AU2002247480A1

AU2002247480A1 - Method of charitable giving/investing

Info

Publication number: AU2002247480A1
Application number: AU2002247480A
Authority: AU
Inventors: Michael L Canney
Original assignee: G LLC
Current assignee: G LLC
Priority date: 2002-04-04
Filing date: 2002-04-04
Publication date: 2003-10-20
Anticipated expiration: 2022-04-04
Also published as: CA2481359A1; JP2005521972A; EP1490806A1; AU2002247480B2; IL164403A0; EP1490806A4

Description

WO 03/085575 PCT/USO2/10641 TITLE: METHOD OF CHARITABLE GIVING/INVESTING BACKGROUND OF THE INVENTION Field of the Invention 5 The present invention relates to a method of charitable giving. More specifically, the present invention relates to linking charitable giving with investing and consumer purchasing. Problems in the Art o10 Throughout the world, there are people who are underprivileged and lack some of the basic necessities of life. For various reasons, these people do not have the financial means to provide for some of life's basic requirements. A variety of programs exist to help these people, but they all fall short in one respect or another. 15 One of the major providers for the needy has been the government, both at the state and federal level. State governments have provided programs such as unemployment compensation. The federal government has provided programs such as welfare, food stamps, and subsidized housing. However, due to bureaucratic inefficiency, many of these programs produce a great deal of 20 waste. In addition, many people resent government-directed social services programs. In addition to the various government programs, a number of charitable groups exist to help the poor. The United Way, the Salvation Army, and church related groups are examples of such charities. In many instances, 25 these groups do an excellent job of helping those in need. Sadly, these charities often suffer from a lack of funding, so they cannot help all those who need it. Due to the shortcomings of government programs and the paucity of funds currently given to charities, there is need for a method which will 30 increase the funding for charities. The present invention helps meet this need by linking charitable giving with investing and consumer purchasing.

