Defining Purpose in Retirement

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Podcast 170

170: Giving Back in Retirement with Phil Cubeta

Today I’m talking with Phil Cubeta. Phil is the Assistant Professor of Philanthropy, CAP® Program Director, and Sallie B. and William B. Wallace Chair in Philanthropy at the American College of Financial Services, where he directs and teaches the Chartered Advisor in Philanthropy® program.

Phil’s work has appeared in The New York Times, The Journal of Gift Planning, Lifestyles Magazine, Financial Planning, and the Financial Times. Prior to joining the American College, he served as Chief of Staff for The Nautilus Group, a subsidiary of New York Life Insurance Company that provides estate, business, and philanthropic strategies through 200 of the company’s top agents to affluent clients.

Today, Phil joins the podcast to talk about what philanthropy really is, the challenges and issues retirees face as they work to create a legacy, and how to create a plan that works from abundance instead of scarcity to help you support people, organizations, and communities close to your heart.

In this podcast interview, you’ll learn:

  • How Phil defines philanthropy, what giving really is, and what it can mean for your community.
  • Why legacy becomes so urgent for so many people late in life – and how financial advisors sometimes let their clients down when it comes to giving.
  • Why some retirees are so hesitant to give – and how retirees can give organizations and communities they care about things other than money to make a difference.
  • How to research organizations before you make a gift and prevent your money from falling into a “black hole” and being poorly utilized.
  • How to maximize your tax benefits as you give charitable gifts.
  • Why impact investing is emerging as a way to put your money to work while helping to build the world you want to live in.
  • How to educate your heirs about your charitable legacy and keep it moving across generations.

Inspiring Quote

  • “Philanthropy or charitable giving is about love, community, impact, and results.” – Philip Cubeta
  • “The word philanthropy comes from the Greek word for love.” – Philip Cubeta

Interview Resources

Disclosure

Offer valid in the 50 United States and the District of Columbia, to first-time requestors. During the offer period, receive one (1) in-stock book per request. Limit (1) book per week per household. Limit three (3) books total each calendar year, between January 1 and December 31. Offer valid while supplies last. Howard Bailey Financial, Inc. reserves the right to cancel, terminate or modify this offer at any time. Void where restricted or otherwise prohibited.

Read Full Transcript

[INTERVIEW]


Casey Weade: Phil, welcome to the podcast.

Philip Cubeta: I’m glad to be here. Thank you for having me on the show.

Casey Weade: Well, I’m excited to have you here, Phil. Just another one of the professors that has come on the show here from the American College. I’m a bit of a consumer of all things American College. I might be called a bit of an addict when it comes to the American College educational programs.

Tomorrow, actually, I am going to be sitting for my final ChFC exam. So, I’ll be able to add that along with my CLU and my CFP and my RACP, and I have yet to do the CAP Program. This one is relatively new to me.

Philip Cubeta: Now, you’re obligated.

Casey Weade: Yeah, I feel that way. And I would love to have you as a professor. Can you just kick off the discussion here sharing with us what CAP is and what that means to advisors? Why this is such an important area of planning and education for financial advisors?

Philip Cubeta: It was stablished, I guess, about 20 years ago by Bill and Sally Wallace. And Bill had been in the insurance business and rose from being an insurance agent to being the head of his company and made quite a lot of the money along the way. And he and his wife, Sally, were always very generous. They gave to a lot of causes. But what they noticed is that, as they put it, our nonprofits can bring us to tears with their needs and what they serve, but they know nothing about our money.

And our advisors know everything about our money, and they’re cold as ice when it comes to our philanthropy. I mean, you know this is the truth. So, what they wanted was to have the nonprofit people participate more in legacy planning, the estate planning. So, it wasn’t just about the money, it was about accomplishing something with your money beyond yourself and your family for those people who want to do that.

So, the purpose of the program is to bring these really different groups of people together in common purpose to better serve people, like the people in your audience, to give them a better chance to get a legacy plan that reflects or a giving plan that actually reflects who they are and what they’re trying to accomplish, and not just the financial specifics.

Casey Weade: Well, I think it’s a complex area of financial planning, and maybe it’s not. I think it seems complex to most, especially when we get into more advanced strategies. And I think much like the RACP Program. It was built for a gap and financial education for advisors. And there wasn’t any formal education specifically around retirement income planning. I think the same thing is true with philanthropy.

And first, I think we just have to distill down what philanthropy is because I do think philanthropy is pretty broad, that definition of philanthropy can be pretty broad. How do you define philanthropy?

Philip Cubeta: Well, I think philanthropy probably for many people in your audience seems like a very alien term because it’s associated with people who are worth a billion dollars or more. But I think what it really comes down to is, if you start where the word philanthropy comes from, it comes from a Greek word for love. And if you say, where does the word charity come from? It comes from caritas, which means love from the heart. And if you think about your religious traditions, how essential faith, hope, and charity, in which faith, hope, and charity, charity, meaning love and the grace of this is charity.

So, when you think about philanthropy, it’s not necessarily somebody else’s yacht that we’re talking about. We’re really talking about how you live your life, how you raise your family, where your roots are, what you care about, and what you want to pass on to other people. What’s circulating through you? Not just money, but love. And how far does that love extend into whom and in what form? Who’s your neighbor? Who’s not your neighbor? There have been books written on that topic.

So, I think philanthropy or charitable giving essentially is about love and I personally feel it’s primarily about love in community and then secondarily about tools and techniques, and also to some degree about impact, about results. It’s where it’s coming from in you and serving the community, but it’s also about accomplishing something because you’re putting something into it, you’re putting your money, you’re putting your time, you’re putting your skills, you’re putting your connections, all that goes into giving and you’d like to see some return on that investment. If you see it as an investment, you want a return. But I think if you start from the idea of who do I love, what do I love, you’re going to get off on a better footing and techniques.

Casey Weade: Well, I do think that, I mean, when you phrase it that way, when you say philanthropy is love and then, that makes it sound like it’s for everyone. And when we have this conversation, someone at times I’ll ask them, when are you philanthropic? Are you interested in giving the charity or volunteering your time and you’ll quite often hear, no, I’m not philanthropic.

