A personal take on donor advisory

Wirkung Impact

(This text was originally published in October 2023 as a simple google doc. The goal was to offer some guidance to fellow donor advisors both in Europe and in the US who are as focused on effective giving as we are. Meanwhile we have decided to put the article on our blog in order to make it more accessible for interested parties and also to provide donors with a peek into what donor advisory looks from the inside.)

Donor advisory is an animal of its own, a shape-shifter, really. It changes shape depending on you, the advisor, the personality of the donor, what you are talking about, when you are talking about it, and where you are in the process of working together. I could say that I have never had the same conversation twice. Over time, however, I have discovered that there are also some aspects of my work, or rather the approaches I take in my work, that are quite consistent.

In the past couple of months I have been approached by a number of people who associate with effective giving and asked for my take on advising wealthy folks.  One of them, Bram Schaper from Doneer Effectief in the Netherlands, asked me to write up some of my experiences so they can find further distribution.

Donor advisory is a personal experience for the advisor. As an advisor you will only be trusted if you bring your entire personality to the table: your true self instead of just a role that you assume. It’s also a very personal experience for the donor, who lays not only money on the table, but his personal take on ethics and morality and his individual experiences that got him there. So if you, the reader of this text, are already a donor advisor or are considering becoming one, I ask you to follow my advice only when it not only sounds right, but also feels right. 

Before I get to it, let me quickly introduce myself so that you know where I’m coming from. My background is business consulting. I entered the nonprofit sector around 2011 when a business partner and I were asked to assess the impact of a charity in Germany that was funded exclusively by a single family. What we found: Yes, there was an impact, but the money spent on achieving it was ridiculous, literally 10x of what another organization in the same cause area needed to achieve identical results. Our advice: Close it down, now. The family followed our advice and thus freed up a significant amount of money. Money that was put into a foundation that we helped to set up and run—With a simple goal: to achieve as much good as possible with whatever money the family put on the table.

Around 2015, actually looking for advice regarding my personal donations, I stumbled upon GiveWell. Like some before me and many after me, I was blown away by the depth of their analysis and decided to book the next flight to San Francisco. Before that I had asked the GiveWell team whether they would allow me to shadow them for a week or two. (I believe I was present when Holden Karnofsky, at that time co-CEO, pitched the issue of AI safety for the first time to the team). 

A couple of weeks later, I traveled to Oxford to meet Will MacAskill and his team to learn more about EA and incorporate what I learned into our work with the foundation. That lasted until 2018, when a conflict regarding the strategy of the foundation forced me to leave (aka, I got fired). So I left and, together with my former colleagues, co-founded Legacies Now and Effektiv Spenden, two effective giving projects that we recently merged. At Effektiv Spenden I’m responsible for advising large donors, especially in Germany, Switzerland, and the US on how to give wisely. 

Please note that this write-up is a very personal take –no footnotes or cited studies to support my claims. And a rather lengthy one. And at times redundant, because I will revisit some arguments with different lenses. Best to think of it as an essay. Please also note that this text reflects a European perspective, and within that, a German one. While most of my colleagues at Effektiv Spenden will agree with most of this text, some of them might disagree with some aspects or at least would frame them in a different way. 

So this is a personal take on a highly personal experience. My goal is to ring a bell or two that might make lives easier for some fellow advisors and maybe contribute to moving even more money to interventions that help make life on this planet a little bit less hostile. And, of course, I don’t mind donors reading this. The donors I advise won’t be surprised by anything written up here anyway.

The order is random. Best consider these brief thoughts regarding single terms or concepts that come to my mind when I think about donor advisory.

1. Intuition

I have spent years, literally years, putting myself into the shoes of the donors I advise. What kind of support do they want? What kind of wording do they expect? What kind of material are they used to? Until I realized that rather than thinking about their shoes, I should be thinking about my own. 

What kind of support would I need? How would I want to be approached? What material would help me understand how to go about my donations? I realized that there really is only one structural difference between the donor and me: My clients often are incredibly wealthy. And I’m not. But if wealth really is the only difference and all else is pretty much similar—or equal—I should rather think about what would suit me; then there’s no need to speculate because I know perfectly well how I would want to be approached and advised. So I guess my first message is this: Don’t overthink it. Treat your donors exactly like you want to be treated. Look in the mirror and trust your gut.

