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December 15, 2002 at 07:00 PM
“Scam Alert” On Charitable Gift Annuities Was A False Alarm
To The Editor:
In his Dec. 2 article, “Scam Alert on Some Charitable Gift Annuities,” Chris Annalora bumbled aboard the bandwagon of fee-based consultants who want the world to believe there is something amiss when a commission is paid in connection with a charitable gift annuity transaction.
His effort, as expected, was weak. For instance, Annalora suggests that advisors should “be suspicious” of “unknown” charitable organizations “especially those offering commissions,” because they “may not be on the up-and-up.” His caution would be sound if the financial integrity of the annuity issuer could be determined by focusing on the organizations recognizability and compensation methodologies instead of its financial statements. However, most reasonable people should focus on what is important–the net assets of the issuer.
Which annuity would a reasonable person prefer: (a) one issued by an unknown charity with $100 million in net assets that uses a commission methodology, or (b) one issued by a well-known charity on the brink of bankruptcy that uses traditional compensation strategies? Apparently, Annalora would recommend option “b” because he would at least know the bankrupt charity and appreciate its embracement of compensation methodologies recommended by fee-based professionals.
Next, Annalora states that the payment of a commission in connection with a charitable gift annuity transaction is a “no-no” because “its considered to be inappropriate by most reputable charitable giving planners.” (Isnt that a bit circular? Maybe its “inappropriate” because its a “no-no.”) What Annalora means to say is that its inappropriate because its not “fee based.” However, since when does commission compensation cause the recipient to suffer a loss of reputation? It is simply absurd to suggest that if a charitable organization elects to limit its costs to those relating to the point of sale–well recognized by American industries and capitalism generally as the most efficient means to effect revenue growth–then the compensated facilitator must be disreputable.