Philip Cubeta: That’s true. You do hear no and it’s terrible. It’s terrible, I think, mismatch or disconnect with the audience. If I were I want to say to you, “Are you insurance and client?” What are you going to say?

Casey Weade: Yes.

Philip Cubeta: Well, you’re a very unusual person. To say, No, I don’t know what you’re talking about. Does this sound good? And when you raise the subject of philanthropy, people assume you’re somehow about to ask them for money or guilt them into something or you’re talking about billions of dollars. But if you’re asking much more human kind of question, okay, what’s your first memory of giving or receiving a gift? What did you learn about giving generosity, sharing from your mother? When you look at the way your kids and grandkids are going, are you concerned from moment to moment about their being too concerned just for themselves and want to get out of their shell and give back a little bit?

There’s a saying I picked up from a book on raising generous kids, which I think is really, really good. The woman was asked, the author of the book was asked, “When do you first talk to children about giving?” Her answer was, “The first time they say mine.” That’s a pretty young age. That’s like age one or two, probably.

So, I think if you think about giving as woven into the fabric of your life, and giving, defining for your community, if you think about your family and gifts at Thanksgiving and the holidays, think about your religious organization, not just the amount you’re giving, but the sense of it being a participation in the community. There’s the offering, right? It’s an offering. And the roots of this are really, really deep in human nature. And they obviously predate money. They predate money, they predate writing.

So, when you lay all these other more complex tax codes and things on it, you can sometimes forget the root of this is compassion, caring, concern, and self-expression and being who you are as a person and finding another avenue, another venue to be yourself. And I think particularly as people in your audience into retirement or approach retirement, we’re kind of trained to understand ourselves in the world of work. What if I say, “Who are you?” You’re supposed to answer that with a job title? Right? You’re introducing me, so you look for my job title. So, who is he? He’s a guy with his title. But who am I outside that? I think the title of life, what’s left?

And I think as you approach retirement, end of retirement, you feel this kind of stripping away of your identities that were based on your title, your world of work, showing up for work. You kind of have to get back to asking, Who am I? What do I stand for? What do I have to give? What do I have to give in every sense of the word? So, that connects, I think, to your nonprofit life which again connects to giving, but I think I put the giving in the context of what are you doing with your time, your money, your talent to have a meaningful impact on the people and things you care about?

Casey Weade: Well, as you explain it, I’m seeing… Yeah, I think most of us, I know, especially as a financial planner, I think of philanthropic planning as something that’s very technical. It’s science, right? But as you say, it sounds more like art.

Philip Cubeta: Right. It actually is both and I think that’s the beauty of it, in terms of it being an interesting field to be in. The human side of it is what interests me primarily. The tools and techniques are necessary thing. I mean, you’ve got to be able to master those in order to do justice to the client situation, the donor situation, but really it is very close to being an art in the sense that it comes from the heart. It’s a craft you master, you learn by experience.

And I think, fundamentally, although probably we’ll have a very few people to be saying this is fundamentally a form of self-expression. It’s how you show up in the world, the way through art you do and work. But outside of work, how do you show up in the world, and as a parent? In various roles, but one of them is your social role, your role outside the family, beyond the family, but not at work. And retirees, I guess, would be an issue because you’re not going to work anymore.

Casey Weade: Right. Exactly. There’s so much more opportunity as you get to that time in your life when you have that financial freedom because you have the time and as you say this, I wanted to ask, what’s the intersection of philanthropy and legacy? But it sounds much like the conversation I had with Dr. Jann Freed not long ago, where she talked about a breadcrumb legacy. It’s how you’re utilizing your time, every single moment of every day. It’s those little crumbs you’re leaving behind, not a big lump sum you’re leaving at the end of your life.

Philip Cubeta: I think the term legacy changes. I think it changes in terms of how you understand depending on your age. You age into different understandings because your position on your life timeline changes. And I’ve been working in this field of legacy planning long enough to have aged into the demographic you might say. And I can tell you the way I understood it when I was 45 or 50 is completely different the way I understand at my age now.

When you’re 35, 45, 50, first of all, you’re pretty close to being immortal. You’re still saying, if I die, not when I die, and you’re still thinking of all the things, all the work you’ve yet to accomplish, and you have kids. You’re really looking forward to getting certain things done and you see yourself with a three-year plan, five-year plan. There comes a point, this is really, I mean, it’s somewhat shocking to me because I didn’t expect to get old. I think it gets to be shocking when you reach the point where your five-year plan, it may not be there. I mean, how do you plan for five years when you’ve been realizing now there’s this life expectancy curve. And at some point, I’m planning for life or I’m not going to be in it.

Legacy becomes extremely urgent as you approach the age where you can actually visualize the end of the runway. And you say, what can I do today that’s going to have effect after I may not be here? That’s where legacy planning suddenly gets really… It goes from being hypothetical. And I totally identify with the breadcrumb trail thing is what you do every day that is your actual legacy because that’s how you’re going to be remembered. That’s your effect on other people. That’s all things you set in motion.

But as you think about who am I today, what can I still do to make a difference? That timeline gets shorter and shorter. And you begin to think, how can I get this done through somebody else? Well, I don’t have subordinates anymore. I don’t have a company anymore. How can I get it done through somebody else? And I think that’s kind of the legacy. That’s the inward side of the legacy conversation. I think so many advisors are a generation younger than people having this conversation. That’s hard for advisors, I think, to identify with it, and there’s kind of a disconnect because the questions were asked in these younger people are eliciting younger person’s answers.

And for an older person, it’s going to be a different answer because they’re not going to be in the picture. Isn’t that hard to imagine building something when you’re not going to be in the picture? Maybe your age would be really hard to visualize that. So, how do I create something, get it going today and keep it going after I’m gone through people who I trust to do that work, and that’s the nonprofit connection.

