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"For development officers
that are really in the engagement business, what a great way to engage the donor.
You're really getting them to buy in and align their objectives with the organization's
financial objectives," he says.
The investment guidelines are typically set by the
charity. They may allow U.S. equities, fixed income and hedge funds,
for instance, but not derivatives or other more risky investments.
The donor, however, gets to choose the brokerage firm. Certain risk
parameters and minimum performance thresholds are set, and the charity
may revoke the donor's right to steer if they run the fund off the
road.
Winklevoss provides all the investment tracking,
issuing reports and monitoring the donor's performance for a small fee based on
assets under management.
"Charities can do this themselves,
but once they look at the administrative and IT
resources necessary, we think they will find our
outsourced solution very cost effective,"
Rakov says.
While charities have the ability to set their own donation minimum
for DMIs, Rakov places the cost-effective point of entry at $250,000.
That said, some donors have lowered the mark to $100,000, while
one has raised it considerably to $5 million. Donors who are enthusiastic
about investment control have even stepped forward to underwrite
the cost of setting up their DMIs.
"You've got some people who really enjoy managing their money,
and they're willing to give it to charity as long as they can continue
managing it," says Gallo.
With an array of options to organize your philanthropy, where to
begin? Gallo suggests you contact a community foundation in your
area; they act as clearing houses to get your money where you want
it to go. A Google search for "community foundations (and your
city or state)" will get you started, or you can log on to
the community foundation locator at the Council on Foundations Web site.
When you've narrowed your options and are ready to seek the help
of a professional, you'll want an estate planner with expertise
in nonprofits. Keep your accountant in the loop for tax-planning
purposes, and if they aren't conversant with IRS rules regarding
noncash gifts (real estate, stocks, etc.) and you plan to make some,
find a lawyer who specializes in tax or estate planning.
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