The Future of Philanthropy: 4 trends to pay attention to
Wednesday, October 18, 2017
By Brenda B. Asare, President & CEO, The Alford Group
Philanthropy in the 21st Century has rapidly changed and continues to do so. There is a rapid increase in available data, tools to analyze and interpret the data, fundraising technology, as well as an increase in diversity among donors and staff.
As fundraising and nonprofit professionals, we are working in an industry that is changing before our eyes. It’s an exciting time to be in philanthropy, yet challenging to stay ahead of the curve. I’ve had many conversations with clients about the most important trends to be aware of and to stay on top of.
Here are the four top trends you should be paying attention to right now to assess the future of philanthropy:
- Diverse donor demographics can be reached
- Donors want to engage differently today
- Technology is changing how we operate
- Proposed tax policy will reduce charitable giving by $13 billion
Diversity has been a topic in philanthropy for many years. Today we agree that there is a need to reach new demographics through fundraising, but there is still uncertainty about who to reach out to and how. Jackie Copeland-Carson, Ph.D. is the Chief Program and Operations Officer with Catholic Charities of Santa Clara County in California. She has been studying this issue for more than 30 years. Jackie recently spoke at the AFP International Conference and as a guest webinar speaker on this topic. Her research shows:
- 7 million Hispanics and African-Americans had a net worth of more than $500,000 in 2011
- Asian-Americans have the highest median income
- Nigerian-Americans are the most educated of all American ethnic groups
So, why aren’t we seeing these demographics reflected in American fundraising? The answer is simple: they are not being asked. Fundraisers and nonprofit leaders in many cases have pre-conceived notions about these communities. These include:
- People of color don’t give, so why ask?
- People of color only give in small amounts
- People of color only give to religious organizations
- It will cost too much to develop these new relationships
Once leaders get past these pre-conceived notions, the classic question remains: but HOW do I reach those demographics? A recent 2017 report concludes with specific tactics to reach high net worth people of color. The key to each is meeting this demographic where they are. A few ideas include:
- Engage with them directly
- Focus on building a network of high net worth donors vs. recruiting a few to join your board
- Ensure the influencers they currently seek advice from (lawyers, accountants, professional advisers) have information about philanthropy
- Improve the cultural competency of your current high net worth donor networks
Diversity doesn’t only mean racial diversity. The future of philanthropy will include the next generation of philanthropists. Gen Xers and Millennials are already changing the face of our workforce, our volunteer networks, nonprofit boards, and donor pool.
In a new book out this month Generation Impact: How Next Gen Donors Are Revolutionizing Giving, authors Michael Moody, Ph.D. and Sharna Goldseker find that Gen X and Millennial major donors will be the most significant philanthropists ever. The next generation is more engaged, aware and feels a sense of social responsibility that we haven’t see with other generations.
And they want to engage with your organization in different ways. This leads me to the second trend you should be paying attention to.
Millennials and Gen-Xers are changing the way philanthropists interact with the causes they support. Driven by values and not valuables, the next generation of donors want to be sure their contribution makes a real difference. Additionally, they want to experience that difference. They want to volunteer. They want to use their skills to benefit the cause, not only their bank account. They want to be part of the solution by attending meetings, working directly with the staff and members, and helping make decisions.
And it’s not just Next Gen donors.
The future of philanthropy includes having more engaged donors across the board. The 2016 U.S. Trust Study of High Net Worth Philanthropy, finds that high net worth donors (regardless of age), experience greater personal fulfillment when their knowledge level of charitable giving is high. Researchers found that knowledge level is associated with personal fulfillment from charitable giving, as well as higher giving levels. This means that the more the donor knows and understands about philanthropy and your organization, the more likely he/she will be to contribute to your cause.
In addition to wanting to be more engaged in-person, 21st Century donors also want to be engaged online. This is one way that technology is changing the sector.
There are two buckets that make up how technology is changing the future of philanthropy. One is how organizations communicate and interact with donors and the second is how organizations operate internally.
Let’s start with interacting with donors.
We all wish we could have the next viral fundraising campaign like “The Ice Bucket Challenge” that raised millions of dollars overnight for ALS. This is just an example of how technology has changed the philanthropic landscape.
In addition to engaging differently with donors, nonprofits are using technology to change their internal operations.
First, there are now many tools available today that assist nonprofits in managing and analyzing their donor data. Companies like Blackbaud and Bloomerang offer database software that includes dashboards and reports, making it easier to track and communicate data trend insights.
Of course, everything is “data-driven” today. And the future of philanthropy depends more and more on not just the quantity and quality of data – but the strategic interpretation of the data. Most organizations have more data than they know what to do with. Every transaction, every volunteer sign up form, every feedback form - this is all data. Services such as Target Analytics can help you make sense of your data. And services such as wealth screening and prospect research can help you enhance your data.
It was 100 years ago this year that the U.S. government put in place the charitable tax deduction that allows taxpayers who contribute to charitable causes to take a tax deduction. This has been a huge incentive for citizens to donate over the years. In 2015, taxpayers who chose to itemize their deductions (the option filers choose when they wish to include charitable giving) contributed nearly $217 billion to charity.
Unfortunately, the charitable tax deduction is currently at risk under President Trump’s tax plan. The charitable tax deduction would stay in place, but fewer taxpayers would take advantage of it. The U.S. House Blueprint would reduce the percentage of taxpayers who take it from 25% to 5%.
A recent study conducted by the Indiana University Lilly Family School of Philanthropy and commissioned by Independent Sector concluded that the new tax policy changes proposed by the Administration and Congress would reduce charitable giving by up to $13.1 billion.
The future of philanthropy will be affected by the tax policy decisions made in Congress this year, next year and every year to follow.
If it’s diversity, donor engagement, technology or even U.S tax policy - it is important to stay educated, get ahead of the trends, and make decisions based on the best available data and information.
Visit The Alford Group website for more information on these topics and others.