WO 03/085575 PCT/US02/10641 Currently, there are many charities and many different investment vehicles. Popular gifting methods include "split gifts" where the distribution to charity is deferred until the death of the donor. In many cases, years pass before the charity actually receives any money. There is a need in the art for 5 an investment/purchasing process whereby money is automatically given to a charity on a regular and timely basis. Therefore, a primary objective of the present invention is to provide a method of charitable investing/purchasing that will help address problems and deficiencies in the art. 10 Another objective of the present invention is to provide a method of charitable investing/purchasing that will increase the amount of funds that are donated to charitable groups. A further objective of the present invention is to provide a method of charitable investing/purchasing that will decrease the need for governmental 15 assistance programs. A still further objective of the present invention is to provide a method of charitable investing/purchasing that spawns new charitable financial instruments. Another objective of the invention is to provide a method of charitable 20 investing/purchasing that is easy to implement and efficient in operation. These and other objects, features, and advantages of the present invention will be apparent from the following specification and claims, in conjunction with the accompanying drawings. 25 SUMMARY OF THE INVENTION A method of charitable investing/purchasing involves the use of a financial instrument or a financial account or service that normally has an embedded fee structure. For example, one such financial instrument is a mutual fund which typically charges an annual fee to investors for investment 30 management and administration. Other examples would include unit trusts, life insurance policies, annuities, brokerage accounts, and trust accounts, 2 WO 03/085575 PCT/US02/10641 among others. From the fees normally deducted from the value of (or earnings on) the investment instrument, account or service, a portion would be redirected to a charitable community foundation account (a "donor advised account") over which the donor has the right to provide nonbinding 5 instructions with respect to charitable distributions to be made from the account. Further steps include introducing a donor to the community foundation and this charitable giving process, and advising the donor on the financial and philanthropic benefits of this process. The investment advisor and the person who introduced the donor to this charitable giving/investing 10 process (the "charitable liaison") would receive compensation from specified parts of the standard fee. A second embodiment involves a purchasing account, such as a credit card or debit card account. The difference between what the consumer pays for purchases and what the credit/debit card company pays the merchant 15 represents a fee paid to the card issuer. Part of the fee from this specially structured credit/debit card would be given to a charitable community foundation donor advised account. Other parts of the fee would be used to compensate the consumer's investment advisor, if any, and to compensate the charitable liaison. 20 Rather than a credit/debit card, the account could be a brokerage account, or any other account or financial service to which a fee is applied. Part of the fee is given to charity. Other parts of the fee can be used to compensate the donor's investment advisor and the charitable liaison. 25 BRIEF DESCRIPTION OF THE DRAWINGS Figure 1 is a flowchart of a preferred method of charitable investing/purchasing according to the present invention. Figure 2 is a block diagram of the fee structure that is utilized with the preferred method (mutual fund). 30 Figure 3 is another block diagram of the fee structure utilized with the preferred method (insurance/annuity product). 3 WO 03/085575 PCT/US02/10641 Figure 4 is a flowchart of a second method of charitable investing/purchasing according to the present invention. Figure 5 is a block diagram of the fee structure that is used with the second method. 5 DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT A preferred method of charitable investing/purchasing is schematically shown in Figure 1. The preferred method consists of six steps. The first step in the process is the establishment of a charitable 10 community foundation, known as the "Foundation for Giving." Within the Foundation for Giving, donor advised accounts are established. These donor advised accounts are the recipients of donated funds. The Foundation for Giving controls how the donated funds are disbursed from the donor advised accounts. The Foundation for Giving is a tax exempt charitable organization, 15 as defined in the Internal Revenue Code. The second step in the preferred method is the creation of a fee structure to be applied to a financial instrument or account wherein part of the fee is sent to the investor's donor advised account within the Foundation for Giving. The fee shall be expressed as an annual percentage (for example, 20 1.85%) of the value of the underlying instrument or account. For example, where a mutual fund is the underlying instrument, the annual fee will equal the product of the percentage (1.85%) multiplied by the value of the mutual fund at the time the fee is assessed. The dissection of this fee is shown in Figure 2. The mutual fund with this type of fee structure is referred to as a 25 "charitable giving mutual fund." The various recipients of the fee dissection in Figure 2 will be discussed later. Preferably, the fee is no greater than the fee usually charged for similar investments. After the mutual fund has been established, potential donors are introduced to the idea of making charitable gifts through mutual fund 30 investing. The individual or entity that introduces potential donors to the idea of giving through this charitable mutual fund is referred to as a charitable 4 WO 03/085575 PCT/US02/10641 liaison. There are many different ways that donors can be introduced to this charitable giving/investing process. In some instances, the charitable liaison would be an individual or an organization that promotes planned giving to its constituent base. The individual or organization would not be involved in 5 giving investment advice. Oftentimes, the charitable liaison will be a charity or an individual affiliated with a charity. In this scenario, the charitable liaison would not give the donor investment advice, but merely educate the donor on the merits of this charitable giving/investing process. Alternatively, the donor's investment 10 advisor could serve as a charitable liaison. In this context, the investment advisor educates the donor on the societal importance of charitable giving and also gives the donor advice on asset allocation. Regardless of who serves as a charitable liaison, that person would receive compensation for the donors introduced by him/her who elect to participate in this charitable 15 giving/investing process. The fourth step of the preferred method consists of advising potential donors on asset allocation. This role is usually played by the donor's professional investment advisor. The investment advisor helps the donor decide where to allocate the donor's money amongst stocks, bonds, and various 20 other financial investments. The fifth step in the preferred method consists of the donor investing in the charitable giving mutual fund or other financial instrument utilizing this charitable giving/investing process. After the donor makes an investment, the percentage fee (1.85%) is charged to the investment on a systematic basis. 