2. Motivation

It comes with the territory that people sometimes ask me how much they should “give back.” I don’t have an answer, just some thoughts. 

For one, I’m not a fan of “should.” In my conversations with donors I rarely make reference to their moral obligation to give. Instead I prefer to talk about their opportunities, their “could”. In my experience this framing moves more money in the long run than appeals to the guilty conscience. Nobody likes to be pushed, everyone likes to be invited.  Donating effectively as an invitation opens up a world of tempting choices, not only to change things for the better, but also to become part of a community of inspiring folks, be it the founders and CEOs of the effective NGOs we recommend, the scientists who provide the research we rely on, or engaged fellow donors.

Also, I’m not a fan of “giving back.” Back to whom, back to what? And why? When we discuss funding opportunities with donors, we never look back, instead we look forward. Into the future. And we look forward to achieving something that obviously couldn’t be achieved until now, hence the funding opportunity that we discuss.

So now we have reframed the question from “How much should I give back?” to “How much could I give forward?” Yet I still cannot answer it. The range of giving is enormous. I have met donors who give away a one- or two-digit percentage of their yearly earnings, or an annual percentage of their wealth. Some plan to give away up to 50% of their wealth during their lifetime; others plan to give away 100% upon their death. 

Whatever donors decide on giving (it’s always a significant number, otherwise we wouldn’t be having that conversation in the first place) I suggest that they define their commitment in absolute or relative terms and install an automatic process of separating the donation volume from the rest of their wealth, for example by having a separate account to which the volume allocated for donations is transferred on a regular basis. I suggest revisiting this commitment only every other year or so. That way, when donors face decisions on where to give, it’s not confused with the question of how much. Because in the donors’ perspective the money is either already gone or has never been theirs to start with.

3. Gratitude

A colleague of mine asked me recently how I say thank you when a donor I advise places a significant donation. The question caught me off guard. Ahem, I mumbled, actually I never say thank you. 

But why is that? To answer that question let’s take a step back. Often (and not very surprisingly), people who learn that I work with donors mistake me for a fundraiser. Actually, few perceptions of my work tend to get me as annoyed as this one. The projects we recommend at Effektiv Spenden operate completely independently from us and we operate completely independently of them. The organizations don’t pay us for moving money to them, nor do I ever ask our donors to give more than what they initially brought to the table. So, no we don’t fundraise.  

Instead the conversation starts with whatever the donor brings to the table. She or he and I sit side-by-side with all the opportunities laid out in front of us and together we try to figure out how to place the money so that it can achieve the most good. Which makes me an advisor that helps them to solve their specific problem: how to give away what’s on the table as effectively as possible.

So, of course, there are mutual instances of thanking each other. For example, thank you for your advice. Or thank you for your trust. But it’s never, ever thank you for the money.

4. Ignorance

When I started out as a donor advisor years ago, my goal was to make my clients always fully understand why I was suggesting what I was suggesting. I wanted them to fully embrace the ideas of effective giving as if it were their own, which of course requires a number of sessions on the philosophical and mathematical foundations of effective giving. 

Turns out, not everyone really cared. As a donor put it once: Bro, it’s wonderful that you know all this stuff. But that doesn’t mean that I need to know all this. All I need to know, really, is whether I can trust you. And I do. So I’ll leave it to you, my expert, to tell me what I should do with my donations—and get back to my life. I believe this “willful ignorance” approach to expert knowledge is absolutely reasonable. As a matter of fact, this is probably the approach I would take if I were in the position of this donor. 

Meanwhile, I have formed the habit of asking the donors I advise early in the process how much time they actually want to spend with their philanthropy. They give me some number, say in hours per month. I discount 50% of that, because they tend to overestimate the additional time they actually have, and this is the time budget we will invest together. If the resulting number is quite low, this means that we won’t ever leave the realm of ignorance. As long as we achieve great things together, that’s totally fine.

5. Stupidity

The reason I’m doing what I’m doing is that I want to move as much money as possible to the organizations that have as much impact as possible. Since the difference between organizations that excel at what they are doing and those that don’t can easily be 10-100x, this pretty much rules out supporting donors who choose not to give to the organizations that provide that kind of multiplier compared to the average. It also rules out supporting donors that want to engage in cause areas that, in our understanding, won’t generate significant impact per se, no matter whether the organization in question does a good job or not. 

