WaterStone is in Its Fifth Decade of Advising Donors

Ken Harrison was ready to retire by the time he was 45 years old, having sold his successful California company to Colliers International, the commercial real estate and investment management company. But God apparently had other ideas.

“The Lord let me know that retirement was not his plan for me,” said Harrison, who in 2017 became the new CEO of WaterStone, the Christian philanthropic advisory firm that helps wealthy donors maximize both their giving and their tax benefits. (Two years later, Harrison would resurrect Promise Keepers and become its new CEO.)

“I was fascinated with what WaterStone was doing, because when I sold my company, it was a November, and I was frustrated because I only had six weeks to make donations before the end of the year. I thought, there’s got to be a better way to do this.”

There was a better way. When WaterStone was founded in 1980 as the Christian Community Foundation, it was an early pioneer in Donor Advised Funds. When donors give money to DAFs, they are granted immediate tax deductions but dole out funds to charities over time.

CCF was a different kind of community foundation—one that was defined not by geography, but by Christian beliefs. Co-founder Doug Kiesewetter appealed to the Internal Revenue Service, which ruled that his foundation designed to help the community of worldwide followers of Jesus Christ qualified for tax exemptions.

By 2007, there were so many groups around the country calling themselves Christian community foundations that the name was changed to WaterStone to avoid confusion.

Some people have claimed Kiesewetter was the father of today’s DAF movement. He was an early adapter of DAFs for Christians, and spent two years coaching Fidelity investments to launch their own DAFs. Fidelity has been so successful with its DAFs that it is now considered the largest “charity” in America. In 2019, Fidelity received $9 billion dollars in tax deductible contributions—more than the five largest U.S. charities combined.

But Kiesewetter, who now serves as WaterStone’s board chairman, says that instead of being a father, he’s actually more like an uncle, someone who helped guide and encourage others.

“I’m not the main catalyst, but more of a cheerleader and adviser,” he said. “Whenever people came to us for guidance about how to form foundations, we never felt like our knowledge was proprietary, but tried to help them because we wanted good things to happen for good causes.”

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Kiesewetter says when it comes to DAFs, Fidelity, Schwab, and other big investment firms have a “mixed motivation” and hunger for perpetual profits.

“A lot of people in these organizations could see their investors getting older, and could foresee that one day they would die and their money would go to their heirs, who didn’t have any loyalty to Fidelity,” he said. “DAFs were a way to perpetuate the management of those funds and generate a perpetual income stream off these investments without there being any real charitable motivation.

“But in the final analysis, DAFs have led to many billions of dollars going to good causes.”

WaterStone says that since 1980, it has taken in $1.4 million in contributions, including $700 million in complex assets like real estate and companies, and given out $800 million in grants to 5,000 charities. It currently has $750 million worth of assets under advisement.

Instead of building an expensive network of offices, WaterStone’s 17 employees work in the parachurch mecca of Colorado Springs, in an office overlooking the US Air Force Academy. WaterStone’s 2021 revenue of $196 million technically makes it the city’s third largest charity, behind Compassion International and Young Life.

WaterStone’s 2020 990 form shows nearly a thousand grants to charities large and small. Two nonprofits related to John McArthur—Grace to You and John F. Macarthur Trust—received a combined $6.4 million. San Diego Christian College—founded in 1970 as Christian Heritage College by a local pastor named Tim LaHaye—received $3.5 million.

CEO Ken Harrison says he’s discouraged when he sees Christians unwittingly giving God’s money to “leftist, godless organizations that are good at pretending that they’re Christian.” He cited The Southern Poverty Law Center as one example. In another case, a Princeton alumnus quit giving to the school because of its connections to abortion.

Harrison says many large donors are just like he was: They’re good at making money, but often struggle in giving it away.

“I wish I had been a lot more wise” said Harrison of his own rushed giving after he sold his business. “I realize how much better I could have done.”

Harrison also regrets giving directly to charities, saying his big gifts led to ongoing harassment from ministry leaders inviting him to lunch.

“I don’t want organizations knowing what I have, and I don’t want them bugging me for more,” he says. “And I don’t want to go to lunch. I gave these charities money, and I don’t want them spending that to fly me out and take me out to lunch.”

WaterStone clients have their own reasons for seeking anonymity. Harrison says some worry about being boycotted or otherwise persecuted for their generous support of pro-life or conservative causes.

“Some givers are happy that no one can trace that money back to them, and that becomes more important the more politically contentious things get,” he said.

Harrison says there’s “a massive wealth transfer going on right now,” and in many cases WaterStone is helping suddenly wealthy spouses or children of wealthy men who died in their 80s without ever discussing money with their families. One Christian woman, a secretary, was shocked to inherit $60 million from her father after his death. WaterStone set up a DAF so she could give most of it away, along with a trust that will cover her expenses for the rest of her life.

While some firms love DAFs for the profits they generate, Harrison says WaterStone makes more from trusts and urges clients to give away most of their DAF funds.

“Keeping as much as possible is the opposite of why we exist,” he says. “Every year we celebrate how much we give.

“We believe we shouldn’t publicly compare ourselves (to other philanthropy advisors) based on how much we have in assets but in how much we give away. And the better you do that job, the less you have to run your business, which is why we run a tight ship.”

Editor’s Note: Many wealthy families and individuals use consultants to help them manage their finances.  A growing number of high-capacity donors are using philanthropy consultants.  These organizations help the donors develop giving strategies, and then make sure they stay on the plan over time.  MinistryWatch will be profiling several of these organizations in the months ahead.  To read our previous profile of Financial Planning Ministries, click here.