Ep. 247: Digitizing Philanthropy: AssetMark Launches Donor Advised Funds via TIFIN Give with David McNatt

Come on in, sit back and relax. You’re listening to Episode 247 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, founder of Ezra Group Consulting. This podcast features interviews, news and analysis on the trends and best practices, all about wealth management technology.
My guest for this episode was David McNatt, head of wealth solutions at AssetMark. And that was a big coup for us, we’ve been trying to get David on the podcast for a while and this recent announcement about them. Buying software from TIFIN for donor advised funds was the perfect opportunity to get him on and talk about the the AssetMark. platform, the growth of donor advised funds, why they decided to add donor advised funds to their offering, of course why they chose TIFIN Give as their SaaS solution, and how it’s being integrated into their e-wealth manager platform.
David has been at AssetMark for over nine years. Before that he was at Charles Schwab for seven years where he was managing director of their investment platform, and before that, Franklin Templeton for nine years. So he said quite the illustrious career in the wealth management and asset management space.
But before we get started, let’s talk about tech stacks. At Ezra Group, we’ve seen tech stacks of hundreds of RIAs and let me tell you, most of them are loaded down with tech debt. So you shouldn’t feel too bad about yours. But let’s face it tech debt is like a giant anchor, holding back your business growth. If you want to free your firm for exponential growth, you should run, not walk to our website EzraGroup.com and fill out the Contact Us form. Our experienced team can evaluate your current tech ecosystem, deliver targeted recommendations, optimize your existing systems and operations or run an RFP and help you implement new software to take your firm to the next level. You can take advantage of our free consultation offer by going to EzraGroup.com.

Topics Covered

  • Discussing the Donor Advised Funds Collaboration
  • Importance of Charitable Giving in Wealth Management
  • Technology and Efficiency in Donor Advised Funds
  • Future Vision and Integration with Financial Planning Tools

Episode Transcript

Craig: All right, I’m excited to introduce my next guest. It is David McNatt, EVP of wealth solutions from AssetMark. David, welcome to the program.

David: Thank you for having me. I appreciate appreciate your time today.

Craig: I appreciate your time. David, where are you calling in from?

David: I am about 20 miles out of the San Francisco Bay area a little bit east there. Thankfully, it’s a lot cooler today than it has been over the past week. We’ve been under a massive heatwave here on the West Coast.

Craig: I like visiting California, but I have to say that you have the wildest weather. It’s either storming or it’s a drought or it’s a mudslide or it’s an earthquake or it’s smoke. So it’s something but in a couple of days, like this time of the year, you’ve got some nice weather.

David: We do especially on the bear get you get all the fog to roll out occasionally but didn’t do that this weekend. It was a hot one. So but nice. Nice to spend some time with you today.

Craig: Oh, absolutely. So we are talking about a new announcement you guys just made about donor advised funds, your your collaboration with TIFIN, their TIFIN give product which is a philanthropic platform serving families, employers are the cause based communities. Can we talk about the this collaboration, how it’s going to work? How you made that decision? And first of all, let’s start out with why donor advised funds? Why did you see that as something you needed to add to the AssetMark platform?

Discussing Donor Advised Funds Collaboration

David: That’s a great point. I mean, I think it all starts there. What we’ve seen truly is a growing interest in charitable giving across investor wealth here over the past couple of years. And that’s you know, consistent with the overall DAF account and AUM growth that you see in the industry. If you go back to like about 2008 What you see is that AUM and Donor Advised programs has tripled during that timeframe. And today, there’s not more than 2 million DAF accounts in United States and so we’ve just seen a lot of growing demand from the advisor base around helping clients with Donor Advised and charitable giving.

David: Furthermore, I’d say that many of the advisors that we work with and as you know, we’ve worked with more than 10,000 independent financial advisors across the United States. They can make them consider themselves holistic planners or wealth planners. And I’d say charitable giving is often an integral integral part of client’s financial plans, particularly when they’re working with a fluid and high net worth client. For many of these clients, a donor advised program provides a lot of benefits instead of trying to go out and do some private foundation, there’s a lot of complexity to trying to form that there’s a lot of administrative burden a lot of expense. Donor advised funds, on the other hand, offer a lot of the same benefits of a private foundation, but they’re not subject to a lot of the cost. And a lot of the other issues that you have to do that.