The math is easy: All else being equal, a single donor with a true impact agenda equals 10-100 donors that don’t have this focus. So, if we are sincerely interested in impact, it’s obvious who we as philanthropy advisors should spend our limited resources on. When I start working with a donor, we will generally have what I call “the talk,” in which I outline the rules of engagement and define the (impact) terms, which is pretty much that we will follow the science, right? Right?! 

However, with donors generally comes the legacy of past engagements, some of those engagements being quite close to their hearts. And, in the light of science-based effective giving, quite stupid. So how to navigate heartfelt stupidity? One of my first donors asked me exactly this: How stupid do you allow me to be? 

In principle I’m a believer in the 80/20 rule and I believe you can apply it in this context, too. As long as 80% of the funds that are on the table go to high-impact interventions, 20% of stupid stuff should be OK. And if it doesn’t eat up too much of my time, I might even help with the stupid stuff. 

I’m quite qualified to do this, by the way, because of course I’m familiar with stupidity myself. For years my wife and I—at the time already fully aware of the principles of effective giving—donated to an orphanage in West Africa, because the guy who delivered our newspaper told us about it. The orphanage was run by his mother. We don’t even know whether our monthly donations actually reached the orphanage, let alone what the impact was. The guy appeared to be a nice fellow and we wanted to be generous—or stupid for that matter, eyes wide open.

6. Experience

A couple of years ago, a colleague who teaches a course on donor advisory to students in the UK asked me what would be my single most important advice to their students. 

My advice is just two words: Get older. 

On the surface, donor advisory is simply about making the smartest calls on donations. But there are other layers. As donors think about where to donate, they almost always reflect on their values and their ideas about what would make a better world. Often they are forced to think about what actually formed their convictions and beliefs. Sometimes they see what they have believed or done until now in a new and critical light. 

And whatever the outcome, even if their family is not actively involved in the decision process, it is almost certainly impacted—when, for example, donors decide to give away half of their wealth, it’s easy to imagine that not everyone will be happy about this. So welcome to family dynamics that need managing, either by actively engaging with family members or, at least, by managing expectations of the donor. Like letting go of the idea that every family member will be super excited to see half of their inheritance vanish into thin air. 

But even if family is not involved and we are dealing with a single donor who is in total control of her decisions instead, I’ve learned that conversations tend to go (far) beyond philanthropy. The reason for this is that some of the donors I advise simply don’t have a lot of peers they can or want to talk to openly about their wealth—and the challenges that come with it. Many of the donors I advise don’t really associate with “being rich”. Often they have preserved their relationships from back before they were wealthy—and want to keep them just as they are. Some of them haven’t even told their families or spouses how much is in the safe. For them, a conversation with a philanthropy advisor provides the opportunity to learn about how (strictly anonymized of course) other people deal with similar situations, like a sudden windfall, be it through a successful exit or an inheritance.

To sum it up: Having an advisor who belongs to a similar age cohort certainly helps the donor to trust her or him with questions that, at times, can become quite intimate and might require the perspective of age. Or at least it means the donor will be able to share some experiences, like dealing with children who are not happy to lose half of their inheritance, with someone older than they are.

7. Trust

To claim that 20% of my knowledge is sufficient to advise 80% of the donors I deal with is a gross exaggeration. Rather make it 10% for 90%. And this is not because I know so much. It’s because time is a scarce resource for the donors I advise. As is attention. And memory. There is only so much you can present and discuss in the time slot that you have been offered. And it’s not because donors don’t give you more time. It’s because they don’t want to spend more time on donating because they have a life to live. A family to take care of. A business to run. 

So yes, one could spend many hours day in, day out staying on top of every thread of discussion in literally dozens of topics. EA-Forum anyone? The truth is, donation advice rarely leaves the basics of why this cause area, why this intervention, and why this organization.

My job is not to be the expert on what was trending last Thursday in social media’s nonprofit bubbles. So relax, fellow donor advisors. If you know the fundamentals and are confident about your recommendations, you are good to go. And by the way, if there is one single sentence that creates trust with donors, it’s this one: “Honestly, I don’t know . . . but I’m gonna find out and get back to you.”

8. Clarity

Wouldn’t it be great if, instead of donating money, one could “impact invest” it, so the funds aren’t lost, aren’t used up, and can continue to create good over a long period of time? Well, yes, of course that would be wonderful. As would be the invention of the perpetual motion machine. 

