Cheerfully Charitable at Schwab

Most financial advisors are well aware of donor-advised funds: You put your money in an investment pool of your choice, get an immediate tax deduction and you can take your time deciding when and how you want to ultimately disburse those charitable gifts.

Investors appreciate the ease and flexibility of such funds — it essentially allows you to operate your own charitable foundation with no more difficulty than investing in a mutual fund.

But what’s in it for advisors?

I got an unexpected insight into that question in meeting with Kim Laughton, the president of Schwab Charitable, one of the largest donor-advised fund firms in the industry.

Laughton was visiting Los Angeles for the Grantmakers for Effective Organizations (GEO) conference, a large annual gathering of charitable foundations and large donors, and she was noticeably relaxed and calm during our 45-minute talk.

What was noticed, specifically, was — a la Sherlock Holmes — the dog that didn’t bark, the absence of something that is a hallmark of investment executive interviews, namely: the intangible but ever-present tension of the asset gatherer.

Sure, investment executives are usually intelligent and articulate, and to greater or lesser degrees polite, humorous and insightful, but what doesn’t vary is that they are performing a job whose mandate includes championing their product, which is invariably the cleverest, most useful and beneficial of all similar products.

There was none of that in this conversation, and it was likely to due to more than the mellowness of the Texas transplant’s 18 years working with Schwab and living in leafy Northern California.

Rather, the different vibe stems from the fact that Laughton doesn’t see herself primarily as an asset gather but rather as a service provider. And that’s because Schwab Charitable is not currently nor is it expected ever to become a profit center for Schwab.

“We’re still paying back the loan” that funded Schwab Charitable’s establishment in 1999, Laughton says.

Indeed, the Schwab exec says the nonprofits she deals with especially tend to assume some self-interested motive in dealing with for-profit companies, but she insists that — to the contrary — for-profit Schwab has put far more funding into Schwab Charitable than it could ever recoup.

“There’s the original no-interest loan, our line of credit, the space we occupy, the administrative and trading support, the access to their systems, the millions of dollars a year of pro bono support,” Laughton lists. “Our fees, which are low, help to pay the salaries and costs of providing accounts.”

But Schwab Charitable is, as the name perhaps implies, not in it for the money.

“We are very much a service to Schwab clients,” says Laughton, whose staff will even meet with advisors and donors as subject experts who can advise on charitable planning issues.

The lessened pressure of a service offering as well as the cheerful nature of charitable giving make for pleasant day-to-day interactions with clients. But more is involved, from the client’s point of view, than just pleasantness.

“When people are giving money away, it’s a proud moment,” Laughton says.

And perhaps therein lies a message for advisors, and why they should and often do make charitable planning and community activity a focus of their practices perhaps out of proportion to philanthropy’s weight in clients’ finances.