And to get you back from nonprofit connection, this organization made me who I am, perhaps, identify with them, I’ve got their sticker on my coffee mug, you know that sticker on the back of the car, identify it’s on my resume. You ask me about myself, I start talking about this organization. I may have served on the board. How can I get something good going today that expresses who I am that will continue through them? That’s kind of a legacy. That is, I think, the older person’s version of legacy.

Casey Weade: Well, that begs the question on, when we start thinking about philanthropy and where it fits into the financial planning process?

Philip Cubeta: I think it depends on your circumstances. And I think one of the healthy things that comes from advisors embracing philanthropy as a topic, if you were to study the state of the conversation of philanthropy, it’s probably one of the top five conversations people above a certain age want to have or above certain net worth. So, beyond a certain level at which people are just scrambling to pay their bills, it’s one of the top five topics, and it’s right up there with building wealth.

So, its good advisors are getting involved, I think, two of the biggest things they can do is one is to convene a better conversation about who you are, what you’re trying to accomplish with life and your money. That’s very important. But not all of them have, I guess, the empathy to do that. But then there’s how to, once I’m clear on where I’d like to have an impact and how I want it to be in my life, I think advisors can play a very important function and doing some essentially rather basic work because the thought process around legacy or giving, I think, really has kind of a classic example.

The kind of example is tithing, where you put giving first. I mean, for some people, that’s religious obligation. They put it first before paying their bills. But with it, from a typical financial planning standpoint, you start by asking, “Will there be enough for me?” “Am I going to go broke before I get my money?” “When am I going to go broke?”

So, that’s your basic cash flow analysis, retirement planning, and that’s CFP 101, right? That’s right out of the financial planning playbook, making sure that when you die, your net worth is still rising or it’s gently declining, but you’re not going to run out of money before you run out of time. Right? That’s what we all do for living in financial services.

But when you look at somebody’s net worth growing over time despite their spending, so you’ve done retirement planning. You know what I’m talking about. You look at the numbers, you just can’t make them go down, you increase the inflation rate. They’re always going to be worth more than around the other night.

Casey Weade: Yeah, you’ve got a negative required rate of return.

Philip Cubeta: Yes, exactly. And many people are like that, you don’t think of as rich, absolutely positively, because they planned well, the stock market has been favorable, and they live modestly. They live within their means, and their means grow. High school teachers, firemen, people like that are often far better off financially than the people who have more because they spend less. It’s not as tippy a structure. So, when you see the net worth rising over time, the next question is, where do I want my stuff to go when I’m gone?

So, is there enough for me and my wife? Where do I want my stuff to go when I’m gone? And I think that gets you into the conversation about heirs and advisors traditionally talk about. They talk as if more for heirs is always better. It’s just how we’ve been trained. My job is to reduce taxes, do all these sophisticated techniques, so your heirs get more.

It really is much wiser to start by asking a question like, what are you up against with your kids? How are your kids doing? How are they doing with money in particular? Is there an amount beyond which wealth might hurt them? Is there an amount below which might hurt them? What’s the right amount? That’s a question that’s more like a dilemma than a math problem because it can depend on the character of the kid. It can depend on the age of the kids. It can depend on what they did for Mother’s Day. All that stuff comes into it.

But you’ve got to determine the right legacy amount if you’re going to hit the legacy amount. That’s probably the toughest part of this conversation. What amount and what form plan to the kids? And that’s a math problem again. So, you start with a net worth, you subtract that. We’re going to need to deliver on for yourself. And then, from that, you arrive at what could go to the kids, maybe, but is that too much or too little?

If it’s too little, there are ways you can build it up, probably. But if it’s too much, that’s where you get into fairly serious legacy planning because you would then begin to think about, for example, let’s say you don’t have any kids, let’s say your spouse has already gone, and you have nephews and nieces or the nonprofit you’re so close with, your church, your hospital, whatever organizations have touched your life.

And so, at that point, you really begin to think more seriously because you realize, Oh, my gosh, I had not thought of myself as wealthy, but when I look at my net worth rising and so do all the subtraction, there’s going to be a substantial amount of money. There’s going to be enough to care about. It’s not trivial anymore. It’s not like $100 here, $100 there. It’s going to be tens of thousands, hundreds of thousands, even more than that. And that requires some care.

It could require some care. You get the tax tools and techniques at that point, but you also get into thinking about what nonprofit, in what form or what pattern of payments for what result. You’ll begin to think more systematically about that. And that kind of gets into the world of fundraising. But that’s where these plans kind of fall into a black hole because a fundraiser who doesn’t think very systematically is asking for the gift. The advisor doesn’t think about connecting dollars with the nonprofit. So, you just end up basically with a lot of money stuck in travel tools, usually, without those tools really having a purpose.

Casey Weade: Yeah. It’s really, you talk about proactive versus reactive giving in some of your talks, and I think it’s just so important. And I find it so much more beneficial financially if we can have this conversation sooner and get people over the hump, where they can start thinking charitably sooner rather than later. There’s much better planning opportunities if we can accomplish that. But it’s really difficult when we’re, I think, 60 years old. And we can’t wrap our heads around that we actually have enough. And usually it takes four, five years of continually having these conversations with a client before they finally go, Yeah, you’re right. I don’t need that money. This is never money.

Philip Cubeta: Right. And to tell you a quick story, it’s at the other end of the wealth chart, but it just shows everybody has the same issues. I saw an interview on television with Ted Turner. He was the founder of CNN and a multi billionaire kind of guy. And at the time, he actually was married to Jane Fonda at one point. And he was being interviewed about a massive gift he’d given to the UN to clear land mines. It was like a billion dollars given to the UN. And it kind of went through his life story and his business success and his philanthropy.

And at the end of the interview, they were in the interview, I was in at the restaurant with him. So, “Ted, what’s next for you and your philanthropy?” You know, softball question. And he drew back like he’d been stung by a bee. And he said, “Look I’m down to my last billion.” So, even people who were billionaires need to be reassured the billion is enough to get through the rest of their life. And the same is true of people of ordinary means. So, they need a financial planner to help them understand what they can afford to give.