Craig: That’s something that I didn’t know that the AUM tripled and there’s over 2 million of these accounts. It sort of snuck up on us.

David: It did and a lot of people hypothesize around maybe why that has happened and it does feel as though it happened in concert with some changes to tax laws. And I’d go back to the 2017 tax cuts and Jobs Act, for example. That time, standard deductions, they went up dramatically and then you also had caps being put on common itemized tax deductions like state taxes and mortgage interest for all of those in California and New Jersey. We’re all pretty familiar with those.

Craig: Very familiar.

David: Yes, painfully familiar. But the result of those tandem actions was that a number of the number of taxpayers that qualified for itemized deductions actually fell from 30% pre to 10% post. Now with these caps on state taxes and mortgage interest, suddenly the impact of charitable giving in terms of relative tax AIPAC for many of itemizing taxpayers, it’s significantly increased. Now, to be clear, I just want to be clear, I’d say that taxpayers, they’ve been giving for decades it’s not been about tax been about doing good. However, these new tax laws provide an incentive for many taxpayers to think much more holistically and think about how to optimize their philanthropic endeavors.

Importance of Charitable Giving in Wealth Management

Craig: What do you think about some reports that a third of donor advised funds that don’t distribute any money? Are you putting in some guardrails to ensure that they are actually sending money to charities? (New Study Shows That Majority of Donor-Advised Funds Are Sending Little or No Money to Charity Every Year)

David: I think it’s a great question. I would point to is one of the advantages of a donor advised fund is that it allows you to give money away it’s irrevocable once you once you put that money in the fund that’s an irrevocable donation to a charitable cause. But it doesn’t designate the timing. And so it allows you to get that tax benefit upfront at the time of donation. But you have time to donate those assets, as you see causes that materialize that makes sense. And I think it’s also important to realize, too, that the advantages of a donor advised fund are very much focused on the assets within that fund being managed and growing over time so that your actual charitable and philanthropy impact is actually greater over time than if you just were to do cash donations at a given point in time.

David: I wouldn’t be surprised by the stat that you just mentioned. But I would also argue that charitable giving and foundations operate many of the same ways. They don’t just donate everything grants, gets granted, in that given year. There is sort of a process, there is the needs of a charity over time. And I do think that donor advised funds help families honestly operate like small foundations and think about how to support charities over time, and also how to support through more, it’s more of a multi generational point of view. And we’ll talk about that in a little bit. But I really find that to be a really valuable tool in our charitable program, where we provide multi generational tools so that the charitable, the money put into the DAF is thought through at the family level, not just at an individual level, and allows the family to share values and build legacy together and then support those those things over time.

Craig: You made an excellent point there, David, that no one is looking at the foundations and other private charitable structures that very, very wealthy people have access to. No one’s checking to see how much they’re distributing, but I think DAFs because they are new or generating some, at least in the philanthropic world are getting some flack because they’re new and that more people can now take advantage of them. But as you mentioned that they give the same benefits of private foundations without all a lot of the costs and why shouldn’t people who have ever been moderately wealthy have those same advantages? Agree. So now you’ve decided to bring this in. You realize you have this need from your advisors and their clients? Why did you look for a software solution and why why not build it? Why go outside?

David: A couple of reasons. We’ve already established that the demand was a big driver. I think it’s important. We did have a legacy solution on the platform for a host of years. And what what we found is one is it was highly manual. And just in today’s modern age, that’s just frankly, not acceptable. And what we found is it was incredibly important for a couple things to happen. One is this need to be easy for the retail wealth space. They can manage their wealth through a very digitally enabled experience. advisors work in that environment. They expect the charitable side of this to equally be as easy, feasible in terms of the account opening the grant making process, processing times etc. That was a big thing and technology enables that.

