Rockefeller Firm Tells Would-Be Buffetts How to Give Money Away By Lisa Kassenaar
http://www.bloomberg.com/apps/news?pid=20601109&sid=ampzu4gp5vpw&refer=homeJan. 11 (Bloomberg) -- Melissa Berman bears the burdens of the whole world. Right now, she's figuring out how to prevent children from becoming soldiers in Darfur. She's working to bring sustainable power to Sri Lankan villagers. She's trying to cut environmental health risks in post-Katrina New Orleans and stem a loss of nurses that will leave U.S. hospitals in crisis by 2020.
Berman, 51, who leads Rockefeller Philanthropy Advisors in New York, is working for millionaires who've done well -- and are eager to do good. And with philanthropy in vogue, her phone keeps ringing with more calls from hedge fund managers, real estate moguls and technology entrepreneurs.
``It's getting intense,'' says Berman, who holds a Ph.D. in English literature and once lived in Sweden deciphering Old Norse. Her 36th-floor corner office on Madison Avenue is piled so high with files and books that she can barely take in a view that includes a sliver of the East River. ``There's a lot of new wealth, and people are very focused on doing something with it while they are alive,'' she says.
Rockefeller Philanthropy Advisors, a nonprofit charity that was split off from the wealth management office of Rockefeller Financial Services five years ago, helped steer about $150 million to U.S. and international charities in 2006, twice the amount of 2002, Chief Executive Officer Berman says. In 2007, Wall Street bankers and traders sharing more than $36 billion in bonuses may help drive the donations Berman's group advises on to $170 million or more, she says.
Since June, when Warren Buffett said he'd hand most of his $40 billion fortune to the Bill & Melinda Gates Foundation, Berman's client list has jumped to about 135 from 120. Another 45 potential donors are in the wings. She's doubled her staff, to 32, in three years.
Ambitious Donors
Berman belongs to a growing class of charity advisers catering to the new rich, a group that's proving as ambitious about parting with their money as they were about earning it.
``The model in the past was that you made some money and kept a low profile, and when you died, you hoped it all turned out well,'' says Peter Frumkin, director of the RGK Center for Philanthropy and Community Service at the University of Texas at Austin and author of ``Strategic Giving: The Art and Science of Philanthropy'' (University of Chicago Press, 448 pages, $39).
``The new model is to take a more high-engagement philanthropy approach,'' he says. ``For every dollar invested, they want two or three dollars of impact.''
Citi, Harvard
The biggest financial firms, including Citigroup Inc. and JPMorgan Chase & Co., are adding philanthropy consultants. The services are becoming necessary to hold on to rich clients, who increasingly see charity as an integral part of managing family wealth, says David Ratcliffe, director of Merrill Lynch & Co.'s Center for Philanthropy and Nonprofit Management.
At Harvard University, Charles W. Collier, a senior philanthropic adviser, has started helping wealthy alumni fund more than just the school. Nonprofit consulting firms, including the 17-year-old Philanthropic Initiative in Boston and the 30-year-old Tides Foundation in San Francisco, are also helping hand out more grants than ever. New York University has even begun offering a graduate degree in philanthropy.
``This is a cottage industry that's about to become a lot more than that,'' says Tom Reis, a program director at the 76-year- old W.K. Kellogg Foundation in Battle Creek, Michigan. Kellogg, founded by the breakfast-cereal family, is the seventh-biggest U.S. philanthropy, with $7.8 billion in assets. ``It's like everything in philanthropy,'' Reis says. ``It's exploding.''
`Almost a Fad'
Enriched by rising financial markets and moved by images of natural disasters from the U.S. Gulf Coast to Thailand and Pakistan, Americans are giving to charity like never before.
Donations rose 6.1 percent to $260.3 billion in 2005 from a year earlier, including $7.4 billion for disaster relief, according to the Glenview, Illinois-based Giving USA Foundation. About 36 percent went to religious groups; 18.4 percent to health and human services organizations and 14.8 percent to education. Individuals made $199 billion of the donations, or 76.5 percent of the total.
Philanthropy is also fashionable because of the examples of public spirit set by Buffett and Gates, the world's two richest people, says Steve Gunderson, president of the Washington-based Council on Foundations, a network with 2,000 members.
``Their personal commitments to give up their resources sent a signal to the rest of society that this was the appropriate thing to do,'' Gunderson says. ``It almost makes it a fad.''