Of course it’s a better idea to invest in a company that has a positive impact on the world than a negative one. But when you compare impact investments to donations, things get trickier. 

First, some of the world’s most pressing problems simply cannot be solved with business models that return money to investors. Especially when it’s unevenly distributed wealth that is at the heart of the problem, such as extreme poverty: Whether the intervention works indirectly, such as creating access to education, or directly, such as providing cash to people in extreme poverty, making it happen generally means giving money away – for good.

Second, when looking at impact investment opportunities, we need to factor in “additionality” or “the counterfactual”: What would happen if one didn’t invest in this specific opportunity—would someone else do it? Quite often, the honest answer is a “yes,” especially if you are looking at investment opportunities that have a broader appeal. If you don’t invest, someone else will. If that’s true, the additionality of your investment could be 0%. Giving to this cause might let you sleep better because you do business with the good guys, but it probably won’t accomplish anything significant on the margin. When you donate to high-impact charities with room for funding, however—say to GiveDirectly—the scientifically established counterfactual of your donation is that no one else will step in for you. If you don’t place your donation, the family that would have received your money gets nothing. The additionality or net impact of your donation is 100%. Agreed, that the math gets a little more complicated when you look at other cause areas, but you get the point. 

Third, impact investment opportunities tend to be challenging hybrids because, by nature, they need to be optimized for two goals simultaneously: achieving social or environmental impact and achieving the necessary returns to be sustainable. The problem is, however, that those two goals tend to get in each other’s way, especially when the company—as all young companies tend to do—hits roadblocks and has to adapt to market reality. Quite often, this results in compromising on impact in order to keep the company afloat, or to stay on-mission . . . and go under with it. In the (high impact) world of nonprofit donations, on the other hand, funders will insist that the organization they fund never compromises on impact. On the contrary, the more impact they show, the more money the organization will receive.

All things considered, this appears—again—to be one of the arenas where one just can’t have it both ways. If you want your money to achieve truly great things, nothing beats giving it away.

9. Greed

As a philanthropy advisor, you will work regularly with folks who could give more than they actually do. A lot more. However, pushing them towards giving more will not work, for two reasons. One: As stated before, nobody likes to be pushed. Two: People tend to have made up their mind already about how much they want to give, before they even approach an advisor. 

If you become greedy and signal to your donors that they should give more, you eventually will lose the seat at their side of the table and exchange it for a seat opposite them. And now you are now sitting next to hundreds of nonprofit players who try to hammer your donor with appeals and make them feel guilty for not doing more. Don’t go there. It’s not a good place to be seated. You will become indistinguishable . . . and, eventually, you will be invisible.

However, there exists a force that might, in fact, change the volume your donor is prepared to give: the joy of giving. If the donor experiences that what she donates actually does make a difference, if she feels connected to people within the organizations that she funds or to peers who think and act like she does, then the joy of achieving something can create pull—and put air under the wings of the budget.

10. Humility

In the cause area of global poverty, for example, I make a habit to point out to donors that no matter how much money they will throw at extreme poverty, it won’t make a dent on the worldwide trajectory of the issue. Your money doesn’t “fight global poverty.” If you think it does, you are up for a disappointment, because it just won’t show. 

What your money does, instead, is to help individual families who are severely affected by poverty. And for them, your donation means the world. It’s beyond making a dent on a graph. It’s creating a new graph altogether. Your donation will make the difference between a life in misery and a life in dignity, and sometimes it may make the difference between life and death.

Things get a little murkier, of course, when you support advocacy for better policies for example, whether in global development, animal welfare, or climate. Modesty here can mean that it’s not important whether the specific motion you support has been successful. What matters is whether the sum of all the motions and litigation that your fellow donors and you as a community have funded is having a significant impact. 

I believe it’s quite important that we all acknowledge that we as individuals are not actually changing the world here. Personally, I don’t want to be responsible for changing the world; for my taste, that’s way too much responsibility. I would much rather achieve impact on a scale I can fathom. As in impacting a life. Or a family. Or a community. Or even a law. To manage that kind of expectation down to n=1 might appear exceedingly modest at first glance, but it’s not. If donors really, truly understand what their donations achieve for actual people, people like them, this will make a lasting impression on their lives, too.

