Facilitating Giving with Paul Nazareth | E063
The Canadian Association of Gift Planners.
In this episode of Financial Planning for Canadian Business Owners, the host, Jason Pereira (Award-winning Financial Planner and Entrepreneur) talks to Paul Nazareth (Vice President of Education Development for The Canadian Association of Gift Planners) about charity and financial planning for business owners. He also shares his thoughts about tax benefits.
Episode Highlights:
01:55: Tax system of Canada benefits the average person way more than the traditional wealth and the American system.
02:58: There is one political exception and the other one is for charitable donations.
03:31: You do get a really high amount of what you donated as your reduction in your taxes.
04:43: Financials Advisors are asking their clients to give tax receipts at the year end.
08:55: Jason asks, is it primarily advisors? Is it Lawyers or Accountants? How to go about doing this?
09:59: A lot of business owners are very strategic; they're problem solvers by nature.
12:13: You're eliminating the capital gains that are owed on securities.
15:24: Paul says that their mission is to create a better world through strategic gift planning and they are really trying to help everybody bring that strategy to what they do.
17:07: The weird thing about this pandemic is that it's really challenged people on their values and meaning.
19:44: What's the mix, you know, what are the issues? Around food security, gender production, women escaping violence, or on economic health.
20:38: You're seeing the tax bill and you're finding ways to minimize it.
21:32: A lot of organizations are reporting it differently.
22:08: People really want to understand how Charity operates? What are you doing with that money? Are you effective?
30:34: We're going to set up a cadre of local restaurants. We're going to serve workers.
32:02: This is illegal; you can't say it's a donation. You're not giving a tax receipt.
32:39: Jason asks Paul – “Where can people reach you?”
Key Points:
If you really want to make an impact on one thing that really matters to you, let’s have the conversation.
There's an inherent incentive for advisors who basically don't have their clients give away money.
Unless we take an active position, try to educate ourselves and reinvent our processes, we're not going to be able to really speak to client's needs.
Tweetable Quotes:
“Canada has the single greatest charitable tax credit system in the entire world.” - Paul Nazareth
“So, when you donate something or when you have somebody qualifies for tax credit, a lot of people think that is money they don’t pay in taxes that is not quite right.” - Paul Nazareth
“Most people give when they’re asked that’s the danger of fundraising” - Paul Nazareth
“I mean, it's just, where do you want to part with money is all they hear as opposed to what matters to you?” - Paul Nazareth
“I love to work with business owners on these things because they come at problems in a different way.” - Paul Nazareth
“I'm always excited when people meet each other in the middle and say, how can we work together to solve these problems?” - Jason Pereira
Resources / Links:
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Transcript:
Producer: Welcome to The Financial Planning for Canadian Business Owners podcast. You will hear about industry insights with award-winning financial planner and entrepreneur, Jason Pereira. Through the interviews with different experts, with their stories and advice, you will learn how you can navigate the challenges of being an entrepreneur, plan for success, and make the most of your business and life. And now your host, Jason Pereira.
Jason Pereira: Hello and welcome. Today on the podcast I have Paul Nazareth, Vice President of Education Development for the Canadian Association of Gift Planners. And yes, another conversation about charity. Why? Because, it accomplishes two things when we're talking about financial planning for business owners. A: Incredible tax opportunities. But you don't make money off those. The reason you do it is to meet your other desires and purposes and goals and ambitions in life, but you can do so, and if you're doing so in a smart way, which we'll talk about with Paul, you can do so at pennies on the dollar compared to what you would have otherwise. With that, here is my interview with Paul. Paul, thanks for taking the time.
Paul Nazareth: Hey, thanks for having me.
Jason Pereira: So, Paul Nazareth of the Canadian Association of Gift Planners, tell us about what it is you do.
Paul Nazareth: So, I've been in the sector for about 20 years. Working for both charities and as an advisor with a wealth management firm. Our organization exists to be the bridge between charitable giving and finance, tax, and estate planning. I teach charities how to raise money smarter, thinking about assets. I teach advisors how to help their clients give smarter, thinking about tax benefits. And I help the public to dream bigger on what they could possibly do, because Canada has the single greatest charitable tax credit system in the entire world.
Jason Pereira: All right. Well, that's an interesting claim. I'm thinking about US deductions, and I think you're right, it's better than the US. That's a big claim, I had never thought about that. But, tell us about how it works.
Paul Nazareth: The big key one is that our system benefits the average person way more than the traditional wealth of the American system. Your finance tax benefits in life don't kick in until a few hundred thousand dollars donated, and in your estate until millions donated. Whereas in Canada, it all kicks in after 200 bucks.
