ACGA and NCPG Condemn Sales Commissions on Gift Annuities

ACGA and NCPG Condemn Sales Commissions on Gift Annuities

News story posted in Ethics on 2 November 2001| comments
audience: Partnership for Philanthropic Planning, National Publication | last updated: 18 May 2011
Print
||
Rate:

Summary

The Board of Directors of the American Council on Gift Annuities has issued a statement in which it joins with the National Committee on Planned Giving in reiterating both organizations' long standing opposition to the practice of charitable organizations paying sales commissions to for-profit planners in connection with the sale of charitable gift annuities.

PGDC SUMMARY:

The Board of Directors of the American Council on Gift Annuities has issued a statement in which it joins with the National Committee on Planned Giving in reiterating both organizations' long standing opposition to the practice of charitable organizations paying sales commissions to for-profit planners in connection with the sale of charitable gift annuities.

FULL TEXT:

November 2, 2001

To: Sponsors of the American Council on Gift Annuities
From: Board of Directors, American Council on Gift Annuities
Re: Commission Sales of Gift Annuities

In response to concerns expressed by many gift planners about commission sales of charitable gift annuities, the National Committee on Planned Giving (NCPG) and the American Council on Gift Annuities (ACGA) wish to reiterate their long standing opposition to this practice. NCPG and ACGA jointly reaffirm the purpose of charitable gift annuities as a method of making a gift to charity, and they continue to oppose the commission sales of charitable gift annuities for the following reasons:

  • The payment of commissions on the sale of a charitable gift annuity may subject a gift annuity reserve fund to regulation by the Securities and Exchange Commission (SEC). The Philanthropy Protection Act of 1995 exempted charitable gift annuity funds from regulation as securities provided that no commissions are paid to solicitors of these gifts.

  • Charitable gift annuities are different from commercial annuities because they are a means of making a charitable gift. If gift annuities are sold by commissioned agents they may appear to be much like commercial annuities.

  • The payment of commissions on the sale of charitable gift annuities creates confusion and uncertainty as to proper crediting of gift amounts on gift receipts issued by charities for charitable gift annuities under the substantiation requirements of IRC Sec. 170(f)(8).

  • The commission sale of charitable gift annuities may violate state solicitation laws and cause a loss of tax exempt status.

  • The payment of a commission on the sale of a charitable gift annuity may significantly reduce the residuum that will be available for charitable purposes.

  • These practices violate the Model Standards of Practice for the Charitable Gift Planner which state that payment of "finders fees, commissions and other fees by a donee organization?as a condition for the delivery of a gift are never appropriate."

Accordingly, NCPG and ACGA jointly urge all organizations engaged in this practice to cease immediately and further urge all charities to refuse to participate in these practices.

Finally, the National Committee on Planned Giving and the American Council on Gift Annuities urge all charities that issue charitable gift annuities to (1) comply fully with applicable federal and state regulations, and (2) maintain adequate financial reserves, responsibly managed, to assure payments to all annuitants for the duration of their contracts.

Add comment

Login or register to post comments

Comments

Commission on charitable annuity gift sale?

Why didn't I think of that 30 years ago? I would be rich. Being serious, donors expect objectivity from advisors on charitable giving techniques. If the commission is disclosed to donors in advance, I see no problem. Otherwise, it is a serious breach of faith. For the record, I was in the life insurance business when I did most of my advising on this type of transaction.

Hard to draw the line

This makes sense on a legal level - charitable gifts should be exempted from certain pieces of regulation, and the use of commissions complicates that exemption. However, I think this fails to take into account the effect of sales commissions on the non-profit sector. Soliciting charitable gifts is, whether we like it or not, basically a sales position. You're convincing people to hand over their money in exchange for a service - though not necessarily one from which they benefit. In any case, the best sales people/gift solicitors need income. They're people too. They'll go where the money is. So by denying these folks the chance to earn commissions for their hard work, the best in the business are driven out of non-profit and into the private sector. Everyone loses. -------------------------------------------------------------------------------------------------- Nirvaha, Inc.!

Am I missing something?

I'm a commission based agent (OK, financial planner). As such I totally understand the practice and need of commissions to encourage production at higher levels. For the most part, I think objectivity of an advisor is either there or it isn't and, isn't separated by commissions, fees or salary. However, having said that I think I need to side with the NCPG and ACGA. I suggest gift annuities where they are appropriate but would never accept a commission. While the tax and security regulation concerns are important enough to consider, the implications of commissions being paid also seems like an inappropriate conflict of interest with a very slippery slope. Most gift annuities are "sold" by salaried people called "planned giving officers" and "development directors," aren't they? Maybe I'm naive but, don't we have enough credibility concerns already?

Group details

Follow

RSS

This group offers an RSS feed.
 
7520 Rates: October 2.2% September 2.4% August 2.4%

Already a member?

Learn, Share, Gain Insight, Connect, Advance

Join Today For Free!

Join the PGDC community and…

  • Learn through thousands of pages of content, newsletters and forums
  • Share by commenting on and rating content, answering questions in the forums, and writing
  • Gain insight into other disciplines in the field
  • Connect – Interact – Grow
  • Opt-in to Include your profile in our searchable national directory. By default, your identity is protected

…Market yourself to a growing industry