Giving Tuesday: What is the 'right way' to give?

The now-annual tradition of Giving Tuesday — it falls this year on Nov. 28 — is upon us, providing a great opportunity to think about how our values intersect with our financial plans.

But what is the right way to give? Is it better to make charitable contributions directly to nonprofits, or to invest in public companies that share our values? Does it matter how money is made or where it comes from if it goes to support a good cause? And what factors should we weigh when we send money out into the world on a mission to do good?

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These are big questions and — spoiler alert — the answers will depend on a person's financial situation and how they think about charitable giving.

As someone who lives and breathes finance and investments, but also as a person who tries to let values guide my decisions, here are my thoughts for advisors and investors alike to ponder as we head into the most charity-minded season of the year.

Begin with a conversation 
I like to suggest advisors and investors start not with the vehicle for giving back but with a conversation about the desired impact, whether that's curing or treating a disease, protecting the environment, aiding people in need, enriching a community's culture or any other cause. With specific goals in mind, you can start talking about how to give back with your client. 

In many cases, giving directly to a nonprofit is the best approach. Whether that involves giving to those in need or supporting the arts, there are many worthy organizations that can put money to use immediately and, if desired, locally. All U.S. nonprofits report their activities, so you can get a good idea of the impact you are having.

Giving to microfinance organizations that make loans to small businesses or individuals in developing areas is another strategy.

Consider aligned investments
Investing in companies that are working on technology to achieve the same goals is also a viable option. In the areas of medicine and environment, for example, there are companies that can use your investment to help grow and develop solutions.

Values-based investing, via buying individual stocks directly or investing in a fund that invests in many companies that align with your values, can be a good approach. Such funds offer diversification and handle the time-consuming research necessary to identify good matches. (Disclosure: My company offers a range of values-based investment strategies.) Keep in mind that values-based funds may invest in many companies, making it harder to quantify the impact of an investment on the specific causes you care most about

READ MORE: Charitable giving strategies that maximize client impact

In addition to investing in companies directly involved in the investor's areas of interest, values-based funds may also research and invest in companies that have a philanthropic mission that aligns with your values. Investing in these companies is another way to do good, knowing that some of their success will support your own values-driven goals. 

Explore donor-advised funds 
For those who want to both give and invest with purpose, donor-advised funds deserve some attention. While they have been around for decades, DAFs are gaining new popularity due to their flexibility, tax advantages combined with new apps and technology make them easier to set up and use.

Money contributed to a DAF is a tax-deductible donation but stays in a dedicated fund the donor can invest in and manage over time. At some point in the future, the earnings and principal of the fund must be allocated to a qualified nonprofit. In the meantime, the donor has time to decide what causes to support and can make a series of contributions from the DAF over time. 

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Since a DAF can have multiple contributors, it may be perfect for a family that wants to coordinate giving but doesn't have a foundation. A DAF has tax advantages as well. While not a requirement, it is logical to align the values of the donor and the nonprofit — or at least see that they don't contradict one another. I will never understand those who make money investing in, say, tobacco, and then give the returns to a health-oriented nonprofit.  

Keep community in mind
Finally, think local. I like to prioritize doing the most good the closest to home. Our firm recently helped launch the Sheridan Community Foundation to give back to our hometown of Sheridan, Wyoming.

In this season when giving is on our minds, I encourage advisors, clients and families to talk about how to do good all year round. Having a vision and purpose is the first and most important step. From there you can find the opportunities and financial vehicles to support that vision — and do so in ways that will make you confident in your decisions.