Jason Pereira: No, and it's great. I tell this to people all the time, is one of the great things about that tax credit, which is an exception... So let me just explain how tax credits work quickly: When you donate to something or when you have something that qualifies for tax credit, a lot of people think that that is money they don't pay in taxes. That is not quite right. So what happens is: The amount that you have gets applied to a rate in the tax code. That rate is, more often than not, the bottom tax bracket. So, 15% federally, depending on your province, let's call it another 5%. So, best case scenario, you save about 20 cents on a dollar. And I was notorious for basically popping people's bubble on this one. Back when we had the children's fitness tax credit at my karate school, and people would come in like, "Hey, I got to get my $500 off my taxes."
Jason Pereira: I'm like, "It's 75 bucks." And they're like, "What do you mean it's 75 bucks?" And [inaudible 00:02:55] explain it. And they looked at me dumbfounded. Like, "Well, why am I bothering then?" It's like, "You don't want 75? I'll take it." So basically, the exception there... There's a couple of exceptions. One is for political donations, surprise, surprise. Yeah, let's not go there. And the second one, the better one, is for: Charitable donations. Which is applicable at the top bracket. Now, let's be careful here, because in Ontario you do not get the top bracket, [inaudible 00:03:19] 53.53, you get a little bit less because of the way the tax code works. But nevertheless, you do get a really, really, really high amount of what you donated as a reduction in your taxes. Usually around again, close to 50%, depending on the province. Ontario, just under. But that is, again, you're donating 50 cent dollars. Everything you're doing to charity is 50 cent dollars.
Jason Pereira: And one last story, before I go back to Paul, I've literally had people who have felt guilty about claiming that tax credit. They're like, "I'm getting something out of... " Paul is just face palming. "I'm getting something out of doing something for charity. It just feels wrong." And I said, "Okay, let me flip this on his head. Donate double. Donate double. And it's not you donating double. You can claim that tax credit, now you've done double the good work for people." And you know what, when I put it in those terms, they're like, "So if I donate double, the feds will give me half?" Like for some reason, it's like I was willing to donate a thousand, I wasn't willing to donate 2000. You tell me if I donate 2000, really that other thousand is from the government? Now they're good. So, just flipping that around. So I'm going to stop talking now and go back to Paul. So Paul, tell us about your role specifically at the Canadian Association of Gift Planners and how you go about educating people.
Paul Nazareth: Yeah. So, part of it is that that Canadians are generous. They're giving all over the place. And in 90% of the cases, everybody involved is doing it inefficiently. Charities raise most of their money using cash and special events, which is transactional and dollar-to-dollar thinking rather than the exponential thinking of assets. Financial advisors are asking their clients to, hey, just give me your tax receipts at the end of the year. Not saying, "How are you giving? Where are you giving? Do you feel good about this?" and taking it to the next level and saying, "Hey, I can actually help you." Just like you did, give smarter.
Paul Nazareth: I was chuckling when you said that they feel guilt, because my former employer is the Pope, and guilt was our stock and trade
Jason Pereira: Your former employer was the Pope? We're coming back to that, but continue.
Paul Nazareth: Yes, a regional franchise, the Catholic Archdiocese of Toronto, which when you put it together, has 230 churches and 3 million people. I also worked for UofT. And that was bigger than the University of Toronto's global living footprint. And yet, in all cases, 85% of Canadians say they give only 20% of change, use any tax receipt. Most people, when you say, "How are you giving?" they talk about cash registers, and again, special events, buying tickets and all that stuff. If they focused and thought about the benefits, and again, so many people who actually have some sort of wealth, to be giving things like publicly listed securities, taking advantage of the capital gains, thinking about planning, as opposed to just generosity, they can at the baseline do double. And when they use other strategies like insurance and estate planning, they can do five, 10 times as much for causes they care about.
Jason Pereira: It's funny you mentioned the entire donating when they're at a cash register, would you like to donate an extra dollar to whatever cause? We're all used to that. And I say part of the problem, unfortunately, is what I'll call charitable fatigue. Everywhere I turn, I'm going to the grocery store, or I basically am just even sitting in the office and clients will email me about the ride to conquer whatever or the walk to accomplish whatever, and we are all constantly inundated by charitable pursuits. Everybody's trying to basically bring in money, rightly so, but it gets to the point where you've all gotten a little too good at coming at us, because frankly it's a lot.