David: At the same time, technology enables scale, and it scale benefits for AssetMark, but also scale benefits for the investor as a result of working with our SaaS partner, TIFIN in this instance, we were able to bring down the investment minimums or really democratize this solution to your point making what was previously 100k minimum solution really available for as little as $10,000 to open a new account. Again, another thing that was I think really important for us and enabling a solution. Is that right level of education support. Investor charitable giving is a highly intentional act. It’s connected to people’s values, their desire to do good to have a positive impact and we find that it’s important to help advisors have these personalized conversations and empower them with the knowledge of how a donor advised fund can simply be a smarter way for many people to affect their charitable giving aspirations. Those were the primary main things and I think the reason we finally went with the SaaS is that it really enabled plan, experience, advisor experience, drove scale, and really empowered and helped visualize through digital tools, many of those education and engagement points that are very important and what I can remind people it’s a very intentional act, but choose to do

Craig: This is a SaaS deal, so you’re basically hiring TIFIN to provide you with this cloud based software, and are you integrating it into the platform? Will it be white labeled, how is it going to be delivered to advisors?

David: Exactly. So we went with a SaaS solution as I mentioned earlier, what we have decided to do what we work with TIFIN good to do is integrate that into the platform. There was Single Sign On so all advisors that are signing in to their advisor workstation we call that the wealth manager here and asset mark. There’s a single sign on they’ll immediately have access won’t mean to sign into the tiffin give portal, but they’ll have access to open a account. There’ll be API transfers of, of course data that makes opening new accounts, charitable accounts much easier. API feeds and data back to consolidate reporting with the wealth side as well, so that the client has a holistic view of both their wealth assets as well as their charitable account assets. So it is a fully integrated solution here on the asset platform. It is white label, the name is acid more charitable. And we’re very excited again with TIFIN I can go into some of the differentiators of some of the capabilities that they offered in the marketplace, but we’re very excited to work.

Technology and Efficiency in Donor Advised Funds

Craig: I want to hear that, this is a technology podcast. So I’m interested to hear so now we’re getting to the point of you decided to do this. You’re getting rid of your legacy solution. You’re evaluating vendors. So why why did you select TIFIN Give?

David: What I’d say is there are several large charitable foundations and program providers out there and many of them provide perfectly acceptable services. However, when we were doing our search, what we found is some of them were developed to serve the needs that the traditional institutional giving entities, those larger foundations as an example. And then we looked at a few others that were sort of mainstream in the space that were geared more to the retail wealth space. We really liked their focus on automation and scale. Many of them were focused on that but that was kind of their sole objective. We wanted a SaaS solution that we could one white label and then of course integrate into our advisor ecosystem.

David: As I mentioned earlier, we really focused very much on providing a modern frictionless advisor and investor experience. It was very important that hadn’t been an investor portal as well, that investors can see their activity. And I’ll say that through TIFIN’s technology, we were able to fully automate the account opening process, completely enhance the grant the grant making process bringing that down to being a matter of days versus weeks, and then just significantly reduce the processing time. Another important point that TIFIN provided was they were able to use our investments. What we also found with advisors is they’re talking with the clients and building goals based portfolios on their wealth side, and using specific investment solutions that are available for the AssetMark platform. They didn’t want to go over to the charitable side and have to learn a whole new set of investment solutions and then have a different conversation with the investor there.

David: TIFIN was agnostic to that and allowed us to use import over our investment menu also include values oriented strategies, they allowed us to really set the investment minimums for just a lot of flexibility on the feature setting. They also allowed us to play a much larger role in the Client Servicing education support process. As you know, we’re a leader in the industry when it comes to premium service, premium support and premium education. So it really was sort of a compliment I would say, of strengths, the two firms and I think that’s what really made this work.

