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Charities cash in on donor-advised investments

By Steve Arnold
The Hamilton Spectator (Aug 16, 2006)

More than $1.2 million in new donations has flooded into two of Hamilton's leading charities over the last year, the result of a new investing idea and changes to the country's tax laws.

Hamilton Health Sciences Foundation and the Hamilton Community Foundation are two of a growing number of charities across Canada to cash in on a new investment fund, which lets donors control how their money is used, and tax changes, which let them make bigger donations.

Pioneered by BMO Financial Group and Mackenzie Investments among others, donor advised funds are giving people with charity on their minds a way to back good causes, and to stay involved with how their money is used.

"Years ago donors gave their money and then weren't involved anymore," said Carolyn Milne, president and CEO of Hamilton Community Foundation.

"We have a new breed of donors today who want to be active in their philanthropy, and to see results."

Marvi Ricker, vice-president and GM of philanthropic services for BMO Harris Private Banking, and Sandy Cardy, senior vice-president of tax and estate planning at Mackenzie Financial Corp., explain it this way: rather than simply giving $10,000 to the charity of his choice, a donor can establish a charitable fund, have his money pooled with other funds to create an investment pool and then dictate how his share of that's pool's income will be used.

"This way, your money can grow tax free every year and will be there in perpetuity," Ricker said. "It lets you participate in large scale philanthropy no matter how big your gift is."

The numbers tell part of the story -- that $10,000 donation, invested at 7 per cent compounded over 30 years, with 3.5 per cent of earnings given away every year, becomes $15,000 in donations while the initial capital grows to $20,000.

Such funds have been part of the American charitable scene since the 1990s but they've only recently appeared in Canada.

"These funds are a piece of the puzzle that's been missing for the last few years," Cardy said. "This is still in its infancy here compared to the U.S., but we think they're going to grow the overall size of the Canadian philanthropic pie."

Finding ways to grow that pie has been a pressing question for Canada's 82,000 registered charities in recent years as they've faced the loss of government support, donor fatigue and the looming transfer of wealth to baby boomers from their parents.

sarnold@thespec.com