Jason Pereira: And I think, a lot of times I talk about structured planning, people are almost just like, "There's a fatigue to it." It's like, "But I do all this other stuff throughout the year." And you're right, you have to flip the conversation. It's like, okay, talk about your dumb giving, because you're not really focusing on the things that matter the most to you and maybe having a bigger impact, versus planned giving, which is: Hey, what is it you actually care about? If you're fine to do the dumb or easy giving, but if you really want to make an impact on one thing that really matters to you, let's let's have that conversation.
Paul Nazareth: Yeah. And I'll tell you I'm right there with you. I'm in fundraising because I hate fundraising. I have an adult onset allergy to chocolate almonds. Like most fundraisers, I was put on the streets as a child. I have a recurring nightmare that I wake up with my father sitting on the end of my bed with a stack of boxes saying, "We've got to hit the streets, boy, and sell these before midnight." And I found out two Thanksgivings ago that wasn't a nightmare, that really happened. We were selling chocolate almonds for a community center that never got built. Because the challenges is, again, most people are imbalanced in their giving strategy. I always say it's the balance between the heart and the head. And most people are way too overbalanced to the heart. They give it to seasons where they really feel moved. They give to causes that just emotionally move them. But they're not thinking with that head.
Paul Nazareth: And again, that's where advisors can really come in to help them say, "I noticed you've given a couple of hundred bucks to X cause. What is that doing? I can show you how to give more. And actually, we call it gift planning. We can actually help you to reach out, connect with that organization. Stop giving [inaudible 00:07:50] annual dollars and start giving it to a project that really means something to you that you can make a dent in."
Jason Pereira: Absolutely. I will say, luckily, I just had a conversation a couple of weeks ago with a client who, they're sitting on more money than they'll ever spend and they have no kids and they're like, "Well, we really have no one to give it to. What are we going to do with it all?" I'm like, "This is the fun part." I go, "Now we have to do two things. You tell me what it is you're not doing that you want to do, once COVID is over, because you can't travel right now. And you also tell me what actually matters to you." They're the same kind of people, they would give here and give there, they give a fair amount throughout the year. But I said, "You can basically get your name on something if you want. Or you can find the one thing that really meant something to you or your life and we can do something benevolent." So, they went away to think about that.
Jason Pereira: I'm looking forward to the response, because it's... it's funny, I actually always say like, "You're probably thinking it's weird that your financial advisor is telling you to get rid of money that he's managing. Frankly, I don't think you're an idiot. And I think that if I'm not acting in your best interest, you're going to be able to detect it. And I think you're clearly seeing that I care more about you fulfilling it than to not, so fulfilling your life ambitions." So talk to me about how you educate people in this space. Specifically, it sounds like it's just predominantly professionals. Is it primarily advisors? Is it lawyers? Accountants? All of them? How do you go about doing this?
Paul Nazareth: Yeah. We're a 27-year-old organization CGP, and we've been doing it primarily first through courses. So, we have courses for charities where they learn, and we've had courses for advisors. And we do, we focus on the big five: Law, tax, insurance, accounting, and estate planning. But now, over the past couple of years, we've scaled it up to start collaborating with more of the bodies that accredit these advisors. So co-teaching. Again, part of it is we've been always asking them to come to our conferences and our courses and everything, well you got to get out to the street where people are. So we're out and about talking to estate planning councils and local advisor groups, chambers of commerce, to again, share that everybody's giving, everybody's generous. But just like you just flipped the script, right there when you said, "What matters to you?" What you didn't ask them was, "Where do you want to give away money?" And that's one of the challenges of the world of fundraising and charity. It's just like, "Give us, give us, give us." And there's not just no strategy to it, but it doesn't even represent the individual. Most people give because they're asked, and that's the danger of fundraising. But when you flip the script and say, "What do you care about?"
Paul Nazareth: A lot of business owners are super smart. They're very strategic. They're problem solvers by nature. So if you say, "Look, let's apply the next couple of years to a couple of organizations you care about and let's use your brain as much as your heart." Well, then they start thinking up solutions. And we described gift planning often as a charity and an individual sitting together and painting a great, beautiful picture to solve a problem. And at the end of that, and the individual's passion is the paint and the charity is the canvas, the person turns to the organization to say, "Cool, how much does that cost?" And they tell them. And often it's five figures plus. And the individual says, "All right. I don't have that much cash in my pocket. So let me work with my advisor to figure out how to pay for that."
Paul Nazareth: Just like a home reno, a vacation, aspirational business goals. We've got to start setting benevolency goals as well.
Jason Pereira: It's one of those things where part of [inaudible 00:10:46] the problem is design. And part of the problem is education. And part of the problem is incentives. So again, like I said, there's an inherent incentive for advisors who basically don't have their clients give away money. Like as a colleague of mine once said, "For some advisors, it's not so much that they have enough marbles, they have all the marbles." There are some who actually try to actively detract clients from taking money, which is just horrid. That said, the other issue is people just aren't familiar or comfortable with knowing how to start that conversation. And then the last one is, it comes down to the design of how we do things currently.
