one student or multiple students to attend a university.
  • Purchasing needed medical supplies or equipment vs. building a new hospital.

Next, find the organization to match your goal. Consider if the group has the infrastructure to accomplish your objective. If they can’t execute on your goal/vision, the money may be wasted.

Who do you trust?

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For many of us, the trustworthiness of a charity relates to whether or not the donations reach the intended recipients. We want to ensure that no one is running off with the funds and they aren’t being wasted on administrative expenses. Charity Navigator, “the largest independent evaluator of U.S. charities”1 is one possible starting point.

If you really want to make a commitment to a philanthropic organization, I suggest you dig deeper and get to know the people who are running the organization and its inner workings. Websites, donor solicitations, events, and social media are one way to evaluate an organization. But remember, those are marketing pieces designed to get you to donate. Often chockful of photos and quotes, they’ll tug your heartstrings, but are light on substance. I think that annual reports are a better tool. They help you identify:

1. Effectiveness:

The number of people being helped, the program’s short-term and long-term outcomes.

2. Efficiency:

The annual spending vs. budget, operating expenses as percentage of budget, staffing levels, and any unusual expenses or liabilities.

3. Leadership:

Who the President and staff are. You will also see who serves on the board, who they are, and what their background is. Note, you may have to dig a little once you see the names. Ask questions when the leaders are all in the same family or if there has been a lot of turn over.

4. Growth potential:

If the organization is looking to grow, open new facilities, serve a wider audience. Plus, you can learn about upcoming projects or capital expenditures.

5. Funding:

Who the key contributors are. You might be able to see if the donations are from individuals, corporation, or government funding. If the majority of the donations come from one person or family, consider if there’s an influencer behind the scenes. If the charity is government funded, a change in administration may destroy the organization’s cash flow.

“In Delay There Lies No Plenty”

While year-end may seem a long time away, waiting until December to consider the tax benefit of your gifting strategy is not acting with reason. Evaluating your options early enables you to be more generous or save on income tax. For example, you can possibly avoid large cash donations by gifting highly appreciated stock. You can also talk to your financial advisor about donor-advised funds, donating directly from an IRA, or establishing your own charitable giving trust. These discussions allow you to maximize the impact of your donations.

But remember to think reasonable, create a plan, and then act on it. As legendary basketball coach John Wooden said, “Don’t mistake activity with achievement.”

1 www.directrelief.org/2021/01/ten-of-the-best-charities-direct-relief-tops-charity-navigators-list/
2 William Shakespeare, Twelfth Night (II.iii.)


Kathy Roeser is a Financial Advisor with the Wealth Management Division of Morgan Stanley in (Chicago, IL) . The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. Information contained herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness.

The strategies and/or investments referenced may not be appropriate for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Morgan Stanley and its Financial Advisors do not provide tax or legal advice. Individuals should seek advice based on their particular circumstances from an independent tax or legal advisor.

The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney, LLC, Member SIPC.