From the September 2009 issue of Investment Advisor • Subscribe!

September 1, 2009

Catching Up With: Kim Wright-Violich

Schwab Charitable, the donor advised fund from Charles Schwab & Co., announced in early August that it had expanded the underlying investment options in its Charitable Gifts Accounts and introduced a new online advice tool.

In an interview in New York on August 6 with Group Editor-in-Chief Jamie Green, Schwab Charitable's president, Kim Wright-Violich discussed the thinking behind the new options and advice tool, and discussed trends in charitable giving.

So what was behind the new investment options?

We have completely redesigned our investment lineup. The first donor advised funds tended to have limited choices, with only three or four choices, typically blended pools. Over the years we added options, but this is the first time that we looked at every offer we had. We started the process before last fall, with the goal in part to take a more open-architecture approach than we had done historically.

So we increased the choices--we now have five asset classes, plus a socially responsible fund. We did blended funds for people who want to just plug and play, and for those who wanted to design their own, you can pick from these [nine mutual] funds and do a mixture that fits your own risk profile and grant-making history.

Then, because it's slightly more complex, we wanted to give donors guidance on how to invest for some time...so we developed this tool--an online version is in our donor center, the secure part of our site, for donors to use, but there's also a PDF version on the public site (schwabcharitable.org/pdf/Advice_Tool.pdf). The questions [regarding investing time horizon and risk tolerance] would be a great thing to do with your client.

How has donor behavior and psychology changed?

Grant-making from Schwab Charitable is up 6% in the fiscal year ending June 30, though donations are down significantly in the way you'd expect. The primary value of this vehicle is that you separate the tax decision from the charitable decision.

People who have fluctuating income are going to have different tax needs in different years. So the charitable account allows you in years when you have a large income to take a charitable deduction, but then grant evenly.

Charitable giving in the United States is only off 5.7%, which makes sense, because most giving is done directly, and it is amazingly resilient. Most Americans will give up something else before they end giving to their church or synagogue or temple or the local hospital.

Giving is down exactly in proportion to GDP. But in donor-advised funds you'd expect it to be down more now, since you only fund it when you have the extra money or appreciated securities.

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