25 The final step in the preferred embodiment consists of dissecting the percentage fee (1.85%) among various individuals and entities. For example, the donor's advised account with the Foundation for Giving receives 0.5%; the charitable liaison receives 0.6%; the donor's investment advisor receives 0.5%; and the entity which manages the mutual fund or other investment advisor 30 receives 0.25%. 5 WO 03/085575 PCT/US02/10641 In order to compensate the charitable liaison, it is necessary to know who introduced the donor to the idea of investing in the charitable giving mutual fund. Therefore, the donor's investment advisor or the mutual fund company will keep records regarding the identity of the charitable liaisons. 5 These records will help ensure that the charitable liaisons are compensated for their efforts out of the fees. A second entity, called "The Giving Group," has also been formed. The Giving Group will educate people on the merits of this charitable giving/investing process and will encourage participation in this process. The 10 Giving Group will coordinate the activities of the independent charitable liaisons and will itself be a charitable liaison. The fee dissection (Figure 2) will vary depending on how and by whom the various functions are performed. For example, a charitable organization, such as a church, might want to inform its constituent base about this 15 charitable giving/investing process. In this case, the charitable organization itself would receive the 0.6% charitable liaison portion of the fee. In other cases, the charitable organization might not have the ability to provide information to its constituent base about this charitable giving/investment process. In that situation, the charitable organization could 20 utilize the resources of The Giving Group to provide this information. In this case, the charitable organization and The Giving Group would divide the 0.6% charitable liaison fee. A third possibility as a charitable liaison is the donor's investment advisor. In this case, the investment advisor gives advice as to asset allocation 25 and also introduces the donor to this charitable giving/investing process. Here, the investment advisor receives both the advisor part of the fee and the charitable liaison portion. A second method of charitable giving/investing is shown in Figure 4. This embodiment involves the use of a credit card, debit card, or other similar 30 payment device. In the typical arrangement, when a consumer makes a purchase with a credit/debit card, the credit/debit card company does not pay 6 WO 03/085575 PCT/US02/10641 the vendor $1 for every $1 charged by the credit/debit card user. Usually, the credit/debit card company pays the vendor 96¢ for every $1 charged. The 4¢ difference represents a fee charged by the credit/debit card company. The credit/debit card company usually devotes a part of the fee to 5 promotional giveaways such as airplane tickets or magazine subscriptions. These promotions are designed to attract new customers and retain existing ones. Usually, about 1.6€ out of the 40 is spent on these promotional giveaways. In the second method of this charitable giving/investing, the portion of 10 the fee (for example, 1.6¢) is not used for promotional giveaways. Instead, as shown in Figure 5, the money is used for this charitable giving/investing. For example, 0.5¢ out of every dollar that is charged by the consumer is put into the consumer's donor advised account within the Foundation for Giving; 0.6¢ is also paid to the charitable liaison who introduced the donor to this charitable 15 giving/investing; and 0.5¢ is paid to the donor's investment advisor. Preferably, the portion of the fee that is used for this charitable giving/investing process is no less than the amount normally spent on promotions, such that the net profit to the credit/debit card issuer neither increases nor decreases. 20 In addition to mutual funds and credit/debit cards, the method of this charitable giving/investing can be used with other types of investments and different types of accounts. For example, a brokerage account that charges a fee to the account could dissect the fee so that part of it is given to a donor advised account. Other parts of the fee would be used to compensate the 25 donor's broker, the donor's investment advisor, and the charitable liaison. The brokerage account may be managed by someone other than the donor. In that context, part of the fee would also be used to compensate the account money manager. If the donor manages his own account, the management portion of the fee would be eliminated. 30 The method of this charitable giving/investing could also be used with a brokerage account that charges a commission rather than a fee. Instead of 7 WO 03/085575 PCT/US02/10641 dissecting a fee, the commission is dissected. Parts of the commission would be used to compensate various individuals in the same manner discussed in the preceding paragraph. The method of this charitable giving/investing can also be applied to 5 trusts or IRAs. Any account that charges a fee could dissect the fee so that part of it is automatically given to a donor advised account within a community foundation. The type of account is not a limiting factor. The key point is that part of the fee is guaranteed to be given to the donor advised community foundation account in a systematic manner. 10 The method of this charitable giving/investing can also be applied to investments such as life insurance and annuities. (Fig. 3). In this context, part of the fees usually deducted from the earnings on the cash value build up of the life insurance policy or the amount invested in an annuity policy would be sent to the policyholder's donor advised community foundation account. In 15 the box labeled "insurance costs/ M and E" in Fig. 3, "M and E" is an abbreviation for mortality and expense charge. Much of the method of charitable giving/investing will be implemented through the Internet. For example, profiling of donors can be done over the Internet. A potential donor is asked a series of questions to enable the 20 investment advisor to give advice based on the responses. The donor can also be introduced to this charitable giving/investing over the Internet. The donor can also use the Internet to invest in the charitable giving mutual fund or other charitable giving investments. The donor can access both his/her charitable giving investment accounts and his/her donor advised account with 25 the Foundation for Giving account to see the performance of these accounts. It is believed that the donor will be able to take a tax deduction for the part of the fee that is given to the Foundation for Giving, and also for the part of the fee that is paid to the charitable liaison, when the charitable liaison is a charity. With the present invention, an investor would be helping charity and 30 saving on taxes. 8 WO 03/085575 PCT/US02/10641 In the drawings and specification there has been set forth preferred and alternative methods according to the invention, and although specific terms are employed, these are used in a generic and descriptive sense only and not for purposes of limitation. Changes in one or more steps are contemplated 5 without departing from the spirit or scope of the invention as further defined in the following claims. 9

