Giving Preview 2022: An Insider’s Look at the Landscape

00:00 - 00:38

OK, everyone, it's 2022, and I recently saw a meme that said that feeling when you realize 2022 sounds like 2020 too. TOO. This is a tough one. This is a tough one for podcast. Look, two years into the global pandemic, what is this going to mean for charitable giving? Looking ahead, are we going to see a continuation of the surprisingly relative strength of the last two years? Or are we going to see something completely new? And if we see something completely new or not, what are the nuances across the philanthropic sector? We're really excited to have two front line leaders here today to share with us.

00:50 - 01:14

Hi, everyone, and welcome to Inspired Investing. I'm your host, Clare Golla, Head of Foundation and Institutional Advisory at Bernstein. This podcast is where we connect and share insights with listeners like you who are engaged in the nonprofit and broader philanthropy sector or who just want to learn more. Today, we are delighted to have two highly regarded experts in the field to share their thoughts on the state of philanthropy heading into

01:14 - 01:55

Kristin Carlson Vogen is a senior director of philanthropic services at the Chicago Community Trust, and she and I have actually known each other for many years through board work. So as an aside; and in addition, we're welcoming back by popular demand Laura Macdonald, chair of the Giving USA Foundation and founder of the Benefactor Group. Listeners may recall that Laura helped us decipher last year's Giving USA report. Thank you so much, both of you, for joining us today. Thank you for the invitation. OK, so before we get started, I just want to set the stage by giving listeners a brief synopsis of each of your roles so they can better understand your perspective. So why don't I start with you, Kristin, if you could share a little bit about your role?

01:55 - 02:25

Sure. Thanks, Clare, and I'm excited to be here with all of you today. The Chicago Trust where I work, I'm a senior director of philanthropic services. We have over $4 billion in assets, including endowments and donor advised funds. In 2021, we distributed over $1.3 billion through our discretionary and DAF grants with the total value of our donor advised funds, which we'll get to later today, is about 2.5 billion dollars. My team and I work directly with families and individuals to focus their giving on their impact.

02:25 - 02:28

Great. Thanks Kristin, and Laura.

02:28 - 02:51

Hi, thanks for having us both here. I'm happy to be with my friend and colleague Kristin. So I established Benefactor Group about 20 years ago. It's a fundraising consulting firm that works with nonprofit organizations and a number of fundraising and other challenges. And it's from that platform then that I have the opportunity to serve in one of our industries' boards at Giving USA Foundation.

02:51 - 03:36

now share that. Giving USA has been published for about 65 years now, and it's this amazing longitudinal study of the sources and uses of charitable giving in America. Thanks, Laura. Everyone eagerly awaits the publishing of the Giving USA report every year, so circle the date June 21, 2022. June 20.... OK, we're going to... we will circle the date, but we're going to try to tease out some information in advance of that. We'll see what we can get from you today. So great. Look, both of you clearly have just a wealth of knowledge about the sector, both as practitioners and advisors. And so let's start with a wrap-up of 2021. It'll be a while before the June date that you just mentioned, but what are one or two of your key observations from 2021? Why don't we start with you, Kristin?

03:36 - 04:12

There is a lot of spillover from 2020. There was a significant focus on racial inequities that year, as I know that Laura mentioned when she was on earlier, and at least for our donors, we saw a doubling of funding for community building and for social justice. So that was an area that we saw an increase in. Interestingly enough, there was so much direct giving to human service organizations in 2020, and we saw that there was some decline in that. We don't really know exactly what that means, other than the fact that the dollars that donors were giving to human service organizations did decline slightly.