David: The final thing I will say I think it was maybe the icing on the cake, but it kind of ties back to something we were talking about earlier. One of the things that I thought was differentiated that you didn’t see anywhere else was the TIFIN technology has tools that empower multi generational charitable objectives. So what we find when we talk to advisors is that it’s often not just an individual, it’s families that are thinking about philanthropy, they often have a collective exercise a collective way of thinking, and many of the leaders in the family they want to instill and they want to pass along those values and and build a legacy with that next generation. And they had a lot of education and tools that allow that you can grant access to family members to also allow for grants, you can do grant raising activities, that where you invite people to also contribute to to causes that are to charitable causes. And that sort of social dynamic, and multi generational dynamic was a pretty unique feature that I can give offered that we didn’t see anywhere else.

Craig: One of the things I like about this whole project here is you’re walking the walk when it comes to or walking the talk when it comes to holistic wealth management. And that travel giving is usually been part of the tax conversation and advisors full usually they’re involved with that well we’ll transfer some money for you then you can open up your you can do charitable giving. Now you’re really taking the lead on that say we’re going to do the whole thing would open an account for you. We’re going to manage the money for you. We’re going to help you figure all this out. So it’s really expanding the role of an advisor in their clients financial lots.

David: There’s so many reasons that I think advisors should be paying attention that you mentioned, it’s holistic wealth, right. It’s specific to donor advised funds. It’s just another way for them to differentiate themselves in the marketplace. It’s a way for them to service and win more high net worth clients. And importantly, it’s a tool that helps connect them to that next generation of clients. We totally get it. We work with advisors all day about growing and scaling their practices, as you know, asset markets, a business solution for advisors. And we understand there’s a revenue weighted bias to advice today and we’re constantly encouraging advisors to kind of prepare their businesses for that massive wealth transfer, which was, frankly, already underway.

David: I think I read a survey from Fidelity just recently where people under 40 are already inheriting 500 plus billion dollars every year in the United States and this next generation is much more apt to stay with that family advisor if they’ve embraced things like technology, personalization, and they’re able to support them in their values and charitable giving endeavors and preferences. That same study noted that only 13% of advisors are actually engaging with that next generation. But that 13% It’s doing it they have already seen 1.6 times revenue growth and 2.7 times profit growth. So we see this again, as you said, part of holistic wealth, as well. As part of connecting with that next gen client.

Craig: Those are pretty powerful statistics, David. I wanted to roll back to something you mentioned, where it’s on the platform on the eWealth manager being single sign on to not only TIFIN Give but being able to build out goals based portfolios. (TIFIN Give expands its reach as a leading technology powered philanthropy platform for wealth enterprises (Feb 2024))

AssetMark acquired a company called Voyant number of years ago with a full featured Financial Planning application. Is that something that can link into TIFIN Give that if I have a goal that I set up in Voyant of philanthropy or donations can then link that over to open up the DAF account inside the same platform?

David: That is where we want to go. I correct so it’s great. You’re you definitely understand the vision that we have here. But I’d say is today, I would say Voyant is you know certainly an industry leading financial planning tool. It’s very much goals and objective based and it certainly handle modeling and it does handle modeling for tax implications and as well as charitable giving, and very much supports advisors use in terms of thinking about estate as well. So that’s that is definitely something that many of our advisors, a tool that they use today. It’d be a phase two development for us to sort of take that and say okay, we’ve this plan suggests X percentage of donations in your biscuit in year two charitable giving. Now let’s click that button and immediately link over. It doesn’t do that today. But you certainly understand our vision.

Craig: I can see the writing on the wall. It’s definitely where you’re going with that. And I think buying acquiring Voyant was something that I think surprised a lot of people in the industry but not me, it made perfect sense based on what I know about your platform and how you work with clients. That is something you need to do if you’re really going to be understanding how clients think and looking at their overall as we keep you somewhat holistic, the buzzword but that’s an aspect of saying hey, we’ve seen the need to be more holistic while we need to have a financial planning tool in house that we can control we can deliver a bespoke experience that is only available on the AssetMark platform.

