THE SUPER RICH DONOR - IMPLICATIONS FOR THE NONPROFIT SECTOR

 
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THE SUPER RICH DONOR - IMPLICATIONS FOR THE NONPROFIT SECTOR

Andrea McManus, ViTreo Group Inc
January 29th 2019

I often say one of our mandates as fundraisers and nonprofits is to guide donors to not just give, but to give well, to make an impact with their giving. It’s great to see investor and philanthropist Warren Buffet agrees with me 😃.

In writing about how super wealthy donors give - people like Bill and Melinda Gates, Michael Bloomberg and Mark Zuckerberg and Priscilla Chan - I’ve addressed how their giving preferences differ from that of earlier immensely wealthy donors we are familiar with such as John Rockefeller and Andrew Carnegie, as well as the impact of their donations on society.

But what about the implications of their gifts for the fundraising and nonprofit sector? In the last few years, philanthropy appears to be moving towards a more top-heavy approach with organizations needing to rely more and more on the larger gifts given by a small number of donors - often those with immense fortunes from which to give - while receiving reduced donations from lower and middle-income givers.

In the updated 2018 report, Gilded Giving: 2018 Top-Heavy Philanthropy and its Perils to the Independent Sector and Democracy, co-authors Chuck Collins (who directs the Program on Inequality and the Common Good at the Institute for Policy Studies, where he also co-edits inequality.org) Josh Hoxie (he directs the Project on Opportunity and Taxation at the Institute for Policy Studies and co-edits inequality.org), and Helen Flannery (the Institute for Policy Studies), find:

“that our charitable sector is currently experiencing a transition from broad-based support across a wide range of donors to top-heavy philanthropy increasingly dominated by a small number of very wealthy individuals and foundations.”

(source: Gilded Giving November 2018)

According to the report, Giving USA 2018: The Annual Report on Philanthropy for the Year 2017, published by the Giving USA Foundation “national charitable donations surged in 2017, as they have every year since the end of the 2007-2009 recession. The total amount given to charity in 2017 was an estimated $410 billion, up 5.2 percent from 2016 and crossing over the $400 billion mark for the first time in history.” (Giving USA 2018)

The co-authors of the Gilded Giving report, who state that the Giving USA report is ‘the industry gold-standard report on charitable giving in the United States’, go on to say about Giving USA’s findings:

“There are indications in the data, however, that this growth in donations is primarily due to an increasing reliance on larger donations from smaller numbers of high-income, high-wealth donors—and that, at the same time, charities are receiving steadily shrinking amounts of revenue from donors at lower- and middle-income levels. This shift from broad-based public support to narrowly focused giving by a wealthy few is a trend that reflects the escalating wealth and income inequality in our society.

The trend has been starkly driven home by the increasing influence of a tiny group of mega-philanthropists, many of whom made their fortunes in the technology sector, who have been setting up funds worth hundreds of millions or even billions of dollars, dedicated to the causes that matter most to them. As we reported in 2016, growing inequity in charitable giving continues to hold risks not only for nonprofits themselves, but also for the nation. This is truer now than ever, as ever-greater proportions of charitable dollars technically qualifying as tax-deductible donations are diverted into wealth-warehousing vehicles such as private foundations and donor-advised funds, and away from direct nonprofits serving immediate needs.”
(source: Gilded Giving 2018)

 
 

The key findings in the Gilded Giving report research are:

  • Charitable contributions from donors at the top of the income and wealth ladder have increased significantly over the past decade. 

  • There has been a marked increase in mega-gifting. 

  • In the past two decades, the number of households that give to charity has declined significantly. From 2000 to 2014, the proportion of households giving to charity dropped from 66 percent to 55 percent. [based on the information we have been able to find, we believe the Gilded Giving report is basing these estimates on tax filer date]

  • The number of donors giving at typical donation levels has been steadily declining. 

  • The number and size of private grant-making foundations and donor-advised funds have shown dramatic growth. The funds held in private foundations grew 62 percent between 2005 and 2015; the number of private foundations chartered in the United States grew 21 percent over that same period.

  • Donor-Advised Funds (DAFs) are on the rise. Donations to donor-advised funds increased from just under $14 billion in 2012 to $23 billion in 2016—growth of 66 percent over five years. DAFs, a giving vehicle used primarily by the wealthy, are currently the largest and fastest-growing recipients of charitable giving in the United States.

