Something’s Gotta Give: The Invisible Donor

Formal, public recognition of donors large and small has long been a no-cost way for charities to say “thank you” to those who provide financial support to a particular cause.

Formal, public recognition of donors large and small has long been a no-cost way for charities to say “thank you” to those who provide financial support to a particular cause. It also lets others know that so-and-so is a fan of the charity, and why aren't you, too?

For the donor, those engraved plaques in the charity's lobby and “Gold Level” listings in the annual report provide evidence of the givers' commitment to the greater good, as well as an automatic association with the right circles.

But despite all the mutually beneficial outcomes that naming names provides, more big-gift donors are requesting that “Anonymous” occupy the spot where their names would otherwise be.

Here are four reasons it might be wise for your generous clients to make sure the only time their name is associated with a donation is when it's signed on the bottom of the check.

  1. NO MORE “NOs”

    When many charities are getting ready to kick off a big capital campaign, their first additions to the database of prospective donors are those who have given to other organizations in the past. These names might come from a sophisticated, well-scrubbed computer screening, or perhaps a blurry copy of some direct mail piece received by one of the campaign's members.

    Either way, landing on the list forces your client into one of two potentially uncomfortable situations: The first is to have to reject the new group's request, and leave them knowing that the client “gives” — just not to them. The other possibility is that, whether from compulsion or coercion, the client forks over funds to the second organization — after which, he will be twice as likely to land on some other charity's hit list.

  2. KEEPING FAMILIES FRIENDLY

    Even the most indignant response from a shunned charity will pale in comparison to family members who feel that your client is giving away an expected inheritance. It's one thing for the client to reject, say, a granddaughter's request for another $20,000 because she's “thiiiiisss close” to graduating after only nine short years in college.

    It's quite another for your client to turn down the would-be trustafarian while simultaneously giving $2 million for the naming rights on her alma mater's new football stadium. Of course, it's often the least-deserving heirs who generate the most acrimony over who gets what, and are also the least likely to listen to and comprehend the reasons behind your client's choices.

  3. TO AVOID A PREDATOR

    Of course, spurned charities and outraged relatives could be the least of your generous clients' worries, compared to what could happen if a criminal gets wind of the clients' wealth. An article in the Los Angeles Times earlier this year noted the case of Ernest Rady, who made several well-publicized eight-figure gifts to area organizations. Shortly afterward, he and his family were held hostage in their home by an attacker looking for money.

    The family's attorney blamed the publicity surrounding the donations, saying it made them a bullseye target. Perhaps a warning from you to your clients could help them avoid a similar fate.

  4. STOPPING UNWANTED SCRUTINY

    Even strangers who aren't criminals might cause some problems for your charitable clients if the names and donation amounts are found out. For example, gifts to groups on the fringes of the political spectrum might win your clients some enemies who reside on the opposite end of a particular issue.

Even supposedly non-political causes can raise rancor. Some individuals might go to any length to know if big, anonymous donors have received special favors in exchange for a donation. It may not matter if a client's heart and motivation are in the right place.

Last year, an elderly pair of siblings in Wisconsin donated $10 million anonymously toward the construction of their town's new municipal complex. The local newspaper filed a request for the donors' identity, and sought evidence that the donors were getting something under the table for their generosity. The names were released to the newspaper, which subsequently found no untoward activities surrounding the gift.

Despite pleas from both the siblings and the city manager, the paper decided to publish the names anyway, for good measure.

What Can Be Done

The privacy of donors is a subject usually covered by state law, and several legislatures are in the process of establishing to what rights donors are entitled. But clients who would prefer to keep their charitable actions under wraps don't have to wait for the government to act on their behalf. There are still plenty of ways donors can avoid unwanted attention.

First and foremost, make sure that your clients' anonymous giving remains that way. The process starts with reviewing the charity's privacy policy, and ends with the client notifying the group that if the word gets out, no more money will be forthcoming.

The second strategy is to help your client establish a donor advised fund (discussed in the February 2008 of Registered Rep.). One of the many attributes of this vehicle is that the checks can come from the financial services firm or community foundation that runs the DAF, with no need to name the original donor.

Of course, if a client wants the attention and recognition that comes with making magnanimous gestures, by all means let her bask in the glow. But if she's ambivalent on the subject, tilting toward anonymity may prevent more solicitations, family strife or worse. Plus, it will keep her name off of the radar screen of other financial advisors.

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