David: I intentionally use the word that AssetMark is a wealth management platform. And we have evolved that over over the past 1015 years, by we have a very strong heritage and investment management, diligence portfolio construction, but we have added lots of points solutions to help advisors with everything from tax management services to cash management services to security back lending programs, and now charitable giving programs. And as you mentioned, at the same time advisors are all using more and more of our tools to develop plans. The Holy Grail that we’re driving to, of course, as you said, is making this super easy for advisors because at the end of the day, we’re wanting to empower them for growth, make them be able to scale their business. And so we need to connect all of those point solutions to the plan, right? You got the plan and let’s put that plan into action and we got to make that a little bit easier for advisors. And that is definitely a key objective.

Craig: You mentioned, I don’t want to I want to highlight that you’re talking about the Voyant’s tax capabilities. We had a demo I think back in March. And we were impressed with with the goals based planning the cash flow analysis, you know, the net worth the balance sheet capability. So I see that being able to then in the future say now I’ve got my charitable giving now, boom, open up a death account. It’s gonna be hugely valuable to advisors in all along those lines. You mentioned, as you see reduced the grant process, the opening the key account and getting the grants going from weeks to days.

David: That’s right, instantaneously, anyone that was in that legacy solution, they often experienced, for a grant to happen, it might have taken three weeks, we’ve taken that down to two to three days on average now so just shows the power of technology, a technology brings probably not going to shock your your audience here. But for advisors, I mean the delight that brings to them to their clients, right that just makes them look like a hero in front of your clients. It’s a very powerful tool.

Craig: Indeed, and it’s also going to increase the number of deaths that are open once it becomes easier, why not open one? It’s a no brainer, it doesn’t take a long time. It’s all electronic, no paperwork required. I would expect to see a spike in number of DAFs second open from AssetMark clients and AssetMark advisors.

David: Yes, we’re already seeing increased activity and it’s only been a matter of weeks. People think of charitable giving as sort of a end of the year exercise. Again, as I think about it is the thing about donor advised fund is we’re always we’re giving throughout the year, right. And so it actually is there is an element of individual planning. I do agree with that. There is some seasonality but what we actually see is that this is a much more we are teaching people to better opt to use a DAF to better optimize their charitable giving, in terms of their planning, their overall financial planning and their lives. And what that’s doing is actually creating activity throughout the year. Not just in that keeps sort of time period.

Future Vision and Integration with Financial Planning Tools

Craig: Is there any connection or any planned future deployment with the family office given program that TIFIN acquirable giving place back in February with was a solution for family offices and private foundation? Is that something that you see AssetMark getting involved with?

David: They think the the Give program and they work with clearing that as the actual foundation that that there’s sort of a SaaS and then they have the actual charitable foundation itself. They support more than donor advised funds and we have talked to them about the other types of clients that they and solutions that they can bring. Certainly they can bring true private foundational services and democratize that to clients think they also provide charitable lead trust, charitable gift annuities. So there are a host of other things under that realm of philanthropy in charitable that they support. We just focused on the Donor Advised piece for the first year. But we will probably continue to have conversations with them as as our client needs continue to evolve.

Craig: It’s all technology just making everything easier and easier and giving people more and more capabilities to deploy their assets in the way they see fit and without requiring a lot of headache.

David: It’s trying to build this for a subset of your population. It’s just really hard to do that. And I think it’s important for firms to really just be honest with themselves sometimes about what they’re good at. And then partner more in the industry, I mean AssetMark, we are open architecture in terms of our custody services. We have a custodian but we’re open architecture and custody or open architecture on the investments. We have many wealth solutions that we offer to clients today through the platform that are white labeled solutions with third party tech providers today. So just knowing what we’re trying to do we know who we are. We’re trying to empower advisors to grow and better serve their clients. Sometimes that means that we should just partner with people rather than build solutions and this is definitely one of those cases.

Craig: It’s a great goal, David and wish all the best of luck. I think we are out of time. Please tell everyone where they can find more information about AssetMark.

David: Easiest place to start out as an AssetMark.com and just encourage you to go there, find out a lot about how to work with the platform and advisor with the platform. And then also just figure out all the different services that we provide there. Thanks for having me. I really appreciate it.

Craig: David, thanks for being here.

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The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at craig@ezragroupllc.com