Claire: So this is one of those wondrous Silicon Valley stories.
Jamie: Meet Claire. She's a civil engineer in her mid fifties living in California. She and her husband recently came into a lot of wealth and their plan is to give most of it away.
Claire: what good can I do with this money? I don't want to sit on the money and let it be used when I die. I want to use it wisely and send it out into the world as quickly as I can. And have the biggest impact.
Jamie: but as a kid, she could never have imagined this much wealth.
Claire: I grew up in an immigrant family. And an Asian immigrant family. When you talk about money, it's all about frugality. Right. We do not waste a penny. My dad would, drive the extra mile to get the cheaper milk, at the further grocery store
Jamie: Even with a frugal upbringing, Claire has great memories from her childhood.
Claire: I grew up a typical suburban kid. Very happy, played outside all the time. I, enjoyed just running around, playing ball in the neighborhood, playing tennis in the street with all the neighbors, riding our bikes around. I just love being outside all the time I'm a big backpacker, hiker, biker,
Jamie: and her parents taught her the value of taking care of the world. She loved so much. Her father was a water resources engineer, and she followed in his footsteps.
Claire: This is a situation where the apple does not fall far from the tree. In my career, I thought I was saving the world, I was working on acid rain. I was working on cleaning up, contaminated sites.
Jamie: Claire built her career as an environmental engineer around these values and found deep meaning in her work. She and her husband raised two daughters. Then something happened. Something game changing.
Claire: My husband was at a tech company. The tech company did really well. And, all of a sudden our life is different.
Jamie: Claire and her husband earned tens of millions of dollars from the company's IPO more than they could ever imagine spending on themselves.
Claire: We're not just working professionals trying to make ends meet in expensive California, but this unexpected wealth is terrifying. I grew up in a family where, we weren't wealthy, we were making ends meet. And, those values are core to me, right? And I want those kinds of values to stay with me. Me and my family but it's also exciting,
Jamie: and while many people might fantasize about how they'd spend such a fortune, Claire and her husband know that this wealth gives them an opportunity to do something bold. They're determined to give it away.
Claire: The door's just kind of open to think big, now I'm not just working in my field, but what can I do to save the planet?
Jamie: The possibilities seem endless and overwhelming.
Claire: I care about everything, what can I do with this? What can I work on? plastics is destroying our world Climate change is everything. The beautiful world that we live in, I want to protect it. And I want to figure out how to do that.
Jamie: and that's where we'll start today. I'm Jamie Rowe and welcome to What Should I Do With My Money? An original podcast from Morgan Stanley. We match real people asking real questions about their money with experienced financial advisors. Here at Morgan Stanley, we work with a range of clients. Some are experienced investors. Others are new to working with a financial advisor. On this show, you get a front row seat to hear what these initial conversations are like and get answers to some of the questions you might have yourself. Claire and her husband unexpectedly came into a large sum of money a few years ago. She has since put together a new budget and financial plan for her family to ensure that their future is financially secure still.
There's a lot of money left, and Claire and her husband want to give the rest of it away. Claire wants to do everything she can to protect the outdoors she grew up in. But where should she start? How does she know which organizations will make the best use of her money, and how can she or any of us align personal investments with values?
To guide Claire on her journey, we have Mike from our San Francisco office. Mike is a managing director and private wealth advisor at Morgan Stanley. He specializes in managing wealth for ultra high net worth families , think tens of millions of dollars in net worth.
But his career started in a place far from the world of finance.
Mike: I was actually a marine biologist. I grew up wanting to be Jacques Cousteau. I got certified to scuba dive when I was 13. Did my undergraduate marine biology, and then, uh, career pivot into finance.
Jamie: But like Claire, his love for nature stuck with him.
Mike: It's just heartfelt. When I'm. In the water, or backpacking, or just, out in the world. I'm just constantly amazed, by the biodiversity. And obviously the world's got lots of issues now, so, I feel like I can use my experience. Um, Success, you know, both personally and helping a lot of our clients, to do good work in the world.
