Firms Merge to Market Charitable Investment Products

June 18, 2001, 1:00 a.m. EDT 2 Min Read

Two firms that provide technology and other infrastructure to help financial service companies offer donor-advised philanthropy funds have merged to more aggressively market their products, the firms announced today.
Giving Capital, of Philadelphia, has merged with a smaller company, Giving Systems, of San Francisco, which provides similar services, in a deal that will result in a new New York sales office and expanded training services for clients, the companies said.

Giving Capital struck a deal during the first quarter of 2000 with the National Philanthropic Trust, a nonprofit organization offering donor-advised funds for the purpose of donating the assets to charity. The deal positioned Giving Capital to provide technology and a prearranged partnership with NPT to financial services companies who can then offer donor-advised philanthropy accounts to their investors.
It works like this: A client of, for example, Credit Suisse can invest a minimum of $25,000 in a donor-advised fund that will be handled by Credit Suisse portfolio managers. The account will be maintained using Web-based software provided by Giving Capital and Giving Systems. NPT will then use that software to monitor the investments. And, when an investor wants to donate some of the assets-from principal or earnings- to a specific nonprofit group, NPT will research whether the group is a legitimately registered nonprofit and approve and execute the transaction. Because NPT, an IRS-approved nonprofit, is involved in the deal, the investor can take a $25,000 tax deduction on the investment. Credit Suisse would earn revenue from fees, just as it would any other investment product.
The Web-based software provided by Giving Capital and Giving Systems will make it easier for financial services firms to set up the accounts and for clients to take tax deductions resulting from the firms' partnership with the IRS-approved NPT, said Giving Capital co-founder, Eric Lee Smith.
The merger announced today is an advantage for both Giving Capital and Giving Systems because neither wanted to compete, Smith said. In addition, Smith said both companies identified each other as valuable assets in marketing strikingly similar products.
Giving Systems had been developing a similar donor-advised fund product and accompanying Web software, Smith said, but Giving Capital already had a similar system up and running.
'It was mutually attractive,' he said of the deal, adding that the prospect of not merging 'was mutually scary.'