Jason Pereira: As I said before, many times on this podcast, you think about estate planning processes, you go to get your will and power of attorney done, lawyer asks you, "Do you want to give to charity as a checklist item?" It's not a conversation about what matters to them, it's a conversation about: Do you want to do something? Yes or no? I haven't thought about this, whatever. Like that's basically it. So, unless we take an active position in trying to educate ourselves and reinvent our processes, we're not going to be able to really speak to client's needs. So, tell me how you solve that.
Paul Nazareth: I was out in Alberta one time talking to this group of CPAs who advise private business owners. And there's a whole bunch of them saying, "We're tearing our hair out because all these people are donating cash." These folks, and a lot of the older ones, have portfolios where they've got incredible capital gains on blue chip stocks. And the advisor is saying, "Look, we're not even saying you've got to give away those stocks. We can donate them, eliminate the capital gains, reset the cost base and buy them back. But the bottom line is you're eliminating the capital gains that are owed on those securities." So, there's a lot of strategy in this. A colleague of mine in Montreal who was talking about a guy who said, "You know what? I'm not super passionate about charity." But when they were saying, "What matters to you?" One of his biggest priorities was honoring his father and mother. And when they went deeper in how to honor them, they were both very connected to causes and community and his charitable giving, which actually then took the place of life insurance, which was an incredibly well put together plan.
Paul Nazareth: Again [inaudible 00:12:41] Canada, when a charity owns the life insurance, the premiums are receiptable, he made the donation of securities to cover the premiums, just beautiful tax planning. But, what mattered to him was honoring his father and mother, and they found organizations in charity and in the community that would do that. And it was a massive gift, protected his family's wealth, got him a lot back in his estate, got him a lot back annually because he's making those securities gifts. It was just this gorgeous plan. But if he said, "Where do you want to give money to?" Wouldn't have moved.
Jason Pereira: Yeah. Where do you want to part with money, is all they hear. As opposed to: What matters to you? It's an interesting dichotomy. As we talked about before, with the tax benefits of this, it does not have to be a loss to you in many ways. Especially if we're donating things like appreciated capital property. The amount of tax you can save for for doing that. And for those of you interested in some of these strategies, special [inaudible 00:13:32] insurance, go back and listen to my podcast with, I'm sure you know the gentlemen, Mark Halpern. Who basically, we went over a lot of strategies in this space, but he's got a saying, "When you die, you're basically giving your money to three different people. Your heirs, the government, and charity. What you don't realize is you have the option to pick who."
Paul Nazareth: And a lot of people, when they hear it that way, are like, "Well, let's do this." And when they also see, again, Canada's never had the least amount of kids as it does right now, smaller families. So, Mark and other people often talk about charity as a child. You got two kids? Charity is the third. And all of a sudden, you can really be shaping a legacy. Because as I like to joke, children are born to spite us. And more and more are not fulfilling the legacy, they're not fulfilling obligation like they did in previous generations. So, now this third charity child can be the one that speaks to your values and your purpose and do things that you want to. Also freeing up the kids to have their own lives and their own desires. So that's why we're seeing even more charitable funds like foundations and donor advised funds also have the flexibility so that next generation can meet the needs of the community where it is. If you have just been given a hundred years ago to whatever, all the money would have gotten to Polio. We've got to be flexible and creative. Again, this is why I love to work with business owners on these things because they come at problems in a different way. Food banks, how to cure cancer, how to help the community, how to increase democratic and civic engagement.
Paul Nazareth: That's all charitable stuff. But you know, the sector is doing it the same way it did 50, 60, 100 years ago. This is where an influx of smart professionals isn't just money, it's [inaudible 00:15:00]. So this is an exciting time for people to be thinking about this.
Jason Pereira: Yep. You see [inaudible 00:15:05] business owners understand why. Not just tooting my own horn as a business owner, but the reality is disproportionately Type-A personalities who want to get stuff done. And they're used to managing resources and thinking around corners. So, it makes a lot of sense. Makes a lot of sense. So talk to me about the Association of Gift Planners. Tell me about the mission there and how you guys go about it beyond just the education.