Jamie: Mike's science training left him with a love for crunching numbers. So much so that Mike and his team earned the nickname, the planning geeks.
Mike: I can't really think without a spreadsheet. You Our team We always say we like to measure twice and cut once, maybe measure three times and cut once. So we just love to do a deep dive, lots of modeling and our job really is to be the experienced captain and crew and help you build the right, boat for the voyage so that you get to your goals and can make course corrections, but can also deal with whatever the world throws at you along the way.
Jamie: Obviously Claire and Mike have a lot in common. Let's dive in.
Mike: Hi, Claire. Great to meet you.
Claire: Wonderful to meet you, Mike.
Mike: So I guess, the first thing Claire is, on the philanthropic side, it sounded like you're still exploring where you want to provide support, or do you have a really strong sense of, organizations that you, love and are comfortable giving large sums to now?
Claire: I have done a lot of exploring and giving to different organizations. I have a lot of energy and time now to give more away now. And then. Taper off when I'm older. And then, I have endless, you know, ideas
Mike: no, no shortage of where to give
Claire: to give it.
Mike: I think the way we would start is first, to back up a step, it's thinking about what philanthropic vehicle to work from. The vast majority of clients, end up using a donor advised fund, which is a effectively a charitable vehicle that you make contributions to
Jamie: A donor-advised fund or a DAF is a tool to structure philanthropic giving. There are some tax considerations, so speak to your own tax advisor when considering a daf, but there are many benefits to setting up a DAF rather than making donations directly to charitable organizations. If, like Claire, you're not sure exactly what organizations you intend to donate to, a DAF enables you to make tax deductible contributions to the fund while you're still planning out your giving strategy.
Mike: And then the assets can grow. You can build a portfolio, within your donor advised fund, and then use that to make grants from that vehicle. For most clients that, tends to be a better choice than a private foundation. You get better tax deductibility, less administrative complexity.
Jamie: Mike says Claire could even get her college aged kids involved.
Mike: And then, You can actually set up sub donor advised funds for your kids. We call it a next gen donor advised fund. And carve out small amounts of money for them to encourage their own giving. And then turn the whole kind of philanthropic conversation into a family conversation. Here's what we're doing, what are you thinking about? With the dollars we've set aside yourself. And again, it's an interesting tool for kind of transmitting your values. And, keeping the family in sync over time.
Claire: I love that idea. I have, set up a donor advised fund, so I, got the philanthropy started. I'm really intrigued by this idea of this, what do you call, sub donor advised
Mike: next gen or sub. Yeah.
Claire: next gen. Yeah, To get them going.
Jamie: This is connected to something that has been on Claire's mind since coming into this wealth. She worries about how her children now in their twenties have been affected by the money.
Claire: We want our children to develop their own meaning in life, right? Have their own professional career. Think about, what their own pathway is, irregardless of this wealth. We don't want them to rely on it. That would be the worst thing that could ever happen.
Mike: Yeah, with kids, I think there's some value to giving them some amount of money sooner rather than later. Because you get to see how they handle it. and they have your advice and counsel as they deploy it or make decisions. And, for all of us, you learn more from your mistakes than from things that go well.
Claire: that makes sense.
Jamie: Mike now turns his attention to the idea of how Claire can not only give away her money, but also how she can invest it.
Mike: a lot of your wealth came from your husband's company going public, do you still own some of that stock
Claire: yes, we do. Like I said, we opened a DAF, but, another thing that I was curious about, impact funds and how to do all of that.