The full report can be found here: Gilded Giving 2018

 

In its 2018 The Giving Report, Canada Helps also noted a decrease in giving by Canadians, with the most significant decrease in donation by those 45+ (Canada Helps Giving Facts).

 

Do these findings mirror what you are seeing in your work as a fundraiser or as a nonprofit organization? If so, how have you altered your donor approach strategy to engage with donors in this changed environment?

WHAT ARE THE CONSEQUENCES OF THIS - THE RISKS AND THE OPPORTUNITIES - FOR US AS A SECTOR?

Source: Illustrated by Paul Dovey,  The Philanthropist

Source: Illustrated by Paul Dovey, The Philanthropist

The journal, The Philanthropist, reports in its article The Personal Philanthropy Project: Research Helps Move the Dial on Charitable Giving Attitudes and Behaviours (Part 1), on the research done by Imagine Canada on the repercussions of this phenomenon, which states these implications:

Untapped potential
”Most affluent Canadians say they make some kind of charitable contribution every year, with the size of the gift varying from year to year…This shows that middle -to higher- earning Canadians are punching below their weight when it comes to giving, especially if one considers earlier findings that show Canadian donors earning $50,000 or less give more to charity as a percentage of their income than those earning between $100,000 and $900,000 (Benoit, 2017 )”

Intentionality
”Almost half of the participants from this study (47%) say they have no process for determining the size of their annual charitable allocation, thus exhibiting an absence of intentionality…However, most participants do recognize the benefit of a formal, structured approach to giving, with many noting that they see value in understanding where they ‘fit in’ relative to other Canadians in the same income bracket, reinforcing the notion that this information might encourage these individuals to give more”

Impact
”After exposure to ‘real-life interventions’ [a giving calculator, pre-determined tiers, peer levels], …The good news is that all interventions performed better than no intervention in terms of increasing potential giving levels, ultimately resulting in a net positive impact….This research suggests that a more disciplined giving paradigm seems to make sense. At minimum, there is a need to build a broader process of engagement for affluent Canadians around giving and using the concept of a ‘standard’ giving percentage based on income as a guide. But it is important to bear in mind that the particular approach is not as important as ensuring that these giving interventions reach affluent donors and are perceived as helpful, relevant tools that help them solve a problem.”

The Philanthropist goes on to state:

“This research suggests that a more disciplined giving paradigm seems to make sense. At minimum, there is a need to build a broader process of engagement for affluent Canadians around giving and using the concept of a ‘standard’ giving percentage based on income as a guide. But it is important to bear in mind that the particular approach is not as important as ensuring that these giving interventions reach affluent donors and are perceived as helpful, relevant tools that help them solve a problem.”

(source: The Philanthropist Personal Philanthropy Project)

Are these the consequences you have experienced in the different fundraising world we now inhabit? Are there others you have seen?

 
Gilded Giving.jpg
 

The co-authors of the Gilded Giving report conclude with this:

“Growing inequities in income, wealth, and opportunity pose considerable perils to our economy, democracy, and civic life. They are also disrupting the philanthropic sector, corrupting our existing systems of charitable rules, policies, and practices. As wealth becomes concentrated in fewer hands, dynastically wealthy families will gain increasingly massive and unaccountable philanthropic power. They will stockpile even more billions into private foundations and donor-advised funds, and bestow newsworthy mega-donations to a few fortunate organizations. There will be an increase in the use of LLCs for formerly charitable purposes, and a further blurring of the lines between unfettered, no-strings-attached giving, and donor control over organizational missions. 30 And, as this happens, broad-based charitable giving from low- and middle-income households will steadily continue to shrink.”

(source: Gilded Giving November 2018)

What do you think about these recommendations? Do they go too far? Not far enough? What approach are you taking now with other, less affluent donors?

I would love to hear your thoughts on what’s happening in our sector.


Check out ViTreo's Braintrust as we bring you additional insights into what is and what will be important in philanthropy through our Weekly News Recap and our Podcast.


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ABOUT THE AUTHOR

Andrea McManus, Chair, Board of Directors, Partner
ViTreo Group Inc

Andrea McManus is a Partner with ViTreo with over 30 years’ experience in fund development, marketing, sponsorship and nonprofit management. A highly strategic thinker and change maker, Andrea has worked with organizations that span the nonprofit sector with particular focus on building long-term and sustainable capacity. 

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