Paul Nazareth: Yeah. So, our mission is: A better world through strategic gift planning. And we're really trying to help everybody bring that strategy to what they do. So, teaching and encouraging charity. We train everybody from board members to the fundraisers, not just the individuals, finance staff, on how to be thinking more creatively in this space. Because, as we raise the fundraising to our assets, well, yes, there is complexity. There is a greater level of receding and fiduciary obligation. So, we do the education, we encourage them. Part of what we do, we have 20 chapters across the country. We're also trying to foster dialogue, trying to get everybody to get out there and mix it up. Everybody's all in their own little corners. That's why I believe in boards of trade, chamber of commerce, places where we can connect with each other. Outside of work, I'm a big proponent of professional networking, but that's because I believe that the best things happen when we come together. So, that's a lot of what we try to do in our local chapters, all across the country, suburban, rural, and urban, to try to bring people together to solve the problems in that way, charities, advisers and the public.
Paul Nazareth: So we do a lot of engagement. We have this big national campaign we launched last year called Willpower. And that is a $40 billion, 10 year campaign, to socially normalize, in the public mind, that it is normal to leave a bequest to charity. So, that's going to be a really big effort. It's going to take us 10 years, but this is year one.
Jason Pereira: Yeah. It's hard enough to get people to put wills together. That's a big enough challenge. The stat is: Less than 50% of Canadians actually have them. And of those who do, more than a third of them are out of date. So you have that problem. But that's interesting though, the charitable aspect, it could be a motivator. If someone really cares deeply about it, that could be the reason to actually go out and get the will done, quite honestly.
Paul Nazareth: You really hit on the head here: What is the true motivator? The motivator is not going to be: I can give to an organization. It's about meaning. And the weird thing about this pandemic is: It's really challenged people on their values and meaning. We heard in March, April of 2020, wills were the new toilet paper, everybody was trying to get it and they couldn't. If they sold them at Costco, we probably would have sold more, but
Jason Pereira: Always in a crisis, always in a crisis. Never before that.
Paul Nazareth: Yes. So, it did, but the great thing is, we're hearing from a lot of the professional and estate professionals as well, is that: There was a panic element, but as we start to come out of COVID, there will be then a planning element. Where people are saying, "All right, that one was just because I was scared, and now I want to make sure everything's covered" and they're starting to think more deeply. They're going beyond just money, they're getting into meaning. Once they get into meaning, that's where this kind of conversation comes up.
Jason Pereira: I like that. The entire normalization of the concept of it. Here's the other thing too, is that there's a lot of normalized myths out there. So, people think that: I don't have to do a will because of my spouse will inherit everything. Whereas, if you have kids, guess what? That's not happening. So, there's a lot of misconceptions that people can just lazily think and assume. But I don't think anyone would be lazy enough to assume that a portion of their estate is going to go to charity. So, if that's what resonates, maybe it's not the: Oh yeah, I need to make sure my wife's taken care of because she's going to inherit everything anyway. I don't have to do anything. It's [inaudible 00:18:23] default.
Jason Pereira: There's no default for charity. So, if that's the thing that gets them motivated, gets them started, that's a powerful thing.
Paul Nazareth: And in some ways, there is a bit of a default for charity because all that money going to the government is often allocated, granted out, et cetera. But then that's when we ask the individual to, say, take a look at how the government gives away money. Is that something that aligns with your values? Does it support your local community? And for a lot of people who often have different values, especially things like people of faith or people who are connected to activist ideas in a community, it just doesn't. They don't see themselves in that grant, in that tax dollar usage. And so they're like, "All right, I will look at changing how that works."
Jason Pereira: And it's funny, I think that the complete nature of the botched effort, especially in Canada, Ontario, of rolling out the vaccine and then some other COVID initiatives has led to a lot of apathy to our institutions. So, I can see that leading a lot of people to say, "How do I not give them money when I die?" Even more so.
Paul Nazareth: Yeah. But we're also going to, once we get through all this, start to take stock. And you know, one of the more interesting things is how people really responded to food banks. Like thousand percent growth in some cases. Really, really big outpouring of people saying, "Okay, this is the one thing I get. So I'm going to do that." But when we actually start, and this is where our colleagues at community foundations, there's about 200 across Canada, in every community, suburban, rural, and urban, and they went deep into the needs of every community. What's the mix? What are the issues, not just around food security, but gender protection, women escaping violence, or on economic health who has access to what? They've done it.
Paul Nazareth: It's a brilliant report they do called Vital Signs. And almost every community has one of these. And when people see what the needs are, that changes their giving. Again, people who like to say, "Am I doing something efficiently? Am I just giving you 20 bucks to go away? Cool." But there's people who are like, "I'm giving four and five figures a year. I want this money to do something effective." And that's when they're starting to do their homework, because what they are doing is socially investing. So this is where more people who are doing that homework, using and understanding the data are saying, "Wow, I can do more. Show me how to do more." And we're trying to encourage them to go to their advisor, finance, life, tax, estate, all of it, to say, "How can we do this smarter and better?" Just the rebalancing of head and heart.