Mike: So you've got the donor advice fund established, which is great. You're probably aware you can actually Move stocks into the donor advice fund not just cash So that's part of that integration, right? If you have a highly appreciated asset like, the Post IPO stock or maybe just from your overall portfolio, there's a stock that's tripled in value You can contribute that stock to the donor advice fund get a deduction for the value when it's put in, and then the donor advised fund sells it without tax. So it's much more efficient to do that than to contribute cash. And then that, cash that results within the donor advised fund, you build a portfolio much in the same way that you would personally. Usually we kind of back into, what's the potential pacing of the grant making you want to do?
Jamie: Grant making is a way to distribute money to nonprofits and charities. Grants are essentially the main way Claire can transfer money from her donor-advised fund to the organizations that are doing the work she believes in.
Mike: And we're going to keep that in cash or short term, maybe fixed income securities to make sure there's, adequate assets to meet your grant making over the next couple of years. And then a portion can be in longer term growth oriented assets,
Jamie: claire said she wants to do most of her giving over the next few years when it can make the most impact, but she still needs to keep an eye on the pace of that giving.
Mike: One of our favorite mantras is you never want to have to sell a long term asset to meet a short term need. So we want to, again, do lots of modeling and kind of play with this on paper before you make, actual decisions.
Claire: that makes sense. So What are the organizations that are doing work that's meaningful, that will have an impact on these environmental problems? That's something that I want to do, but I have no idea how to do
Mike: One of the challenges or opportunities is when you have larger sums to give away, you want to make sure that the organizations are really doing good work, right? We often, for clients, work with our philanthropy management group to put together what we call a landscape survey. You mentioned, plastic pollution as an issue. Our philanthropy management group will put together, a white paper on who are the thought leaders in that area, what are interesting resources to read, and then what are, organizations that are doing good work in that area.
Claire: that's really helpful.
Mike: So often we'll see clients scale their giving over time, you know, I'll make it up. Let's say you were going to give away 5 million over the next 10 years. You might start with smaller grants, sprinkled a little more widely. And then as you get a comfort level and you really get excited that, two or three of them are, Kind of on the money, you start concentrating larger grants that really meaningfully move that organization forward. Does that resonate at all?
Claire: Yeah. It really resonates. This pathway that you're talking about, going from excited about everything to try and have more impact with a couple that is a journey that I, am on. And doing it with support is, is exciting to
Mike: Yeah. Yeah. We have a lot of resources to support, what ultimately are your decisions, because you're so passionate about these causes, it'd be, both looking at your existing portfolios, your taxable portfolios and the portfolio that you're building within your donor advice fund and making sure that those investments are well aligned with your values.
Jamie: What Mike is talking about here is something called impact investing, where investors seek to generate market rate returns alongside positive social and environmental impact.
Mike: So that they're not doing harm, you're not doing bad things, excluding. Companies, that are big plastic polluters or, have a bad environmental record. And then, more importantly, and a lot more fun, this idea of impact and investing, can you devote dollars and resources to companies, that are doing good in the world that are leading the charge on change, whether it's, renewable energy or, biodiversity. There's a million ways to play and we have a lot of resources.
Claire: You know, my background is as an environmental engineer, I love the technical parts, knowing that, the company is doing good, just strikes me so hard in my heart, so I love that, but I have no means for assessing, is this a good decision or not.
Mike: Yeah. You're not alone as you can imagine. The nice thing is that Morgan Stanley has a lot of resource in this area. We've built out a number of tools, both to hone in on your, values, and you're already miles ahead there. I think you have a very strong sense of, what's important to you. And it can be as simple as, for example, if we're building a passive indexed portfolio that might track the S and P 500, you can actually, create that portfolio in a way that portfolio is going to have a lower carbon footprint than the index. And might be investing assets into a fund that's building renewably energy driven data centers, electric vehicle charging infrastructure for commercial fleets, right, so.
Claire: That's super exciting. I'm ready to invest now.
Mike: fine.
You know, and that's the thing, right? It's like, what you're trying to do is make sure the portfolio works from a risk and return and liquidity perspective, the way you would with any portfolio. And then. on top of that, say, can I get my cake and eat it too, by having positive environmental impact.