Casey Weade: And I find that no matter how many times you go through that financial plan utilizing multiple softwares, heck, use a spreadsheet, use a calculator, it just doesn’t feel like enough until you get further into that experience of retirement and financial freedom. I guess my question for you is, what can we as advisors do to better help individuals move along this philanthropic planning path quickly?

Philip Cubeta: I do think it starts with one thing that you’re indispensable in which to make sure they have enough. That’s the financial planners’ jobs, fiduciary responsibility. And then, once you know they have enough because you run the numbers up, down and sideways, you got the experience, have they bought into that? Do they appreciate that they have enough? Do they really understand they have enough? Have they taken to heart because we’ll be ashamed to have more than enough and still feel poor?

Casey Weade: Yeah.

Philip Cubeta: Right? So, once you reach that point, whether it be in a plan from abundance rather than scarcity, the heart begins to open to new possibilities. And I’d be kind of looking for that moment where their heart is opening to the other things they would like to do and you’re able to assure them that they can do and some of those things involve, people outside their family involve, people in causes and organizations outside their family, and then helping them think as systematically about that side of their life as they do about the stuff they work on with you.

How much can I afford to give to what organization? In what form? Do I need money coming back the other way to me? What will be accomplished with my money? What kind of reporting will I get? Can I meet the people inside the organization who are doing the work? Those kinds of questions are nontraditional for advisors to ask, but they’re good for clients to ask and they won’t know to ask if you didn’t tell them it was okay.

Casey Weade: Phil, I’m curious, the idea of philanthropic giving, charitable giving, how has this idea changed throughout your career? You spent so many years, decades even in this field of work.

Philip Cubeta: Well, I’m not sure the field has changed as much as our perception of it. I think I understand it a lot better. I was trained as a financial advisor in the traditional way. And I was trying to think of it as basically being about controlling money and tax planning and tax efficiencies and things like that, cash flow kind of issues, tax law issues. What I have discovered is it is really secondarily that, and I think you kind of see it, even with the recent tax reform. I mean, if you ask about giving as a percentage of the gross national product is 2%, it’s been 2%, it’s still 2%, has been 2% for 20 years, it’s 2% this year, it was 2% last year. And you’d look for changes because of tax changes and you just don’t find them. Even though, many people in your audience are no longer getting a travel tax, I mean, we’re obsessed with as advisors.

Most of them aren’t getting any more because they raised this so-called standard deduction to a point where that’s like a threshold. It’s like a deductible. You got to get over that amount, we don’t get a deduction. And I bet very few people in your audience know that. And I bet very few essentially care very much. In reality, they give because they love the organization. They feel some kind of obligation and, of course, they give. It’s like expected.

Casey Weade: I think as advisors, quite often, we want to lead with the tax planning benefits, rather than a more meaningful impact.

Philip Cubeta: Well, it’s almost like, I don’t know if you’ve ever seen the cartoon, the spouse comes home from the clothing store and there are, let’s say three outfits, the justification for buying three as they were 30% off. Tax is a saving, so it saves you something but doesn’t justify the activity in the first place. I mean, so you’re going to save 30% off, do you want to do it in the first place? And so, it really isn’t about the tax savings, I don’t think. It’s really about the satisfaction you’re getting, the impact you’re having, and the way you’re expressing who you are and who you want to be.

I think one thing that has happened over the last few years and maybe the last 5 or 10 years, there’s so much more wealth disparity. I mean, the wealthiest people are getting wealthy really fast and ordinary people are kind of where they used to be and the poor people are getting worse off, and that gets reflected in the giving. And for very obvious reasons, if you have less, you give less. So, when you look at giving by people whose income is less than hundred thousand dollars, that has been a slow, steady decline.

And the giving with people whose ordinary income is million or more, just cash flow coming in has gone way up. So, the overall statistic of 2% is there. But I think the sad part is the squeezing out or the reduction of ordinary people’s giving because it’s not just reducing it. It’s not so much a cash flow issue for the charities, it’s a civic participation issue, where it says if we were losing faith in the organizations we support. I hope it’s not losing faith, I hope it’s because we don’t have the money but still, you lose something. It’s like people not voting. That it was if you give $5, it shows you care.

Remember the parable about the widow’s mite, Jesus in the temple. I’m fictionalizing the story slightly, but it’s in the spirit of it. Let’s say, building a new wing on the temple and the richest person has given this lead gift for 30% of the thing, and everybody else is being honored. And the poorest person in the congregation gives the equivalent of a nickel. And Jesus says, “Her gift was the greatest because she gave all she had.”

So, when we stopped giving to nonprofits, we’re really depriving them of the lifeblood, not just the money, but a participation and love and support, in there, by definition, public charities, I mean, they depend on base public support. So, I think there’s a movement towards the high end, which I think is somewhat unfortunate. And that’s where we tend to cluster with all the stuff, all the technical tools and techniques, working with a wild thing. It’s just important to show up to the organizations we care about in some way, shape or form. You can’t afford to give. Show up, volunteer, serve on a board, serve on a committee.

Casey Weade: Given that we’ve seen this trend, so we’re still giving 2%, but the wealthy are giving more, those below 100,000 in income, say are giving less and less, that has to have an impact on where the funds are going, right? Are we seeing more funds? Are we seeing more politicians versus…

Philip Cubeta: Well, that’s actually interesting. Charitable giving is distinct from political giving in terms of the way the tax code and all that treats it. But from the standpoint of impact, there are people trading off philanthropy or giving versus political giving. They see it in their own mind as being related, in other words. If this cause you care about something that makes you angry, you might try to fix it through giving or you might try and fix it through politics. And so, there’s a trade-off there and there’s more political giving, for sure.

But I think one of the biggest reasons people aren’t giving is just they don’t feel secure. I think, particularly in this year with COVID and all that, people don’t feel so secure. So, financial advisors being able to help them with their finances does contribute to that sense of abundance that will flow over into giving.