Claims

1. A method of philanthropic investing and giving, comprising: investing in a financial instrument, account or service with an embedded fee structure; and giving a portion of the fee to a charitable organization. 5

2. The method of philanthropic investing and giving according to claim 1, wherein the charitable organization is a community foundation and the charitable portion of the fee is directed to a separate donor-advised foundation account. 10

3. The method of philanthropic investing and giving according to claim 1, further comprising: introducing a donor to the philanthropic investing process.

4. The method of philanthropic investing and giving according to claim 3, 15 further comprising: compensating whoever introduced the donor to the process with a second part of the fee.

5. The method of philanthropic investing and giving according to claim 3, further comprising: advising the donor on the methods and benefits of linking 20 philanthropy with investing.

6. The method of philanthropic investing and giving according to claim 5, further comprising: compensating the donor's advisor with a third part of the fee. 25

7. The method of philanthropic investing and giving according to claim 1, wherein the financial instrument is a mutual fund that is managed by a mutual fund manager. 10 WO 03/085575 PCT/US02/10641

8. The method of philanthropic investing and giving according to claim 7, further comprising: compensating the mutual fund manager with a fourth part of the fee. 5

9. A method of charitable giving/investing, comprising: issuing a credit or debit card with a corresponding account to a card user wherein the card issuer charges a service fee; giving a first portion of the fee to a charitable community foundation; and giving a second portion of the fee to a separate donor-advised foundation account. 10

10. The method of charitable giving/investing according to claim 9, further comprising: advising the card user on the methods and benefits of linking philanthropy with purchasing. 15

11. The method of charitable giving/investing according to claim 10, further comprising: compensating the card user's advisor with a third part of the fee.

12. The method of charitable giving/investing according to claim 9, further comprising: introducing the card user to the process of charitable giving 20 through use of the card.

13. The method of charitable giving/investing according to claim 12, further comprising: compensating whoever introduced the card user to this method of charitable giving/investing with a fourth part of the fee. 25

14. A method of linking investing with charitable giving, comprising: establishing a financial account; charging a service fee for managing the account; giving a percentage of the service fee to charity. 11 WO 03/085575 PCT/USO2/10641

15. The method of linking investing with charitable giving according to claim 14, wherein the charity is a community foundation in which the account holder has a donor advised account. 5

16. The method of linking investing with charitable giving according to claim 14, wherein the financial account is an investment account.

17. The method of linking investing with charitable giving according to claim 14, wherein the financial account is a credit or debit card account. 10

18. The method of linking investing with charitable giving according to claim 14, further comprising: providing advice concerning the methods and benefits of combining philanthropy with asset allocation techniques. 12 WO 03/085575 PCT/US02/10641 AMENDED CLAIMS [Received by the International Bureau on 21 November 2002 (21.11.02); original claims 1-18 replaced by amended claims 1-13 (3 pages)] 1. A method of philanthropic investing and giving, using the Internet that provides a donor with control over an investment direction of at least a portion of a fee comprising: conducting over the Internet a transaction using a 5 financial instrument, account or service with an embedded fee structure, for generating the fee wherein the donor provides a payment; selecting a charitable organization, wherein the selecting is performed by the donor; giving at least a portion of the fee to a donor-advised account wherein the donor directs investment; and benefiting the charitable organization with 10 proceeds of the donor-advised account. 2. The method of philanthropic investing and giving according to claim 1, wherein the charitable organization is a community foundation. 15 3. The method of philanthropic investing and giving according to claim 1, further comprising: introducing a donor to the philanthropic investing process. 4. The method of philanthropic investing and giving according to claim 3, further comprising: compensating whoever introduced the donor to the process 20 with a second part of the fee. 5. The method of philanthropic investing and giving according to claim 3, further comprising: advising the donor on the methods and benefits of linking philanthropy with investing. 25 6. The method of philanthropic investing and giving according to claim 5, further comprising: compensating the donor's advisor with a third part of the fee. 13 WO 03/085575 PCT/USO2/10641 7. The method of philanthropic investing and giving according to claim 1, wherein the financial instrument is a mutual fund that is managed by a mutual fund manager. 14 WO 03/085575 PCT/US02/10641 8. The method of claim 1 wherein the step of conducting a transaction includes conducting a transaction using a credit card, bank card, or debit card. 9. The method of philanthropic investing and giving according to claim 1 5 wherein the financial instrument is an annuity. 10. The method of philanthropic investing and giving according to claim 1 wherein the financial instrument is life insurance. 10 11. The method of philanthropic investing and giving according to claim 1 wherein the financial instrument is a unit trust. 12. The method of philanthropic investing and giving according to claim 1 wherein the financial instrument is a brokerage account. 15 13. The method of philanthropic investing and giving according to claim 1 wherein the financial instrument is a trust account. 15