Almost every high-net-worth investor wants to make a difference through philanthropy, but far too few know how to maximize the impact of their generosity. Greg Weimer, one of Confluence’s founders and Wealth Manager, leads a conversation with Kate McKenzie, Assistant Director of Development at The Pittsburgh Foundation, on the many benefits of charitable giving. Together, they examine how strategic philanthropy can help high-net-worth families to clarify their goals, pass values along to their children and grandchildren, and create a legacy that lasts for generations. You’ll discover how talking to your financial advisor about including philanthropy in your financial plan cannot only help you maximize your legacy, but may also provide tax advantages to support your estate planning objectives.

Guest Speaker:

Kate McKenzie

Podcast Transcript

Confluence Financial Partners — Maximizing Your Legacy: Kate McKenzie | Episode 3

Greg: Over 95% of high net worth clients are generous in their support of various causes. Imagine that.

This is Greg Weimer with Confluence Financial Partners and I’m here today with Kate McKenzie, who’s the assistant director of development for The Pittsburgh Foundation. Welcome Kate.

Kate: Thank you so much for having me, Greg.

Greg: I’m looking forward to this conversation because I’ve met with you several times now and, I remember the first time actually, the first time we met was in this room. It was, and I’ve always been impressed with The Pittsburgh Foundation and what they have been able to, to accomplish for families and philanthropy and bend the curve on some really big issues for our society, but equally important, I have to tell you, when we met in this room, I was really impressed with your passion to help families find their values and what they really care about in their philanthropy.

So, we’ll get to that in a minute, but just for a little bit of a backdrop, could you just give us a brief overview of The Pittsburgh Foundation?

Kate: Sure. The Pittsburgh Foundation is a community foundation. We are one of the oldest and largest in the country, believe it or not. And we have just over 1.2 billion in assets. But really, what we do is we help individuals and families start individual funds under our umbrella. Those are named funds so they can be named after a family, or a family legacy, or they can remain anonymous if they so choose. And during their lifetime. And again, after dollars are continuously being granted out to the nonprofits that the donors care about most in the community.

Greg: And what I like about The Pittsburgh Foundation and working with foundations in general is one of the things that Confluence is, you know, that we think a lot about is, how do we help clients and families maximize their legacy.

For the listeners. Kate actually participated in an off offsite with us last week where we brought the entire organization together. And we talked about donor-advised funds and we talked about the difference that philanthropy can make in working with families. So, one of the things you said, and I don’t know if you remember this or not, about how you can set up a foundation, and you used the number 100, and you talked about your legacy in context of a hundred years. Do you remember that?

Kate: Yeah, I do. I think what I was really trying to get across is that I’m working with a community foundation can really help individuals and families, just like you said, create that legacy. And when we talk to our donors, your clients about their philanthropy, we ask them, “Mr. and Mrs. Client, what do you want this fun to look like a hundred years from now?” Because all of our funds are permanent endowments. So, we want to make sure that the things that the donors care about most in the community, that we’re really having a conversation that’s ongoing and capturing that intent to make sure that it’s always going to go to the place that they preferred.

Greg: So, it’s an interesting day. I’ll connect two dots for you because I totally agree with what you just said. And then this morning, I had a conversation with a very good client and he was talking about one of his concerns with some of the organizations he’s involved in — charities — and he’s a very generous human being — is what direction are they going and are they? Is he still going to be motivated in three years or four years or five years to be contributing to the same charities? What type of due diligence and expertise can The Pittsburgh Foundation lend and helping make that assessment?

Kate: So, we can help families in a lot of ways to give money strategically and to know that the money that they are giving away to nonprofits is going to go to great use. We have, once a donor starts a fund at The Pittsburgh Foundation, they have a dedicated donor services staff, that’s their person. So, they will be able to utilize our staff members to do research to know who’s doing the best work in a specific space within nonprofits. And we’re able to help that client make sure that their money is being put to good use. And in addition to that, if clients are, and your donors are, naming specific nonprofits in with their fund, when they establish it, we’re making sure that those distributions are always going to nonprofits who are in good standing with the IRS and who are using the money in the way that the donor intended.