Casey Weade: I find one of the gaps. Let’s say that we go on this road and we start to identify who we might want to leave funds to. And quite often, we’ll meet with an individual that says, “Yeah, I know, I’ve got more than I need, but I don’t even know where to start. I don’t know who I want to give it to in the first place.” What would you say to them?

Philip Cubeta: Another law science statistic that is maybe relevant to this. If you look at the giving trends, and you say, “If I were to ask you, what are the two or three most generous cities in the United States, what would come to your mind in terms of giving per capita?”

Casey Weade: Per capita, I’ve got to think that…

Philip Cubeta: As a percentage of the money flow into that community.

Casey Weade: Right. Well, also, you’ve got to go back to defining what is philanthropy. I’m going to go probably the DC, the New York.

Philip Cubeta: That’s what I would say, too. That’s what I would have said, too, but I was actually giving a talk in Memphis, Tennessee. It was a community foundation and advisors there. And one of the things I try and talk about my program is it brings up the level of giving in a community, in some of the communities I work with them like CAP Study groups and they try to compete to see who’s going to do the best job as far as stimulating philanthropy in the community.

So, it’s kind of making that appeal. And I said, “Someday Memphis could be the philanthropy capital of the world, or the country.” Somebody in the back of the room raised her hand, and she said, “Are you aware that we already are?” The Chronicle of Philanthropy had done a study of the most generous per capita communities in the United States. Memphis was number one, and number two was Salt Lake City, Utah. What do you make of that?

Casey Weade: The old Salt Lake did come to mind. That was on my list.

Philip Cubeta: But how do you explain it?

Casey Weade: I don’t know, especially there’s a wide disparity between Memphis and Salt Lake demographically, right?

Philip Cubeta: Salt Lake is LDS Mormon, and they have a very strong religious obligation to give. Memphis is very Christian and they have tithing and that whole Christian or faith-based giving is like this undercurrent to this whole conversation. So, you’re asking about where to give and why and all that kind of stuff, I think you really have to get back to who you are in terms of your personal commitments.

And there’s a whole strand of philanthropy, which maybe I can explain it in kind of a humorous way. I’ve been married to my wife for, gosh, we cannot account the number of years, like, let’s say, 50 years. I’m just a kid when I met her. We met, we married spiritually for the first meeting, really, we’ve been together for a long, long time.

Casey Weade: So, you’re allowed to forget your anniversaries at this point.

Philip Cubeta: Actually, it was not a good idea, though. You can kind of get away with it, but you’d better not. I’ve got my electronic tickler system, I’m not going to forget again. But if you think about what is the right way to meet the person you’re going to spend the rest of your life with, think about that as a problem. A certain kind of person will say, Well, how many women are there in the world? What are my criteria? What platform has the most women I can date on there? I’m going to run this algorithm against it.

That’s not how I met my wife. I think loyalty counts, I think fidelity counts. And I’m not in the market for shopping around for the best woman, I’m in the market for being as best husband I can be for the woman I married. And I think taking that attitude into your philanthropy is one way to approach it. What organizations have been good to you? What organizations are proud of you and your family’s identity? And what can you do to be a responsible member of that group and give back in accordance with your means?

I think then, it’s very much, to some degree, a faith-based perspective, but I also think it fits with schools, it fits with hospitals, it fits with organizations who’ve touched your life. I wouldn’t reject that, and I wouldn’t be ashamed of it. And I think a lot of the public press is around, well, there’s got to be an algorithm, and somebody else in some of the community, there’s logic to that, too. There’s definitely logic to that.

But before you get into this puzzlement over what’s the best possible organization? I think I would say, “Where am I at, too? What organization am I loyal which would have been good to me, and how can I give back? And until I had satisfied that part of my giving, I wouldn’t get too worried about the best possible charity.

Casey Weade: Yeah. I love the analogy with marriage. Had I put together criteria, I would have married myself, I never would have married my wife.

Philip Cubeta: Exactly.

Casey Weade: You fell in love. Right? And then, philanthropy is about love, then start with love. What do you love, right?

Philip Cubeta: I think that’s right. I think, these are strange words to use a lot of times, but I mean, it’s love, it’s obligation, it’s responsibility, it’s reciprocity, it’s fidelity. I think the nonprofit sector keeps those values alive in ways that the investment sector and commerce just don’t. And so, anyway, I’m not speaking against more systematic philanthropy because obviously, you can give to an organization and feel disappointed, the gift wasn’t used very wisely, they don’t provide any stewardship. You’re not sure they spent the money wisely.

So, you can go online and do research and you can look at what your friends are giving, but I think for most people in your audience is the quest of giving more effectively to the organizations you already care about. Because if you think about your normal giving patterns, I bet if I went through where’d your money go, with your members, your audience, it’s going to be a wildly miscellaneous list. It’s going to be 1525, if you’ve ever looked at the tax forms, where they used to report what they’re giving. It’s $10 here, $10 there, $50, $100. There’s no real rhyme or reason to it. It’s just they asked and I gave and couldn’t get them off the phone. And I felt like I owed them and it’s satisfying.

I think the first step would be to kind of say, “Well which of these gifts are best aligned with what I believe in?” And can I eliminate some of the static? Things where I really don’t care and don’t understand, I’m just giving because they asked and narrowed it down to a fewer number, where your gifts are a little bit larger, a little bit more strategic, and begin to ask, what are they doing with the money? Are they using it effectively? Can I structure my big gift and we’re going to make a big gift in such a way that I actually do have some solid sense that a program would be conducted that I can be proud of? Something productive that I can be proud of.

Casey Weade: The media has created some fear in giving to nonprofit organizations. We’ve got CEOs making tens of millions of dollars a year. So, yes, we can start with love, but there is going to be this point where we need to start vetting the organizations. And I don’t know that most people have any idea where to even begin.

Philip Cubeta: Well, if you want to do that kind of research, there are intermediary organizations like GuideStar. You can go to GuideStar and you can do research, if you’re a data driven, and they will give you things like the expense ratios and all of that. But all I would say to you is, again, I’m kind of making a passionate point. I think that the best way to get to know an organization is to be an active participant in it, if you think about how venture capitalists give money they serve on the board.

