Ethics Questions About Donor-Advised Funds

LETTERS TO THE EDITOR

To the Editor:

In the article, “Charity Official Questions Ethics of Fees Paid to Financial Advisers” (August 18), the statement, “few fund-raising or financial experts agree” with my views about fund-raising practices in donor-advised funds is completely inaccurate. Many experts have published statements in agreement with my key points, although there is disagreement on the prevalence of the problem.

In the “Ethics Lab” column of the 2nd Quarter 2005 issue of The Journal of Gift Planning, the ethics committee of the National Committee on Planned Giving finds that the sales commissions or incentives paid to donors’ advisers are essentially the same as finders’ fees, which are unethical, and those commissions place the adviser in the role of solicitor for the charity.

The planned-giving association disagrees with me on the prevalence of this practice. My preliminary review suggests that most commercially sponsored donor-advised fund programs use these methods, and that many other charities have begun to adopt them. It has become a very common approach.

The Association of Fundraising Professionals’ ethics committee indicates that most of the people who would be involved in such practices would not be within the association’s jurisdiction, implying that it should therefore take no action. This is an untenable position, as the practices are conducted by officials of 501(c)(3) charities, many of whom are members of the association, and AFP has effectively helped to control their actions in the past with regard to offering finders’ fees. This should follow the same model.

For 13 years, the philanthropic community has been uncomfortable with the unfair advantage commercial firms have in being able to easily siphon their clients’ funds into their own donor-advised funds. The root of this discomfort is that these commercial firms have not been aware of the traditional ethics of philanthropy, and the fault lies with the charitable world and its officials for failing to make them aware of the relevant standards.

If the philanthropic community supports those standards, we can put commercial donor-advised funds on a level playing field with other charities when it comes to fund raising. And other charities will not have to adopt unsavory fund-raising practices in order to compete with them.

Bruce Makous
Major-Gifts and Planned-Giving Officer
American Association for Cancer Research
Philadelphia