Greg: Hearing you speak. I’m just wondering, Pittsburgh Foundation sounds really big, foundation sounds really huge… What’s the minimum you have to invest, or you have to contribute to open up a donor-advised fund, for example?

Kate: The minimum to start a donor-advised fund at The Pittsburgh Foundation is $10,000.

Greg: Okay. So, I know that’s not the typical one, but it just shows you, for a lot of families, having a foundation of some sort is very doable.

Kate: Absolutely. And it’s a great way to just start that legacy.

Greg: Explain to our listeners what a donor-advised fund is.

Kate: So, a donor-advised fund is an individual fund, a named fund, under the Community Foundation umbrella, that’s established to give money away and grant money to nonprofits as the donor recommends throughout any given year. So, it’s very flexible. And that the donor can send grants out to any nonprofit, any 501(c)(3) domestically. Usually grants from the foundation in Pittsburgh go to Pittsburgh-based organizations or a surrounding area, but they can use that money throughout the year to give donations and grants away to nonprofits. Of course, when they make that initial gift to The Pittsburgh Foundation, they get an upfront tax deduction by the end of that calendar year and then have the flexibility to give that money away as they see fit.

Greg: So, if someone had a very lucrative, lucrative year where they’re gonna pay a lot of taxes and they want to make the majority of their contribution in one year, right, you could open a foundation and get the write-off in that calendar year.

Kate: Absolutely correct. And that’s a very smart way to give to charity.

Greg: And then the other thing is, so then you can advise and maybe help explain the advisor role. You can advise where you would like the grants to be made, in perpetuity, either you or your successor advisor.

Kate: Correct.

Greg: If you could just explain.

Kate: Yeah, that’s correct. So, with the donor-advised fund, the client and donor actually has the ability to recommend those grants during their lifetime. And then it’s an ongoing conversation with us to figure out, “What is the future purpose of this fund look like again a hundred years from now?” “Would you like your family to continue the advising, as successor advisors on this fund, to make grants out to nonprofits or would you prefer to name specific charities to receive the distributions from this fund?” It can look a lot of different ways and it’s very customizable and individual to that particular donor.

Greg: Do people normally contribute stock? Could you talk a little bit about the advantages of that? Or cash?

Kate: Sure. Cash is always king, but appreciated securities make a whole lot of sense when you’re talking about charitable giving. The reason being, the client of course gets that a fair market value for the stock gift for tax purposes. And that’s the biggest bang for their buck because they don’t have to realize those capital gains. They use that to fund their donor-advised fund at The Pittsburgh Foundation. And then they can recommend those grants as they prefer throughout the years.

Greg: So, here’s what’s interesting, I remember last week you mentioned a couple of numbers. Over 90% of high-net-worth investors are inclined to give, right?

Kate: That’s right.

Greg: And then, what percentage of their financial advisors are involved?

Kate: About 6.6%

Greg: So that’s crazy.

Kate: Yeah.

Greg: Because well, two parts of that I find somewhat concerning.

One, that means sometimes they should be using highly appreciated securities and they’re not. So, there’s some people contributing cash that could be using highly appreciated securities and there are some tax advantages to that. So, that’s one.

And then two, just how does it fit into your financial plan? So, that is actually somewhat concerning.

The other thing we talked about, you talked about, and I’ll paraphrase it as: how philanthropy and a donor-advised fund can be a gateway conversation to have families talk about their wealth and what their wealth means and their values and their expectation. Could you talk a little bit about how The Pittsburgh Foundation works with families and helps them communicate about their goals and objectives around philanthropy?

Kate: So, bringing a family together to have values-based discussions about philanthropy is really important because it’s more than just money and it brings people together around the table to talk without having to talk numbers at all. And it brings people around for a purpose.

Greg: Did you know that, one of the challenges of a family, I shouldn’t say challenges. One of the opportunities of a family is to figure out what they’re all about is really all about.

Kate: Yeah.