And if you’re going to start making a bigger gift, it’s not all bad to start locally, to start with organizations you participate in, and to think about volunteering or think about even board service. And then, you’re knee deep inside the organization, you get the financial statements, and you can better assess the information. If you’re dealing with something like, the American Red Cross, and you look at their numbers, you don’t know what they mean.

So, cost of funds raised by American Red Cross is eight cents on the dollar, is that good or bad? Is that the right number? Their expense ratio is 12%. Is that good or bad? But they’d be more effective was 15, you really don’t know. Guess what I’m trying to say, if you start with this as a personal issue rather than academic issue, you’re going to get more satisfaction.

Casey Weade: We have to talk a little bit about strategy, though. I know that’s not why do we give, but we do have to talk about strategy because if we are giving, there’s nothing wrong with getting a tax benefit. And most of us want to maximize that tax benefit. It just allows us to give even more on the back end. And then, I think strategies have evolved. I want to talk about kind of some of the more basic strategies. We’ve utilized more donor advised fund strategies over the last couple of years than we ever have in our company’s history. And then, you’ve got the opposite end, more advanced strategies. Can you kind of share with us that spectrum of basic for everyone to advanced?

Philip Cubeta: Yeah, I think all this kind of planning has to begin with understanding the client’s situation and understanding their goals. You really can’t talk about tools without talking about goals first. So, if you are looking at one of your viewers’ financial situation, you’re going to start by asking, “Will they have enough for themselves?”

And let’s say that’s a touch-and-go conversation, let’s say their cash flow in retirement is a touch-and-go situation, that when you’re doing the projections, it looks like they may have enough, it looks like they might not have enough. And let’s say on their balance sheet is a fairly chunky non-cash asset, something which is not easily liquidated and it’s a big capital gain or it could be stocks and bonds, it could be a block of stock they bought a long time ago, it’s been highly appreciated.

And they also have expressed a desire to really benefit, let’s say, their alma mater or their church or their museum or the hospital, and they really need to do that. It’s on their bucket list. Indeed, there is an urgency behind that. They would like to leave their mark on that nonprofit. Well, there are tools that combine both getting income back and making a bequest.

And so, a gift annuity is one of those, where you give the money to the nonprofit, you get an income back and at your death, they can use the balance and they can be written down to like $10,000. So, if you aren’t involved in the organization, obviously, a gift annuity is such a way to leave a legacy and get it locked in and get credit today. If you put it in your will, they’re not going to give you much credit today because it’s so iffy. But if you do the gift annuity, you get credit today for, basically, you get the income back and they get the amount at your death.

On a larger scale, you can do the same thing of what’s called a charitable remainder trust, where you’re giving an appreciated asset into one of these two tools, the donor advised fund, primarily the CRT, or the gift annuity. You don’t pay capital gain when it’s sold because you don’t own it. It’s inside the tool. And you get back a stream of income based on the gross amount and the face amount, the capital amount rather than the amount minus the capital gain.

So, you can actually enhance your income, get an income tax deduction, and set up your legacy all in one tool. But the reason that it’s interesting to somebody is they’ve got the right set of facts and the right set of goals. They need an income. They want to be charitable. They’ve gotten an appreciated asset.

Casey Weade: One of the things I’ve found is quite often, we’re overlooking how simple it can be. And one of those areas where it can be really simplified is with community foundations, locally, and I think that’s quite often overlooked.

Philip Cubeta: Well, I think you mentioned donor advised funds and their role. Donor advised funds kind of compete with foundations. You can say it’s almost like the ordinary person’s version of a foundation. The advantage of that is you can give cash or appreciated assets into it, and you can give an amount that’s sufficient to get an income tax deduction.

Talk to your accountant, talk to your financial planner, you’ll discover you probably aren’t getting much of a charitable deduction and the thresholds are too high. But if you take 4 or 5 or 10 years giving you, give it all in one chunk, kind of prepay your charitable giving obligations, then you do get a deduction. That can be a substantial difference in somebody’s financial affairs to just bunch the giving into one year’s use of donor advised fund is the conduit. It allows to think a little bit more systematically about your giving.

You can bring your kids into it, say, “We’ve got this family foundation,” call it that and we need your advice on where to give out the grants, you mean to teach them to be a little bit more charitable, that’s a huge benefit. Bring the grandkids into it, tell them, “We’ve got this pool of charitable dollars and for your birthday and giveaway, $100 or whatever it is.” You have to do some research, you got to make a case for it.

I mean, that’s wonderful parenting tool or technique. So, donor advised funds are very popular. And they’re also just a great thing to have in the family as a way to help your kids and grandkids think about giving. And a foundation, obviously, is a much bigger version of that, takes a lot more setup, you need an attorney, most people in your audience wouldn’t be prospects for it, but the donor advised fund, I mean, you can get one of those for like $10,000.

Casey Weade: Yeah.

Philip Cubeta: It is not complicated. It’s like getting a mutual fund, basics about that.

Casey Weade: I think there’s another element that is maybe even broader, maybe it’s the broadest of all and there’s a huge trend in this direction. We’re seeing impact investing become more mainstream. You talk extensively about the different types of impact investing and for someone that goes, “What’s impact investing?” Can you share what that is, and some of the different types?

Philip Cubeta: Well, impact investing is kind of the intersection of investing with purpose or investing with social good in mind, and it’s very much an emerging discipline. I think, the way you can probably be most helpful in terms of getting into impact investing is to be clear what you’re trying to accomplish, what you’re for and what you’re against. And then, work with a financial advisor. You can take that information into their research on the investments that are right for you and come back with proposals.

Impact investing started long, long time ago with the Quakers. They said, “We don’t want to invest in guns, we don’t want to invest in alcohol, we don’t invest in tobacco. And we want to invest in funds, where we screen those things out.” That’s where it started, SRI. Now, today, it’s more commonly screening in the good ones as well as screening out the bad ones.