Jason Pereira: Especially if you're doing financial planning, it's a natural spinoff, because essentially it's like, you're getting to the terminal date. Or you're seeing the tax bill and you're finding ways to minimize it. And you getting to the terminal date, you're seeing this large tax bill. You have two choices, either say, "Okay, I've planned around it, this is as small as I can get it." Or, "I planned around it, this as small as I can get it unless you want to do something in the charitable sector, in which case you can basically have the government pay for a big chunk of what you're doing there." Let's go back to the data point that you made there, because there's one data point that I know you and I have talked about in the past that we consider a little bit dangerous and misguided. It's the one on the amount of money donated going towards the administration of these charities. That report of: What percentage of money coming in actually flows out to the end benefit? Can you speak to why that metric is somewhat flawed?
Paul Nazareth: Yeah. Part of it is: There's no standard across the country. As much as the government has a reporting form for charities. And again, people can go online right now, [inaudible 00:21:23] the Canada revenue agency list of charities. All their financials are there, and it's got the pie chart of how much is spent on what good works, administration, fundraising, et cetera. Because there is no standard, a lot of organizations are reporting it differently. And of course, the capacity of how many organizations. There is, as last count, 85,000 charities in Canada. And more than 80% of them operate at less than a hundred grand. And almost 90% of donations go to only 2% of charities.
Paul Nazareth: And you know who they are? Often hospitals, universities, big organizations
Jason Pereira: They just lost a lottery ticket on [inaudible 00:21:55] not win there. It's unfortunate.
Paul Nazareth: They're big organizations, they do great work. But again, a lot of my work is traveling the country, getting to the nooks and crannies of Canada and seeing what people want to do locally. Local has never had more power, especially in the pandemic. So, people really want to understand how it operates. Well, a big organization, a small organization, operate totally differently. And that overhead, that amount, is not a good way to gauge it. The big question is: What are you doing with that money? Are you effective? Because, you can manage it effectively and achieve very little. Or you can be an organization that is also bold and is making investments in that space. So, that's why it's not the world's best metric out there.
Paul Nazareth: And there's a lot of organizations that help people who can actually take a look at those tax reporting and think about a smarter... Canada Helps is probably one of the biggest ones out there. That was my last role with the organization, where every charity is on the platform and it actually breaks down all of their tax reporting to show you what's their impact per dollar.
Jason Pereira: You got to look at the boldness, like you said, of what it is they're doing. A buddy of mine did a bunch of work for [inaudible 00:22:55]. He's like, "They got to build runways to bring in planes. Does that count as administration? And if so, [inaudible 00:23:03] penalize them for doing that? Like that's insane." And recently, it was on the news a couple of months ago, where this report got released and they talked about it. And of course they don't talk about: Be careful how you read this. And there was one charity in Toronto that actually had the audacity of claiming that they were 105% or something like that of their money that was donated went to... It's like, I'm sorry, you just cooked the books. So what you're telling me that not only does everybody donate... All the utilities are being donated, the locations being donated, everyone's working for free, and in addition to that, maybe they donated more than the salary they would have earned. It doesn't make any sense. So there's some gaming going on.
Paul Nazareth: That could also be a tiny organization with an operating budget of nine grand. You could get everything donated. You could do all that. But your operating budget is nine grand and you're helping out a couple of hundred people. As opposed to an organization that is also a smart fiduciary business. Again, part of it is: I'm not looking for a maverick outsider when it's time for brain surgery. I'm also not looking for an amateur when it comes to solving societal problems. Because a lot of these well-meaning volunteer-run organization, we now know, have also done damage because of their amateur status trying to solve really big problems. We need intelligent people who are thinking about these kinds of things. Otherwise, you are just throwing that money away. A lot of people just want to feel good about a band-aid as opposed to saying, "How are we solving this problem?"
Jason Pereira: Oh, it's like, are you familiar with the entire like water pump merry-go-round?
Paul Nazareth: Oh boy.
Jason Pereira: You're familiar with that one? What a legend that one is. So for those who don't know, it's like African Initiative or something like that, anyways, they're like, "Hey, we developed this merry-go-round that, as the kids play, it pumps water. Well, here's the problem. You've introduced friction into the entire thing, which means that it takes effort. So, the kids aren't going to want to take effort to play, so now you basically have adult women who have to walk in a circle with this thing in a far less efficient mechanism for pumping water. It's like: Oh, nice well-meaning intention, terrible, terrible testing and execution. So, you actually would have been better off and it would have been cheaper to just donate a traditional pump.