Lance, Angelina
Other celebrities are adding juice, including Lance Armstrong, the seven-time Tour de France winner and cancer survivor who now spends his time raising money to combat the disease. In November, the cyclist ran the New York City Marathon to promote his cause, garnering as much TV coverage as the Brazilian winner, Marilson Gomes dos Santos.
Rock star Bono, actress Angelina Jolie and talk-show host Oprah Winfrey are using their star power to draw attention to causes in Africa, from debt relief to AIDS orphans.
With all of that money out there and more consultants hanging out their shingles, donors need to be skeptical about where they find counsel, Reis says. ``As advice blossoms -- and it will -- the challenge will be good advice,'' he says. ``You can't underestimate how hard it is to give away money well.''
Goldman Sachs Group Inc. isn't even trying to give its clients philanthropy advice. The investment bank, which set aside $16.5 billion to pay its staff for the year ended in November, sends employees and customers, who typically have $10 million or more, to outside philanthropy advisers, says Karey Dye, a vice president in private wealth management who meets with the charity-minded.
``They are the experts on this stuff,'' Dye, 46, says. ``The best thing we can do for our clients is put them together.''
Robin Hood
Many people who've gotten rich in financial services are wary of nonprofit groups, fearing they might squander funds, says Nigel Morris, co-founder of Capital One Financial Corp., the biggest U.S. independent issuer of credit cards.
``These people believe in cause and effect,'' Morris says. ``Money should go to the charities that are better performers and have the best business models.''
Morris, 48, a Briton who lives in the U.S., is now a trustee of London-based New Philanthropy Capital, which does financial analysis of charities and advises individuals on philanthropy. The group is looking at bringing its services to the U.S., he says.
Some donor groups, such as New York's Robin Hood Foundation, withdraw their support from charities that don't perform. Robin Hood, started by hedge fund guru Paul Tudor Jones in 1987, collects annual data from groups it contributes to and compares relative returns. In the past three years, Robin Hood has canceled funding for 24 organizations, spokeswoman Ruth Gallogly says. Robin Hood gave money to 244 groups in 2006.
Hedge Fund Donors
``There's an intense focus on what it means to be an effective philanthropist,'' says Berman of Rockefeller, which charges clients based on the amount of time spent on a project or as a percentage of the donation handed out.
Her organization was created in 2001 when descendents of John D. Rockefeller Sr., the founder of Standard Oil Co., decided to make their private advisers available to other philanthropists. The aim is to help expand the circle of donors to niche causes all over the world, Berman says.
One California couple who made their money in hedge funds hired Berman to advise them on supporting education, which they felt had been important to their own success. Rockefeller staff spent two years discussing dozens of possible education issues with the pair, Berman says. Eventually, the couple decided to support programs to train school principals and teachers in some of the communities where they have roots.
Family Values
``You start with a very broad topic and end up with something actionable,'' says Berman, who formerly spent 15 years leading research on the role of business in society at the New York-based Conference Board. Berman, who grew up in Miami, earned her doctorate at Stanford University.
Philanthropy advisers typically delve into a family's values and past before advising them on how to give, says Lisa Philp, head of philanthropic services at JPMorgan Private Bank. Housed in a Park Avenue tower looking over St. Bartholomew's domed church, the bank now has six senior philanthropy consultants researching charities for clients with a minimum net worth of $25 million. Five years ago, one person handled the job.
Philp, 40, says she goes to about 10 meetings a week with clients, including a growing number of people under age 50 who are still working. ``Families are asking, `What's our legacy?''' she says. ``They're starting to see philanthropy as an expected part of their lives.''
Animals, Environment
Philp has a degree in Asian studies and economics from the University of Michigan and an MBA from Northwestern University's Kellogg School of Management. She joined the bank in 1998 after a year at Robin Hood and eight years at the New York Regional Association of Grantmakers.
Her staff may begin with a discussion about a client's general interests and then try to narrow it down, Philp says. Separate meetings often occur with children and grandchildren.
One JPMorgan client interested in animals decided she wanted to reduce the number of dogs and cats being euthanized. With the bank's help, she's now aiming to build up programs to spay and neuter pets and increase pet adoption rates. Philp is sending her employees to visit New York animal shelters and interview potential grant recipients.
Another client supports a U.K.-based environmental group and needed help setting up a chapter in the U.S. to attract financial donations and carbon offsets, which help reduce the amount of carbon dioxide in the air. Carbon dioxide is the main pollutant responsible for global warming.
Jacqueline Elias, 38, who has a master's degree in urban and environmental policy from Tufts University and is JPMorgan's expert on environmental issues, advised against setting up a new nonprofit and recommended making an alliance with an existing U.S. group instead.
