From the December 2006 issue of Investment Advisor • Subscribe!

December 1, 2006

Private, but Reasonable

Of the many charitable avenues an advisor could steer a client down, private foundations might be more reasonable than you think. The New York-based Foundation Center reported in April that giving by the nation's 68,000 grantmaking foundations grew 5.5% to $33.6 billion in 2005, following a 5.1% gain in 2004. One of the primary drivers of that 2005 growth, according to the Center's Foundation Growth and Giving Estimates: Current Outlook report, was the giving of newly established foundations.

Daniel Schley, chairman and CEO of Foundation Source, is riding that wave through the firm's mission to "transform the private foundation sector through automation, efficiency, and an outsourced service model," including bringing down the point of entry for a private foundation. "The traditional market metric was that you had to be a Ford to have a foundation, with a minimum of $3 million to $5 million," but Foundation Source not only has 500 foundations and $2 billion in foundation assets under management, but "maybe a hundred," Schley says, in the $250,000 to $500,000 range. Its range of services include Foundation Source Back Office, for administration, governance, compliance, monitoring, transaction processing, tax preparation and filing, and all financial and regulatory reporting; Foundation Source Online, a Web site "customized for each family" that automates the actual giving function; and Foundation Source Client Services, which gives donors "24/7" access to a team of experts to help in the process.

The company charges a percentage of the assets under administration--$4,000/year plus 30 basis points, "so a $5 million foundation would be $19,000/year," Schley says. The price declines as assets rise: for foundations with more than $10 million, the fee would be 20 basis points, and at the $20 million mark further decline to 10 bps.

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