So, if you can say what things you’d like more of, like good governance of the organizations, the impact on the environment, whatever your hot button is, it’s possible to find a screen fund, which has been screened to have that in it and to screen out things that are the opposite. So, that’s part of it. That’s probably for people in your audience, the biggest part would be funds, which are screen positive or screen negative for their values. And for that to be positive, you have to know what their values are.

This is what will be the part of the same conversation about philanthropy. Only instead of just thinking about the dollars they’re giving, you think about dollars they’re investing as expressing those same values.

Casey Weade: Yeah, and I feel like there are different opinions on the dangers of incorporating this into a well-diversified investment strategy, where individuals will say, or we’ve heard some say, Well, you can’t just exclude a whole. You can’t say I don’t want tobacco, alcohol, Disney, guns. You can’t exclude all those things or you’re losing diversification benefits. Are there risks, in your opinion, on becoming too focused?

Philip Cubeta: I keep expecting to find them. I go in with the same assumption you just did. But it turns out that actually a lot of the data is to the opposite effect that organizations which are well run with a sense of social purpose, don’t get in trouble as much. They don’t get sued as much. They don’t have as much employee turnover.

For example, think of something as simple as diversity on boards. I mean, if you have an all-male, all-white board in serving a diverse community, how good is that board going to be at making decisions? So, even if all you cared about was the financial performance of the company, you might want to have a little diversity in the board.

So, I think the performance of socially-screened positive screen has actually been higher. It’s actually been as good or higher. That’s not to say that there aren’t trade-offs. And I think this idea that you can’t have your cake and eat it too and there are no trade-offs, it’s probably not a healthy attitude to have. But the data so far, is pretty favorable for screen investments. It’s surprisingly favorable.

Casey Weade: If we’re starting down this path, I see it as there’s environmental leads, environmental, social, and government funds, you’ve got mission-related investing, socially responsible investing, is there really a difference between these three? Is there one that’s outperforming more over the other? Which one’s right for us?

Philip Cubeta: I think an awful lot of this is branding. I think a lot of this actually is marketing and branding. Negatively screen has been around for a long time, and it appealed to a fairly progressive audience. And if you heard about it, you could easily tell the people it’s politics and people didn’t share that politics, didn’t want to participate.

ESG is, I think, a more contemporary version of it. It’s more upbeat. It’s more business oriented. It’s more about good governance, having a positive social impact, but it’s not as politically progressive, I would say, just in terms of the attitudes and philosophies of the people involved.

Casey Weade: Now, when we want to have this conversation, let’s say we’ve listened to this conversation, we say, yeah, I do want to start doing more philanthropic planning, charitable planning, incorporating that in to a broader financial plan, how would someone prepare to have that discussion with a financial planner? Is there something you should do on the front end before you go into that conversation?

Philip Cubeta: Well, I think, I would assume that the advisor does not do this for the most part. I would assume that, I guess, it’s kind of a personal comment. I think every good advisor has a process, and that’s what makes them a good advisor. They have fact finders. They have discovery agreement process. They have step A, B, C, and D. And they’ve got it down to a science. That’s true if you’re an accountant, you’re an attorney, you’re a financial advisor.

If they don’t have it down to a science, you probably got the wrong person. That’s a positive way to say it. The not so-positive way is flat because it’s not part of the process. So, you’re going to have to interrupt them, and you have to interrupt them early. If flat is going to be in your plan, you’ve got to state that right up front when they ask you things like, “Do you have any children?” or “What is your spouse’s middle initial?”

I mean, right at that stage, you’ve got to make it clear that I’m planning for myself, my money, my family, but also, I care about these three causes. If you don’t get that read into the record up front, it’s going to be retrofitted to the end when they have decided for some tax reason, you need some tool or technique. And that’s not where it belongs. It belongs right up front with, Who are you? What do you love? And what do you care about? What do you want to have an impact?

And that is a conversation advisor are learning to have. I would say, it’s one in a thousand or one in ten thousand today would ask you that question. So, you got to come in prepared to state, and if you do it, the advisors are going to be responsive, but they are going to be taken aback by it because most clients don’t do that. I think most clients are more generous when you give them the credit for. But if you are a generous person and you are thinking about these things, be sure to let your advisor know.

Casey Weade: And one of the things I find that comes up quite often in those conversations is, yes, but maybe it’s only one organization, they really care about their church. And they say, but I don’t know how much I can leave. And I remember having a conversation not too long ago, where they’re saying, I want to leave everything in church, but is that going to be a burden on the church? Is it going to damage this church? Is it going to destroy it? It’s much like leaving…

Philip Cubeta: That’s a really, really good question. And there are ways you mentioned community foundations a few minutes ago. Community foundations are a vehicle, and it’s not just community foundations or your local community foundation or more often have the name of your town or city in the title. And you can go to Council on Foundations.org. And they’ve got a Community Foundation Locator.

They’re really in the business of solving problems like this. So, you could set up a fun there. And you can say, here’s my concern, the churches on shaky ground, they may not even survive. So, I don’t want to drop all my money in them and then, they sink. I don’t want this to be such a big gift that nobody else feels I have to give because I’ve done all that for them. I don’t know how well managed the place is. I’ve got a good pass today, I’m not sure and let you know.

So, all these concerns, you can convey that to a community foundation. And they can set up a fund which either gives to that church or one like it. So, basically, what your intentions are put down in writing and then carried out over time with some sensitivity to the evolving facts, which is really what that person was asking for. They were saying, “I’m afraid, I can’t really predict the future and I don’t want to make one big gift.” So, a community foundation could do that.

But also, most religious organizations have what I would call upstream foundation, so if you don’t Baptist Foundation, Catholic Foundation, Jewish Foundation, Methodist Foundation, almost every denomination has an upstream foundation, Catholic Charities. So, you can inquire what foundation is supporting your church, and almost always you’ll find one. So, it’s like a community foundation for your organization. And you can work with them to solve that problem. So, you’re giving to the intermediary that’s going to be there even if the church is a little bit… you love them, but they’re a little shaky.

