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Merrill Eyes Donor-Advised Fund for Charitable Giving


Merrill Lynch will start a donor-advised fund in April that will link the New York brokerage firm with a national network of community foundations to boost its charitable-giving assets.

The Merrill Lynch Community Charitable Fund is intended to let private clients making a minimum investment of $25,000 work with individual money managers and specific community foundations. Merrill has signed agreements with 13 community foundations and says it has 60 foundations prepared to sign up.

H. King McGlaughon Jr., director of Merrill's Center for Philanthropy and Nonprofit, told a press briefing he believes Merrill will accumulate $1 billion to $1.5 billion of assets in the donor-advised funds within two years. In that time, he said, 100 community foundations will each open 250 to 300 donor-advised accounts.

McGlaughon said Merrill's program is the first to offer a uniform donor-advised program through community foundations nationally.

Oranges to Pears'

"Typically, each community foundation sold individual donor-advised funds, and that left people comparing apples to oranges to pears to peaches when it came to giving," McGlaughon said. "If investment firms want to engage investors in real philanthropy, then each program has to look and behave the same way."

Customers of Merrill's philanthropy group will have access to the firm's money managers and a group of 11 non-Merrill portfolio managers. McGlaughon said.

Bank investment executives say the popularity of donor-advised funds is rising. The Chronicle of Philanthropy has reported that the number of people who established donor-advised funds rose by 25.9% in 2001 and assets grew 20%, to $12.3 billion.

Larry Jones, a vice president in Wilmington Trust's philanthropic services group, said more investment managers are offering the products.

Twelve donor-advised funds have been started this year, Jones said. A couple of companies used to dominate, he said, but now everyone must offer donor-advised funds in order to have a full array of products for their customers.

In July, he said, Wilmington Trust formed a partnership with the Delaware Community Foundation to start the Wilmington Trust Charitable Gift Fund. He said he hopes this product will accumulate $100 million to $150 million of assets in its first two years. The Wilmington product, as well as Merrill's new offering, mirrors a Fidelity donor-advised fund introduced three years ago, he said.

Piling in Ahead of Taxes

Jones said these products have performed well. "There is a season for these, from the end of the third quarter through the first quarter," he said. "That is when money comes into these funds. That is when wealthy investors are looking to give in order to take advantage of the tax breaks."

However, Jones said he was surprised to see Merrill take the approach it has chosen.

"Community foundations are very independent; they each have varying degrees of willingness to communicate," he said. Merrill's biggest challenge will be "to see if it can get all of these foundations to work together and on the same page." Even assuming a readiness to work together, Jones said, a further challenge will be coordination between Merrill and the foundations. "Merrill has a large system and a lot of demand. It'll be tough to meet that."

Merrill manages $36 billion of charitable assets.

"This is a unique solution model, and we are going to get everyone on the same page," McGlaughon said. "We are going to make a national network of donor-advised funds accessible to private investors."

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