Matchmaker
At Citigroup, Charles ``Chip'' Raymond works closely with about 25 clients worth at least $50 million each. Raymond, 64, is the former leader of the bank's own foundation. He also worked for four New York mayors, including David Dinkins, for whom he led the city's Department of Homeless Services, and headed the New York City Ballet.
Last summer, three clients asked Raymond to connect them with the Clinton Global Initiative, he says. Former President Bill Clinton's philanthropic foundation holds an annual meeting in September in New York that's attended by heads of state, chief executives, religious leaders and some of the world's most generous donors.
Raymond says he's working on plans to introduce clients with $100 million or more who have similar philanthropic interests. Those may include a regular newsletter and lunches or lectures on specific topics attended by clients from all over the world. ``I'm a matchmaker,'' he says.
Personal Agenda
Raymond's colleague Melanie Schnoll-Begun, a Citigroup managing director in charge of philanthropic services, says some clients aren't sure of their interests when they come to the bank.
In July, she met over lunch with a couple and their two children who'd recently inherited millions of dollars from a relative.
As they ordered their food, Schnoll-Begun, who's diabetic, took out an electronic device to test her blood sugar, as she does several times a day. It turned out that the woman was also diabetic, and they began to chat about the disease.
Citigroup ended up connecting the family with a group of medical researchers conducting clinical trials related to reinvigorating the pancreas in patients with diabetes.
``The family has become critically interested in studying obesity in youth and linking it with diabetes,'' Schnoll-Begun, 37, says. ``People realize they can push their own personal agenda through philanthropy.''
Fidelity
Those without million-dollar fortunes still have options for philanthropy. With as little as $5,000, they can open an account with a so-called donor-advised fund. The accounts offer an immediate tax break, while the investor can disburse the money to charity whenever he or she chooses.
The biggest fund is Fidelity Investment's 15-year-old Fidelity Charitable Gift Fund, which has $3.75 billion in assets. Fidelity, the world's largest mutual fund company, helps customers determine whether it would make sense to contribute cash or appreciated stock to the funds but won't help them select charities, says David Giunta, 41, the fund's president.
Clients can do their own research with the help of GuideStar.org, a 12-year-old organization that now offers data on more than 1.5 million charities online, he says.
High Stakes
Going it alone wasn't for Donald Jonas, 77, after he sold part of his abstract expressionist art collection with a plan to donate the money to charity.
``I needed someone to be there for me to hold my hand,'' says Jonas, who co-founded Harrison, New Jersey-based housewares retail chain Lechter's Inc. He ended up hiring Rockefeller's Berman, who helped him choose to support nurses. ``We didn't want to make a mistake.''
Jonas and his wife, Barbara, were married in 1953 and have two children. They collected art for 30 years and, in May 2005, raised $44.3 million by selling works including paintings by Mark Rothko and Barnett Newman, two wooden boxes by Joseph Cornell and ``Sailcloth,'' a 1949 Willem de Kooning oil that once hung in their Fifth Avenue apartment's library.
Jonas says he picked nursing as his beneficiary because he wanted a cause that had been overlooked by others. Rockefeller helped examine how nursing in the U.S. is losing status as hospital practices change, discouraging people from entering the field.
That portends a loss of more than a million nurses in the U.S. by 2020. Jonas says he knew it was the right subject for him when he realized that no one was funding programs to address the root causes of the shortage.
Annual Grants
The Jonas Center for Nursing Excellence opened in the offices of the Visiting Nurse Service of New York on Manhattan's Upper East Side this past May. The organization's partners include the nursing departments at Columbia and New York universities and three other area schools.
The Jonases made 11 research grants this year ranging from $150,000 to $400,000 for programs to improve retention of nurses, build racial and ethnic understanding in the nursing workplace and develop clear paths for career advancement.
Barbara Jonas, 72, whose Manhattan duplex is still filled with art, including a Jackson Pollock watercolor over the mantle, says she misses living with the works she and her husband sold at auction. Yet when 400 people showed up at a Jonas Center symposium on nursing at the New York Academy of Medicine in November, the excitement for what's happening with the money was palpable, she says. Some people were crying.
``This is a new part of our life,'' Barbara says. ``We wanted to be as thorough about this as we were about collecting art -- that's how we got the masterpieces.''
The Jonases are planning more philanthropic programs with Rockefeller, including one for disadvantaged children and one for mental health. Soon, Donald Jonas may be able to give advice to others; this fall, he took a course in philanthropy at New York University.