Greg: Right? So, what’s their “why?” Any great company, any great individual, any great family figures out: what’s their “why.”

If you don’t mind, last week, you brought these pictures on those cards, those cards you brought to us. I thought they were fascinating. And could you give our listeners just a little overview of the exercise we went through and how it helped people really visualize what they cared about?

Kate: Absolutely. I would start by saying too that it’s important when you bring different generations of families together to have an understanding that everyone is coming from a different place. So, if you have two to three generations around the table, values and understanding of the world are going to be so different and also values around money, without a doubt. But the tools that we used with your firm last week are really helpful. We at The Pittsburgh Foundation have several different types of activities that we can facilitate with families around values, legacy and things that really matter that have really nothing to do with the dollars.

Greg: Yeah.

Kate: To talk about their highest ideals. So, in the case of last week, we use something called “picture your legacy.” These are cards that have photos of all different types of things on them, from nature photos, to old family pictures, to athletes, you know, in a race. And it allows for families and individuals to pick out cards that speak to them in some way and how they’d either like to be remembered as their legacy or just something that resonates with them. And then we ask the individuals who are in the activity for their feedback.

Greg: Yeah. It was really fascinating. So, we did that and then you went around, and I thought you were, were very skillful in getting people to articulate what they probably couldn’t have without the pictures. So, because of the pictures you would say to them like, “Why did you pick those three? What’s your favorite of those three?” And, knowing the associates as well as we do, hearing them articulate what they really cared about was fascinating. I will tell you it had such a great impact. Two things happened. One, we ordered those and we’re going to start implementing them with our discussions with our clients so we really can figure out what they care about. And then two, it was such a powerful discussion. We actually continued, we went to an associate’s house afterwards and the conversation continued. So, thank you so much. That was a valuable exercise.

Kate: Thank you, that’s fantastic. And it’s having something tangible in front of you to use as a tool to kind of share is a lot easier than just picking your most important things in your world, out of the sky. When you have something like an activity and something in your hands, it’s just, it makes it a lot more interactive and fun too.

Greg: So, Kate, clearly there’s a lot of benefits to the families, but I just know in working with you there’s also great benefits to the community. Give us an idea of the size, first of all, of The Pittsburgh Foundation and then the amount of grants that it made to charities

Kate: As one of the oldest and largest community foundations, we have just over 1.2 billion in assets at the foundation and we grant around 50 million every single year out to nonprofits in the community. So, that’s broken down by our individual donors. So, donors who have donor-advised funds or designated funds who are sending money onto the community.

Greg: So wonderful. It sounds like there’s great benefits to families, clearly; based on around $50 million in grants, great benefits to a lot of wonderful charities.

Above and beyond the money, is there an opportunity for donors to also get involved in the charities, beyond just the financial contributions?

Kate: So, donors to The Pittsburgh Foundation are able to learn more about specific pressing needs in the community and we’re able to connect them with nonprofits doing really great work in the space that they’re interested in. So, it’s a very individualized process in which they can get involved, not only from just giving grants out to those nonprofits, but also going to see where those services are provided at a specific nonprofit. Meet some of the staff who are doing fantastic work because there are a lot of great things happening in this area. And then also, to feeling good about giving those types of nonprofits a legacy-type gift when they’re no longer here, so they can support them during their lifetime with their donor-advised fund. But then also to know that their fund can continue to support those types of things when they’re no longer here.

Greg: You may not know this. I’m just curious, how many people work or working at The Pittsburgh Foundation, around?

Kate: Around 50.

Greg: Okay, so here, let me just put some numbers together. You’re saying because potentially you all have $1.2 billion, you have grants of about 50 million a year, and have 50 people to support you…

Kate: Yes.

Greg: …That you may get different access and have more resources with local charities than some individual would?

Kate: Absolutely.

Greg: Right, so there it is. So, there it is. So, that’s wonderful for someone that really wants to know or get involved in a charity and have that involvement financially go on for a long period of time in a prudent way with successor advisors.

You know what? I’m saying the word “successor,” I’m saying the words “successor advisor” and I’m wondering if people know what that is. Do you want to just touch on that?

