We’re soon at the close of another year, and if you’re like me, you’re keeping your sights focused through the windshield instead of the rearview mirror. The philanthropic sector continues to evolve, as is everything in society because of forces such as wealth, technology, and globalization.
When I started my nonprofit more than a decade ago, we were in a different landscape than we are today. Transparency, social media, and Millennials in positions of influence and management (increasingly being taken by Generation Z as the marketing world begins to turn look at the next shiny generation) have brought about enormous change.
But, if you’re like me, then you’re interested in staying one step ahead. As you begin to look to tie up the year and we advance toward 2018, here are some of the trends that you want to keep in mind.
- The rise of foundations and impact investing. Stanford Social Innovation Review reported about the partnership relationships between foundations, government, and corporations for impact investment, which is funding for a cause or community that seeks both profit and social impact. As we know, Detroit has suffered for years because of its adverse financial challenges and its single-family housing market, which was decimated by the 2008 recession. The Kresge and Ford foundations, in partnerships with local banks, the city and state developed the Detroit Home Mortgage Program, to provide home buyers renovated homes with a mix of grants and loans. Another impact investing venture is a partnership between McKnight Foundation and Mellon Capital Management and also the Chan Zuckerberg Initiative with billions of dollars to eradicate diseases and improve education and the lives of children.
With the extraordinary accumulated wealth that has within institutional organizations, there is now an increased openness to make a measurable social impact in the community as public funds decrease. Foundations have knowledge and understanding of what it means to invest in a community, and leading organizations are now using their expertise and massive capital to help decrease the risk for other investors, such as cities and corporations.
- Extraordinary wealth has led to more endowed legacy foundations. Americans have a broad culture of philanthropy. The reality is that we are living at a time of unprecedented levels of wealth for a few (in the hundreds of billions of dollars) and also riches in the millions for others, and the culture of philanthropy continues. And, since Americans are exceptional capitalists, financial institutions have figured out how to make sure they are getting a cut of the money management fees. We know that there’s a dirty little secret in the philanthropic world with donor-advised funds (DAF) which allow donors to get an immediate tax deduction, but massive amounts of money are parked in the DAFs and are not at nonprofits and charities.
With as little as $5,000 to $25,000 more and more Americans are creating legacy foundations, which has made for instance the Fidelity Charitable Gift Fund one of the largest foundations in the U.S. with billions under management as donors create their own legacies due to brilliant marketing. Essentially, Fidelity, Schwab, Vanguard, and others have taken out the expense and complications of creating one’s own foundation, and for the convenience, they get to manage the money.
- Government money and regulations get tighter. The trends will continue, and especially if there is a tax overhaul. The federal government is moving toward a massive tax overhaul, and two essential elements would impact charities:
- There is an interest in capping the charitable deduction.
- One of the goals of tax reform is also to cap standard deductions.
Tim Delaney, CEO, The National Council of Nonprofits expressed in this article, “Both would be a sizable hit for not only the nonprofits but also the people that they’re serving… The standard deduction increase will be a disguised assault on charitable giving in the name of tax simplification… Charitable and philanthropic communities are instead coming together for a universal deduction for giving.”
While I recognize that the majority of nonprofits and charities in the U.S. are small, and you might say to yourself that you don’t think any of these realities will impact your group, that’s not necessarily true. If there is a tax overhaul, that will likely affect the vast majority of nonprofits as donors begin to re-evaluate their charitable intentions. And, even if your charity does not receive money from global foundations, the idea that the public and donors are much more open to donating to private and public partnerships, especially those where profit is made, is essential for your nonprofit leadership to understand. In other words, there are much more ways donors can support society, aside from a straight gift to charity, especially if they have wealth and want the impact to be broad and scalable.