Bentz Whaley Flessner

Best practices, strategies, and tips for fundraising.

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Fundraising in 2018: Looking Back to Move Forward

As 2019 begins, we can look back on 2018 and explore important trends that have shaped philanthropy and consider how they will affect the year ahead.  The world of giving has been shaped by at least five trends:

1. Volatile markets impact giving.

December 2017 was a record giving month for many nonprofits in the United States as the tax law changes escalated major gifts. The stock market rose 25% in 2017, and donors were positioned favorably. In 2018, the markets were more turbulent. The markets saw declines in February and again in April before a summer of growth extending until October. The 10-year bull market created enormous wealth, marked by two 10-figure and many 9-figure gifts made in 2018.

However, pressures in November and December sent the markets into bear territory. December 2018 was the worst December in the market since 1931. Housing prices in many metropolitan areas have stalled after years of rapid increases. The impact of the wealth effect is significant, as the stock market lost approximately $2.5 trillion in the fourth quarter of 2018.  The Conference Board’s Index of Consumer Confidence fell from 137.9 in September to 128.1 in December and is likely to be down again in January.  This does not mean that giving will stop, but does indicate that all forms of fundraising are facing headwinds in the months ahead.

Philanthropy is a trailing indicator, not a leading one. Giving does not decline instantaneously with stock market declines and does not roar ahead the moment the next bull market begins.  However, giving is heavily dependent upon wealth creation, especially gifts to colleges, universities and medical centers.

2. “The Year of the Woman.”

This year has been deemed by many, “The Year of The Woman.” Amid historic political victories and the #MeToo movement, it is difficult to overstate the prominence of gender on the national stage. Therefore, it came as no surprise when study after study demonstrated gender’s significant influences on philanthropic behavior in 2018. The Women’s Philanthropy Institute released numerous studies on the role of gender on giving during retirement, transferring generosity to the next generation, impact investing, the role of social norms, and giving to causes benefiting women and girls. Some key finding of this research included:

  • Social norms and charitable giving are strongly linked.
  • Men’s giving to women’s and girls’ causes is strongly tied to how they think both men and women give. Conversely, women’s giving to women’s and girls’ causes is strongly tied only to how they think other women give.
  • Messages conveying social norms of rising levels of giving are equally effective for men, who traditionally give less than women to women’s and girls’ causes.
  • The correlation between parents’ and adult daughters’ giving is stronger than the correlation between parents’ and adult sons’ giving.
  • Around retirement age, single women and married couples are more likely to give and give more than single men.
  • Impact investors are younger, more educated, and have higher incomes. Women and men are equally likely to make impact investments, but gender differences appear for specific groups of people (examined by income or education level, for example).

Women continue to live longer than men, control increasingly larger amounts of wealth, and gain more positions of influence. For these reasons, among others, it is essential to recognize and address the role of gender in philanthropy and giving practices.

3. The General Data Protection Regulation (GDPR) is impacting how the world uses the Internet, including philanthropists and fundraisers.

For over a decade, traditional fundraising channels have been increasingly challenged in the wake of digitization. Direct mail is expensive, and acquisition costs are high. Telemarketing costs have increased as completed calls have decreased, a method even further complicated by a nearly complete transition from land lines to cell phones. Paradoxically, while we have entered an era of targeted digital communications and more sophisticated donor tracking, many organizations are seeing a decline in their donor base. Less Americans are giving than at any time since we began measuring philanthropic behavior. The prevailing response to these trends and hopeful strategy involves shifting these efforts towards online giving and social media where the potential remains promising.

However, this year we have witnessed unprecedented privacy concerns and a resulting federal and societal interest in protecting the public. How, when, where, and why we use our donor and constituent data is of great concern. The General Data Protection Regulation (GDPR) is now in place in the European Union, designed to assure data protection and privacy for all individuals within the EU, in addition to the export of personal data outside of the EU. The GDPR applies regardless of a donor’s location and citizenship, and your organization’s practices should be evaluated considering this legislation. In the United States, California is headed towards GDPR-like protections to assure privacy of information.