Jamie: Mike's vision is to help more people take Claire's approach when it comes to investing.
Mike: The problem for the world at large is not enough people think that way. They may be doing lots of philanthropy. And yet, if you look at their portfolio, they own a bunch of companies that are actually contributing to the problems they're trying to solve with their philanthropy. So, we try to bring those two together.
Claire: I love that. I think I've started to awaken to that. We don't realize how much, we just siloed these things. Your investments are one thing, your philanthropy is another. So being able to integrate the two is something I'm super interested in doing. Cause I think for me, I care about impact, but I don't know finances. And my husband will come back and say, Claire, you're pie in the sky. How do you know that you're not throwing your money away and you are having impact.
Mike: Yeah, yeah, I mean that's the fun journey and the thing I love about, what I do I think the magic comes as we start to quantify some of these dreams and the goals that you have. And then knowing that it's not going to be perfect, but that we build in a lot of, wiggle room, we can develop comfort with where the money's going and the organizations over time. And then the fun thing is going to my analogy about sailing around the world. It's like if we set sail around the world together on this boat and we're headed to Hawaii and then Fiji and then Australia, right? We do all our planning. And then as soon as we set sail, things start to change, right? And in your case, what you want to do is going to evolve, what you and your husband want to do. Your family is going to evolve. The tax laws are going to evolve. The financial markets are going to evolve. And we make course corrections along the way. And it's a fun process. Keep you safe and make sure you're enjoying the voyage.
Claire: That sounds great, Mike. I really appreciate your vision and explanation of how to approach all this. It makes me feel, secure, feeling like there's someone helping me through the process, rather than I'm journeying alone, solo,
Mike: I'm excited, for you because the voyage you have in mind is both exciting and, one that the world really needs.
Jamie: Mike, thank you for taking the time today to speak to Claire and talk her through the issues that are so important to her. It's been a real pleasure having you here today.
Mike: Thank you. I loved the conversation, and Claire, I wish you well on your voyage.
Claire: Thanks so much, Mike. It was all so helpful. Thank you
Jamie: So Claire, we covered a lot with Mike today. How was that for you?
Claire: My mind is just exploding with things that I need to think about and do I feel like as soon as I'm done with this, I'm going to get going on, on activating.
Jamie: What do you think the first thing you'll do is?
Claire: it's not like I haven't done some of this, but of course, I want to influence my kids to think about this and, like even opening the sub. DAFs I mean, that's something tiny I could try and get started. the thing that I think is super exciting is the impact side, right? How is it all integrated, we have to do good in this world and we have to do it comprehensively.
Jamie: That makes a lot of sense. What does all this mean to you as you move forward?
Claire: I'm so excited by the journey already, but knowing that, I can walk hand in hand with others who are doing the same thing.
Jamie: What do you think your next steps will be?
Claire: Well, sitting down with my husband to talk about these learnings and, planning out how to. begin, and Mike is giving some very specific points on how to get started. I have to say Mike's comment about how They're the planning nerds, was, you know, I'm an engineer, I'm famous for my spreadsheets. You have to quantify these things, you have to really put them down. Otherwise, these are my dreams, these are my goals, but how do I make them happen?
Jamie: It sounds like you and Mike are peas in a pod glad that was able to give you some actionable steps I can say personally, Claire, it's been such a pleasure meeting you. Your passions around doing good in the world, philanthropy and through your investments is inspiring. Thank you for taking the time to share your story with us
Claire: oh, thank you. You're making me cry when I talk about these things. I get emotional
it's
Jamie: money can be very emotional to many people for many reasons. And you have some very big, profound reasons. So makes perfect sense to me.
Claire: Thank you.
Jamie: If you'd like a deeper dive on what was discussed today, such as donor-advised funds, or how to align your investments with your values, come see us@morganstanley.com slash my money. I'm Jamie Rowe. Talk to you soon.
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