11. Consolation

Chances are high that donors we advise at times feel pretty isolated pursuing a path that is based on the principles of enlightenment, e.g., rigorous scientific research. Overwhelmingly donors are implicitly or explicitly told to go where their passion, and their passion only, leads them—and gladly follow that route. Our donors are capable of resisting this urge, because they have understood that giving is not about them. It’s about the others. Thinking along those lines, basing their decisions on effectiveness and impact on the margin can make them outliers. Over time many of them have become frustrated to some degree because they have tried to convince friends and family to join forces and do the scientifically vetted “right” thing. Only very few will have succeeded with this call. As a result, our donors not only tend to be disappointed, but also bewildered. It’s their family and friends after all. Why don’t they see what, to our donor, is totally obvious?

I’ve learned that the donors I advise tend to be quite happy when I introduce them to fellow outliers. Sharing with other donors the experience of failure to convince friends and family helps donors understand that it’s neither that they have failed to make the obvious clear to their friends and family, nor that their friends and family have failed them. It’s not a cognitive issue, it’s a cultural one – and would probably warrant an essay of its own. 

12. Compensation

What about payment? How is donor advisory compensated? In the past years we experimented with a couple of models. We started out with the pay-per-workshop model. Then we migrated to pay-by-the-hour. And ended up with the model of pay-nothing-for-everything.

The rationale for the initial model was to make sure there would be discipline on the donor’s side to prepare for and process the contents of the joint workshops. However, in the process we learned that our donors didn’t need the “stick” of a fee to motivate them to keep up engagement and concentration. There were ample amounts of these. And we learned that, often enough, our donors didn’t even need a series of workshops to make their decisions. A structured conversation once in a while was often sufficient. 

So we switched to a fee by the hour. But what hours really? The conversation hours? The ones we spent researching our recommendations? The hours we spent researching organizations that we ultimately wouldn’t recommend? The meetings where we discussed with experts the lay of the land in general? All of these hours? Some of them? We ended filling out timesheets that were detailed down to the quarter hour, allocating percentages of each task to each client we were advising. But change one of the assumptions above and it’s half the billing, or double. This was not a sustainable model. And not very well liked by some of my clients either. When one client who I had helped—at no cost because things needed to happen in only a couple of days—to move literally millions to effective organizations told me that he wouldn’t have contacted me if he had known that I charged fees for my services, I realized that we needed to change our model again.

So we switched to the nothing-for-everything model. Our mutual agreement with our donors now is this: As long as we deem you a worthy donor (in terms of volume moved to effective causes), we will work with you. Mind you, we will work with you, not for you. If you like our work, you can place a donation to Effektiv Spenden. Not as compensation for our work: Your donation will enable us to make the same offer to the next client and thus move even more money to the organizations we all care about. This decision made life a lot easier for all parties involved. However, it remains to be seen whether the model will prove financially sustainable in the long run.

13. Happiness

Although the topics we cover are often grim or even gruesome—dying children, tortured animals, an overheating planet and other existential risks to humanity—  spirits both at the company I work for and in my conversations with donors are generally upbeat. This is in part because we never discuss a problem without always also presenting possible solutions. Solutions that whomever I’m talking to at that moment can become a part of. I keep returning to our donors’ power to have an impact. But not only for impact’s sake. It’s for their sake, too, because what’s true for me is also true for them: Working on these issues, actually doing something, even if it’s only baby steps, is taking back some control from the forces of chaos. 

Being in control, by having an actual impact with what you do, is proven to be one of the greatest contributors to life satisfaction, and one might say that it’s precisely that—overcoming our shared feeling of helplessness—that makes effective giving so satisfying, especially when we all actually know what we achieve together, be it in lives saved, serious illnesses averted, education provided, torture lessened or CO2 removed.

You might even go a step further and frame what we advisors offer as the ultimate consumer experience. Because what is it really that we all want to accomplish when we spend money for stuff? We want to make our life a little better, right? Donating money to organizations that excel in their field generally establishes a direct causal link. What happens right now right there, happens because I donated. Fewer children dying; fewer animals suffering; less CO2 released. Because I donated. 

I haven’t encountered any means of spending money that delivers more satisfaction—and, yes, happiness.

About the author

Avatar von Stefan Shaw

Co-Founder & Head of Donor Advisory

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