Despite the growing perception that a broad slowdown in the economy will deflate the recent boom in charitable giving, financial institutions that help their customers make donations are betting that philanthropy will remain a growth area.
Both Wilmington Trust Corp. in Delaware and Bessemer Trust Co. in New York have recently hired executives to focus on philanthropic services. Meanwhile, on the investment product front, J.P. Morgan & Co. last week opened its own donor-advised fund to investors, and Oppenheimer & Co. launched its first donor-advised fund Monday.
Financial companies have always been reluctant to document the degree to which such efforts contribute to their bottom lines. But by helping customers manage charitable donations, banks can deepen their involvement in an individual's financial life and retain his assets longer.
The economic surge of the past two years, coupled with the aging of the baby boom generation, has bumped up charitable giving - whether for tax-sheltering or altruistic purposes - to unprecedented levels.
In 1999 Americans donated a record $190.16 billion to charitable causes, according to Giving USA, an annual study by the AAFRC Trust for Philanthropy, an Indianapolis organization that promotes philanthropy. Giving by noncorporate foundations reached $19.81 billion, a 16.5% increase from the year before, the study said.
Though the economy's recent cooling has caused donations to begin receding, a wealth transfer estimated at trillions of dollars during the next several years is likely to keep charitable giving high as baby boomers seek tax breaks.
And bank executives said that market fluctuations will not obviate the need for services that the wealthiest families have required for decades.
"While we may see some near-term negative impact because of market volume, we don't expect it's going to be a long-term negative appreciable impact on giving," said Karen H. Putnam, who joined Bessemer on Nov. 13 as director of philanthropic services.
Banking companies that serve the affluent have long helped them set up foundations and trusts and manage tax exposure. Now, with increased competition for the affluent market, some of these institutions are looking for ways to expand on that expertise.
Lawrence R. Jones, Wilmington Trust's new senior private-client adviser in charge of philanthropic services, started work Monday in its Villanova, Pa., office. He previously was a senior philanthropic consultant at New York-based Merrill Lynch & Co.
At Wilmington, as at Merrill, Mr. Jones is to work with nonprofit organizations, such as charitable foundations and universities, to help them raise money more effectively. For example, he is to organize seminars with the organizations' donor bases and teach the nonprofits' board members about asset-gathering tools, said Jeffrey J. Culp, the division manager for Wilmington's private-client advisers group in Pennsylvania, to whom Mr. Jones reports.
For Wilmington, the payoff is expected to come from new relationships, Mr. Culp said.
"Where I'm coming from is growing the business and finding opportunities to gain access to individual clients," he said.
For Bessemer, which recently doubled, to $10 million, the minimum required to open an account, the goal was to increase its focus on providing the service that the wealthiest of the wealthy increasingly expect.
Ms. Putnam, who previously ran New York's Central Park Conservancy, works with clients on aspects of their charitable giving, from deciding which organizations to support to determining the best way to structure gifts for optimal help to the charity as well as for benefit to their own financial planning.
Robert C. Elliott, the senior executive vice president to whom Ms. Putnam reports, said Bessemer has long helped clients with activities such as setting up charitable trusts and foundations. But the recent increase in philanthropic activity among its clients prompted the New York company to offer "a more comprehensive, or holistic, approach" to philanthropic services, he said.
"There's a very strong and growing interest in doing good, whether because of taxes or a desire to give back," he said. And though old-money families have long-established foundations and trusts, Bessemer increasingly caters to a new breed of rich executives - in fact, 85% of its clients hold first-generation wealth, Mr. Elliott said.
Bessemer has sought to appeal to this new generation by offering alternative investments such as hedge funds, he said. As these executives reach an age at which they need to consider wealth-transfer strategy, assisting with philanthropic activity is another way to gain their loyalty.
At the highest end of the wealth spectrum, "clients really expect help in determining what to do with their wealth," and that increasingly includes philanthropy, said J. Scott Slater, a senior consultant at Windsor, Conn.-based Spectrem Group.
For asset managers, charitable giving is "not just a sideline anymore. It's a fundamental part of planning," Mr. Slater said.
One way rank-and-file banks can compete is through what are known as donor-advised funds, or charitable-giving funds. These funds enable client assets to be invested in a proprietary mutual fund that manages the assets until they are disbursed to a charity (or charities) of the donor's choice.
Several companies - including Bessemer, Boston-based Fidelity Investments, Pittsburgh-based PNC Financial Services Group Inc., and now J.P. Morgan and Oppenheimer - offer these funds. As in a charitable remainder unitrust, the donor gets an immediate tax deduction and decides when and to what charity the assets will be disbursed, but unlike a unitrust, these funds make no distributions to the donor from the assets donated.
An advantage for the asset managers who offer such funds is that client assets remain under their management until disbursed.