4. Extraordinary gifts are increasing in size, while backlash is growing in response.

The most recent generation has seen a growing focus on extraordinary gifts given by high net worth and ultra-high net worth individuals. Over the past year, fewer American households made charitable contributions. However, the size of the charitable contributions that were made continued to grow. One possible analysis indicates that the changes in the tax code, particularly the raising of the standard deduction, has taken away an incentive for giving, except among high and ultra-high net worth individuals.

The growth of charitable giving by dollars despite this trend is largely thanks to the generosity of new wealth. The net worth of American households exceeds $100 trillion, and there are over 11 million households in the U.S. laying claim to millionaire status—one out of ten households has a net worth of $1 million or greater. Each year following the conclusion of the Great Recession, the number of high net worth and ultra-high net worth individuals continued to rise. The designated value of mega-gifts has continued to increase as well—from $200 million in 2016 to $300 million in 2017. The importance of these mega-gift donors in overall philanthropy has been dramatic, with the total value of these gifts reaching $1.5 billion in 2016 and $4.1 billion in 2017, with an even larger total likely in 2018.

As the size of gifts grow, backlash to these gifts has grown as well. Over the past 5 years, many organizations have questioned the influence offered in exchange for significant gifts. Examples of this trend include:

  • John Paulson’s $400 million gift to Harvard was criticized due to the already significant size of the university’s endowment. Critics noted that for many years, just 20 universities have received about 30% of all philanthropy to higher education in the United States.
  • Robert Reich’s book, “Just Giving: Why Philanthropy is Failing Democracy and How it Can Do Better,” is the latest and perhaps most well-developed case against large gifts.
  • Joshua Hunt’s book, “University of Nike: How Corporate Cash Bought American Higher Education,” questions how major giving by the likes of Phil Knight and Nike have shaped colleges and universities.

The criticism is normally two-fold: (1) the extreme nature of wealth inequality in the United States necessitates that individuals should not be entitled to such wealth, and/or (2) the charitable cause or organization receiving a mega-gift is not deserving of such wealth. Public criticism of philanthropists is not helpful. Paul Allen, who passed away this year, received more negative feedback about many of his large gifts for science and engineering than for spending $200 million on a yacht.

It continues to be important to understand and participate in discourse regarding giving by the ultra-wealthy. A century ago, Andrew Carnegie challenged those who achieved great wealth to become philanthropists. As the Harvard Business Review wrote last year:

Foundations and wealthy individuals are making big philanthropic bets on driving social change solutions at scale. In partnering with many donors and nonprofit leaders over the years, we understand their rationale: It takes a bold commitment to confront some of the world’s most intractable social problems. And while big bets don’t always yield big advances, small bets rarely do.

Every major development office should be prepared to defend the right of wealthy citizens to create foundations and make significant gifts, and be willing to share the impact of their gift.

5. Large campaigns continue to grow.

This year, the honor of the first public university campaign to raise more than $5 billion goes to the University of Michigan, a number that would have been hard to imagine a decade ago.  Planning is underway for the first 11-figure campaigns in higher education. Colby College set a new level of campaigning for liberal arts colleges when Dare Northward set a $750 million target; their progress continued in 2018 with another extraordinary year. Boston Children’s Hospital has exceeded its $1.5 billion goal, setting yet another record for a children’s hospital campaign.

For nearly 50 years, people have been predicting the end of mega-campaigns and the rise of new models for fundraising.  However, decade after decade, large campaigns continue, and the results have continued to grow. We believe that 2019 will continue to bring new records for campaign goals and campaign results.

The world is a better place due to the generosity of the many individuals around the world who have shared their wealth to advance causes and institutions they believe in. Our communities are improved by the hospitals and academic medical centers that provide care and medical research breakthroughs. Our futures are shaped by the great universities and colleges that educate our future leaders, provide most of the world’s basic research, and develop resources and services to their communities. We begin 2019 with enthusiasm for the vital role that philanthropy will play in the future of great institutions.

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