Kate: Successor advisor is naming someone to take over the grant making of that fund. When the donor-establishers are no longer here. In many cases, that’s naming children and grandchildren as successor advisers to the fund and that can continue in the family to create that family legacy.

Greg: Let me just tie up some loose ends. So, if I have some highly appreciated stock and I want to get the benefit today, but have the impact for generations, I open up a donor-advised fund, correct?

Kate: Correct.

Greg: I’m the advisor.

Kate: Yes.

Greg: I can start to communicate with my family about how to advise on that fund.

Kate: Right.

Greg: Correct?

Kate: Correct.

Greg: And then if I want my children and grandchildren continue that legacy, they can continue to make recommendations or suggestions to The Pittsburgh Foundation on potential grants. Is that how it works?

Kate: That’s exactly right. And I think it’s important to know also that starting a fund at the Foundation and becoming a donor and a partner with us, we’re going to going to help you to create that philanthropic plan, so you don’t have to know everything right away. You don’t have to know exactly how you want this fund to work in perpetuity. We’ll help you today and we’ll be together with you for many, many years, to come up with a plan for your philanthropy to make sure that it does exactly what you’d like it to do — to create that legacy that you and your family are looking for.

Greg: Mm-hm. That’s good to hear. Because I think when people hear something like “The Pittsburgh Foundation,” it sounds big.

Kate: Yeah.

Greg: Right. It just sounds really big and is it right for me? How do I have access? So, do you want to talk about when someone makes that decision to open up a foundation, you know, what do they do, who do they call? I mean, other than Confluence Financial Partners, right? And then we help them through the process also, because the last thing we want to be is part of that statistic

Kate: Sure.

Greg: You know, only 6% of advisors work with their — holy cow! Only 6% of advisors work with their clients on philanthropy.

Kate: Your firm does a great job in talking with your clients about things that really matter to them.

Greg: Thank you.

Kate: And so, I think including you, if your clients include you in that conversation and then bring us into it as well. That’s when philanthropy works best. When we all work together.

Greg: We try to do a good job, but those cards are going to help more. Wait till we get the pictures and we have clients picking.

Kate: You got it! You know that. Sure.

Greg: It really does, it helps clients put into words what they really care about, which isn’t always easy.

Let me ask you this one. What would people be surprised — or maybe were you surprised — that people don’t know about The Pittsburgh Foundation? You know, I f I think

Kate: You know, I think that when people think about The Pittsburgh Foundation, they think about us grantmaking into the community. We have, you know, a lot of foundations in Pittsburgh. We’re a very philanthropic community, but community foundations are different than private foundations who are granting money out. And so, knowing that, we are made up of individuals and families who really care about Pittsburgh and want to start that legacy with us, no matter if it’s a $10,000 fun or larger than that, you know, we’re going to help them hand in hand, give that money away. We do, of course, have those unrestricted dollars that we’re granting out to the community, but that our donors are a huge asset to this community and can make significant changes where we have many pressing needs.

Greg: Kate, thank you so much. It was really, once again, great to have a conversation with you. Pittsburgh appreciates The Pittsburgh Foundation and I appreciate your passion for it, and we look forward to working with The Pittsburgh Foundation and working with our families that we serve to continue to create a legacy for the families, and ultimately, for the communities. Thank you so much for your time. I appreciate it.

Kate: Thank you Greg. It means a lot that your firm is doing such incredible work in this space. It says a lot about the people that you have here and your leadership as well.

Greg: Thank you.

Kate: Appreciate it.

Greg: Thank you.

Greg: If you think we can help you maximize your life and legacy, reach out at Confluencefp.com.

Any opinions in the podcast are those of Confluence Financial Partners, or any guest speakers, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Investments and strategies mentioned may not be suitable for all investors. This information is not a complete summary or statement of all available data necessary form making an investment decision and does not constitute a recommendation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes. To learn more about the potential risks and benefits of Donor Advised Funds, please contact us. Raymond James is not affiliated with and does not endorse the services of The Pittsburgh Foundation.

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