Paul Nazareth: And this is where we're changing the paradigm, to say it's time to bring in the people who are helping into solving the problem, as opposed to this typical, North American patriarchal model of saying, "Here's how we're going to help you." So, it's an exciting time to be doing that, and also an exciting time that we've got more people thinking about this. Groups like the Ontario Nonprofit Network who are engaging the right kind of professionals, thinking about gender and the economy. I'm on the board of the Carlton University masters in nonprofit leadership. We've got people who are doing their masters and their PhDs on these kinds of problems, to rethink them. And then finally people that say, "What is the effect of funding model for this?"
Jason Pereira: Yep. Effective funding models, because that is something that is, I think, not contemplated enough. Because we're all used to one-off donations, when what we're really talking about in most initiatives is not just ongoing administrative budgets, but projects that take years, and sometimes, decades to get these things from inception to actual fruition. I think a lot of us don't stop to think of how, if we really care about that initiative, we should be automating regular contributions, and making sure that we're there to help along the entire deployment of it. So, that's a bit of a challenge to change that mindset.
Paul Nazareth: [inaudible 00:26:06] that is, is that most funding is one-year funding, short-term funding, it's not going to be longterm to solve these problems. There is a mechanism that does that and it's called taxes. This is the other part too. We've got to stop trying to have charities solve some of these really big problems that we know the government should be way more involved in solving. And that's another rebalancing that needs to take place. The charitable sector is finally turning its head to say, "Yeah, you're right." Because before, we were just trying to raise more and raise more. Great report put out by a group called Imagine Canada called The Social Deficit. They have a chief economist that broke this number down that said no matter how much we raise, the need will always be double what we're raising, so it's time to off book some of these problems to have a better balance between government and the private sector, because that's another thing too. Private sector's throwing how much money are things? Banks getting 25,000 employees to go out and do volunteer work. What if they mobilize those people? And that is what we're seeing more of these corporations doing is having a purpose. Mobilizing them towards a cause and doing something together, well, you're going to be way more effective.
Jason Pereira: Absolutely. I think one good example, I think Salesforce still does this is, they call it 2% time or something like that, where they want to every employee to donate 2% of their working hours towards a charitable ambition. If they choose to, they don't have to, but they still get paid for that 2%.
Jason Pereira: So they're not penalizing. It doesn't sound like a lot, but 2% over the course of a year, it's several hours. The workday is something... something like over two 2,400 working hours per year, so you're talking about the equivalent of a solid week or more basically donated to the charitable sector.
Paul Nazareth: And again, those are sharp minds. That's a reminder you get too. I remember another tech company said, "We have a big charity day." And they were making holiday cards with pipe cleaners. I'm like, "These are multi-million dollar coders." If you look at the world of charity websites, oh man, it's like a puppet show out there.
Jason Pereira: They need to discover Squarespace and Wix, honestly, 18 bucks a month. My goodness. So, is it just advisors who come to you [inaudible 00:28:04] you're going to them. I'm sure you have people come to you. Do you ever have the actual clients looking to make an impact say, "Hey, get me someone to work with on all this." Or is that a common... Do you have a direct [inaudible 00:28:13]?
Paul Nazareth: Almost a daily basis. And part of it is, is because outside of my jobs over the past 20 years, I've been experimenting with [inaudible 00:28:20] as you have as well, with digital media, with podcasting, with blogging, I'm one of the most followed people in charity on Twitter, which isn't as important anymore now that we've got Instagram and TikTok. We got to get out there. [inaudible 00:28:32]. One of the things is how do you [inaudible 00:28:35] in different demographic?
Paul Nazareth: Because [crosstalk 00:28:37] 20 year olds don't have money. Well, there's a whole bunch of them just made a bunch of money on GameStop and Bitcoin and weirdo things. They also know that that's not real money, that that's not going to last. And there's quite a number of them [inaudible 00:28:47] really, really care that said, "I would like to give away money. And I don't know how to do it. And I knew this wasn't efficient." There's a whole bunch of them that knew that wasn't real. So, how do they get in there and help? So that's a lot of what I believe too. Meet people where they are, be available in places like digital media. And they do reach out to me. And it's, again, a real pleasure that we do in the gift planning association to connect them with an advisor, not a website, because again, it's like WebMD [crosstalk 00:29:14].
Paul Nazareth: Boil on your ear. That's the problem. That's what people do with financial planning and charitable giving. When they do it on their own, nine times out of 10, it's super inefficient. And that's why we really believe in that great partnership between not just charitable giving and charities, but advisors and planning. Two totally different mindsets.