Casey Weade: Yeah, I really, I’ve just been ranting and raving about our local community foundation here in Fort Wayne, the Community Foundation of Greater Fort Wayne. I think it’s so often overlooked. I mean, people want to build these elaborate charitable trusts and nonprofit organizations, family, partnerships, and really were able to just go to the Community Foundation. They set it up for next to nothing. And you can either have the Community Foundation take over and guide those funds with your instruction or you can have whatever heirs you want to continue to run that board, I mean, it can really be a board of directors that guides the funds at such a low cost.

Philip Cubeta: Right. So, if you are thinking about, where should I give outside of my little circle, get your little circle of organizations that are really high on your priorities, and you’ll be to think a little bit more strategically, but you’re still thinking locally, the Community Foundation would probably be your best resource because they’re actually working with so many nonprofits. They can know who’s doing the best work, but they can also introduce you. They can actually set up introduction there.

Casey Weade: If we’re going to have our kids take over, let’s say we have kids or grandkids that we want to take over the distribution and management of these funds after we’re gone, how do we best coach them prior to that period of time?

Philip Cubeta: Well, I think you’re touching on probably one of the most important issues because if we kind of go back to where we started, values and legacy and love and tradition, parenting is hard, not just for philanthropy, you pick the topic, it’s hard. And I think one of the benefits of philanthropy is it’s a little less controversial. Other things, you might be contrary with your kids over certain things, but it’s hard to be too upset about giving, I mean, if they’re willing to give and work with you on the giving.

So, I think about a little kid, helping them determine. There’s a technique to, let’s say, you have a grandkid, and you’re going to give them X dollars on their birthday. You can buy this little piggy bank with step three slots. One slot is for spend, one slot is for save, and one slot is for give. And every so often, if they see something on the news that upsets, say, well, let’s look for the helpers, and let’s give some of the money in your gift pot here to help the helpers. It starts at that age. It really and truly starts at the same age as chores.

And another very simple thing you can do if you don’t have any of these tools or techniques is what some people call a 1040 Foundation. Our family is giving away X dollars, whatever those dollars are, you know the amount, look at your records, and say to the kids or grandkids, we would like you to help us give away 25%, and we’ll give what you recommend if you can justify it. And I’ll tell you what, if you and your brother can agree on the same place, we give another 25%. So, you’d be in the teach teamwork around money and give and take.

And then a year later, let’s get together and see how you feel about the gift you made based on the kind of stewardship, other kind of results were achieved. It really starts at that age, and I think it starts in that spirit. As the kids get older, they can take on more responsibility. The tools will be responsive to that. The Community Foundation, they don’t advise when companies will let you turn over the grantmaking function to the kids. But the parenting part, it’s still parenting, it’s still one opportunity at a time, and every holiday is another option.

But speaking as a grandparent myself, I think it is really, in particular for the older people, this audience, the people your age are so busy building a career, and there’s so many things you’ve got to do. Teaching your kids about giving and philanthropy, that may not be the top 10 things you’re thinking about getting up in the morning. But it’s a missed opportunity when they’re little kids because they’re so receptive to this whole conversation about what’s mine and what’s sharing and keep it, give it, they’re interested in that.

And if the grandparents can partner with them a little bit to make a little project out of giving away a little bit of money and doing some research, I think that’s a huge contribution a grandparent could make to the long-term well-being of the family. That gift of time to their grandkid, they will remember that for the rest of their lives. There’ll be a grandparent telling their grandkids about, they will.

Casey Weade: It’s amazing how often these jars come up. I mean, you must be the 12th person I’ve interviewed. We’ve talked about Rachel Cruze. We had this conversation with Brian Portnoy. We had this conversation with John Lanza. And we’ve used three jars with our kids and say, here are your jar, not spend, save, and give. Everybody has a different thing. But those three things, I think, are so valuable, spend, save, share, and requiring them to set some funds on their earlier years and then helping them.

I love your follow-up, checking in with organization, checking in and seeing what impact those dollars made. That’s really good stuff. So, I hope you will share that with their kids, their younger ones that are raising kids. As we wrap up here, I want to ask one more other philosophical question here and that is, what does retire with purpose mean to you?

Philip Cubeta: Well, the very word retire comes from the military. It means retreat, which means you got defeated. So, I think the first thing it means to me is that, really, we have to think about the final third of our lives as achieving a new set of victories and not just cleaning up after we retreated from whatever the field of battle actually is. And I think it’s a time in your life, where you can begin to make choices that are driven less by financial need, and more by purpose. You try all your life to do that. But it’s really hard when there are other obligations. When you’re a breadwinner, it’s hard. Now that you’re on your own, you’ve got enough money, it’s up to you to decide where you want to invest yourself.

Casey Weade: Speaking of meaning and purpose, where does meaning and purpose show up in your life?

Philip Cubeta: Well, it shows up largely what I’m doing. I had another career and a career in financial services. And I did as much of this kind of work as I could within the confines of a business model, but I always want to do more. So, for me, the meaning and purpose is what I’m doing. I mean, I’m very fortunate right now, it’s my encore career. So, I’m pretty much really devoted, outside of my family, to this kind of a work because I feel like I’m having the biggest impact I can have to other people.

I mean, about 2000 people into my program, they all touch hundreds of people. And so, for me, that’s where it shows up. It’s helping other people to do more, putting other people in a position where they can be more effective.

Casey Weade: Well, Phil, I might have to be your 2001th student here.

Philip Cubeta: I’ll look forward to that.

Casey Weade: In the future.

Philip Cubeta: You’ve got plenty of audience members who would benefit from it.

Casey Weade: Well, I really enjoy this conversation. I enjoy this type of discussion. I think this is something that we need to be talking more about. And it’s just not a topic that comes up a lot in the financial planning world, but it is so key, especially when it comes to meaning and purpose. Phil, thank you so much for your time.

Philip Cubeta: It’s been a pleasure. Thank you very much for having me. Thank you to all the audience who listened. Thanks.

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