Jason Pereira: Absolutely. And go back to the 20-year-olds don't have money. I mean, okay, well Millennials and Gen Z have all been raised with this entire find purpose in your job attitude, they're considered entitled, but at the same time, they're also very socially aware. And frankly, most of them want to have some form of impact in their job and in the world. So frankly, yeah, get them young, get them thinking about it young, get them doing small things like small monthly or paycheck donations [inaudible 00:29:58] 20 bucks a month. That sort of thing, you'll have them for life. And you're already speaking their language.
Paul Nazareth: And they're not waiting for anybody. They're not waiting for their company to show them purpose. And they don't even like the old school ways companies have been doing it. So, what's cool about them, and I've always admired these generations to just go out and do it themselves. They're helping organizations. In some cases, they're starting things that look and feel like non-profits. Again, in the pandemic, I've been watching a lot of crowdfunding initiatives. And although it's not traditionally charitable, one of the things I'm really proud of these generations for doing is saying, "We got to save small business. We've got to support these restaurants. I'm not going to go do something with buying McDonald's for frontline workers. We're going to set up a cadre of local restaurants. We're going to serve these workers. We're going to raise the money in crowdfunding. We're going to buy the food from them."
Paul Nazareth: There is charitable ways we can do that, but the charitable sector didn't move fast enough to meet the need. And these young professionals, through technology and will and care, did it. And that is super cool. So, we're going to find, as time goes on, as they grow up and can put more money into it, because again, they were putting in 20 bucks at a time, they were just doing it 5,000 [crosstalk 00:31:00] at a time. But as they grow older and get wealth and assets, we want to help them to keep thinking like that. And if they need to break the mold and break the system, that's cool too.
Jason Pereira: I get why it can move faster. When you don't have the administrative overhead burden, which I'm not criticizing, if you're a professional organization, you've got bureaucracy. When you don't have that, and you're just basically like, "Hey, I'm laid off." Or, "I got time on the weekend." Or whatever it is. When I can't go anywhere, I can't do anything, but I can share as heck put together a website on Squarespace and I can sure as heck raise some money and do this in my spare time and organize some friends. When you don't have the bureaucracy in place, it's a lot easier to move. So, I do love that technology has created ways to not only execute on these things faster, but also for people to congregate, find each other, support causes, and do it in ways that we've never seen before. It's fantastic.
Paul Nazareth: Our challenge in the charitable sector though is always that word also for us encompasses accountability. And as much as people want to move fast, for every cool and great, wonderful crowdfunding campaign I find, I find three that are borderline fraudulent. And I got to reach out to them and say, "What you're doing right now, you're going to get audited. This is illegal. You can't say it's a donation. You're not giving a tax receipt. You're not actually a foundation or a charity. So, stop using those words." And, "Can you account for how you use all this money?" Well, no we can't and we won't. I get a really nice go to hell email every couple of days after inquiring about these things. So again, it's just about that balance to say: How do we balance accountability, transparency, and impact? Because if we get all of one and none of the other, it's not good. But also if we move super slowly and can't react and be flexible, that's not good either.
Paul Nazareth: So again, I'm always excited when people meet each other in the middle and say, "How can we work together to solve these problems?" That's where the magic happens.
Jason Pereira: So, Paul, I very much thanks for taking your time here. Where can people reach you? If they're either a business owner looking to basically get connected with an advisor who does good work in this sector, or just an advisor wants to learn more about [inaudible 00:32:48]. Where can they find you?
Paul Nazareth: Yep. The Canadian Association of Gift Planners, CAGP. They can Google it and find us. And same with me, Paul Nazareth, luckily to have a pretty unique name. So I'm easy to find. My place of residence is LinkedIn. And again, I really believe in being found, so people can find their way to me. But the Gift Planning Association, we're in 20 cities all across the country, there's probably a local chapter near you and we'd love to connect.
Jason Pereira: Fantastic. Paul, thank you so much for taking the time today.
Paul Nazareth: Thanks for having me, Jason.
Jason Pereira: And that was this week's episode of Financial Planning for Canadian Business Owners with Paul Nazareth. I hope you enjoyed that. And I hope that if this basically rattled around in your brain a little bit [inaudible 00:33:23] think of some of the possibilities and initiation of it and inspires you. If you're dealing with an advisor, to speak to that advisor about how you can make more of an impact. And if your advisor doesn't do that, Paul's a great resource for reaching out to and finding someone who can. As always, if you enjoy this podcast, please leave a review on Apple Podcasts, Stitcher, or [inaudible 00:33:39] your podcasts. And until next time, take care.
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