04:13 - 05:10

Maybe we could try to unpack that a little bit more throughout the conversation. Laura, anything that you've seen from 2021 in these early days of 2022? I want to pick up on something that Kristin shared, and we do a lot of work in arts and culture. And so when we took a look at the data on Giving in 2020, we saw that there was a significant decline in Giving to arts and culture, seven and a half percent, much of which was going to Human Services. And that's typical of what has happened in past times of economic disruption. And so it was reassuring to be able to look back at the Giving USA data and see that, as my economist friends tell me, you know, a system, an economic system tends to revert to the mean. And so to hear Kristin say that perhaps some of those donors that temporarily shifted their priorities appropriately to frontline needs, to hear that now some of them perhaps are going back to their higher philanthropic priorities like arts and culture or healthcare,

05:10 - 05:41

what have you. I think, it is not surprising. And that's part of why one of the biggest challenges we see organizations having is donor retention. Nationally, only 20 percent of donors who make a first gift to an organization, ever make a second gift to that organization. And particularly amongst younger generations, we tend to see loyalty to a cause, but not necessarily loyalty to an institution. So even if their cause is, let's say, the environment, they might give to the Nature Conservancy one year and Earthwatch or Sierra Club the next year.

05:41 - 06:32

So I think that's continues to be a big challenge is donor retention. One of the things that we've seen consistently is that philanthropy has become more and more concentrated amongst ultrahigh-net-worth and high-net-worth households, not necessarily healthy for the future. And we've seen a decline in the percentage of American households that participate in philanthropy. There's some early data out from a group called the Fundraising Effectiveness Project that suggests that actually the percentage of households that participated in Giving in 2021 increased by something like nine percent over what had been the case in previous years. So we're happy to see that, we think that it's something you can build on. So that's something that's a real reversal that's really interesting, because so much of what we've seen, I feel like are continuations of trends, so that's an interesting one to keep our eye on.

06:32 - 06:56

Yeah, it helps us understand that we used to think that there are households that are always givers and households that are never givers. In reality, it's much more dynamic. There are some households that are always givers and some households that will never be givers. But there's a big group in the middle that gives some years, but not all years. And I think what we saw was that 2020 or '21 were the years that they were going to lean in, if ever there was a year. How can we now do great things with their money,

06:57 - 07:20

be great stewards of those relationships, and keep them giving and feeling great about their Giving? Yeah. And also a parallel to, you know, to the universe that I operate in every day, right? 2021 was a great year for investors, and by large, and 2022, in the first few weeks, maybe not so much. And so it's interesting always to look at that, you know, the parallels that maybe there year to year.

07:20 - 08:12

You know, one thing you mentioned, Laura, I want to dig in on a little. I'd be curious to get your thoughts on it, Kristin. What you just described on loyalty to a cause, but not necessarily to an organization, is an interesting phenomenon that we're seeing quite a bit with private foundations that we work with across the country, which is, you know, maybe it's generational shifts within a family or even, for foundations that its community members who are the leaders of the organization, but it's sort of the next generation of leadership coming in. We see a lot of tension and a lot of struggle around how do we maintain the integrity and the initial mission of the, you know, decedent or the, you know, the initial founder of the foundation, but deliver it or interpret it in a way that's more relevant with the issues going on today. And so I'm curious if you're seeing that, especially Kristin, in your work. Yeah. Kristin, I'd love to hear your take.

08:12 - 08:38

Yeah, we are seeing that. We have two things happening. I think there is that generational shift. So there is one generation who has been at the forefront of being able to be philanthropic. They now are handing the mantle off to the next generation to be able to do that. And that takes a number of different forms, whether it's a private foundation, whether it's just within their family and how it is that they think about Giving and how it is that they are involved in different nonprofit organizations from a volunteer perspective.

08:38 - 09:26

But then also whatever the Giving mechanism is that they're giving, trying to get that next generation evolve and that next generation does have a little bit of a different approach to how it is and what kinds of organizations that they want to fund, what difference they want to make. As we talked earlier about that intention to work within the social justice perspective and being able to... One thing we didn't talk about was education, but some of the other areas that maybe haven't been as involved while... education has been... but many other areas that maybe haven't been as focus of that older generation, if you will, the next generation coming in and saying, you know, we want to... we want climate change, we want to be able to make equities and inequalities something that is important for all people. They are looking across the board in a very different way than what has happened in the past.

09:26 - 10:06

I think about a presentation I attended several years back now in which an investment advisor was talking about the tendency for wealth in America to go from shirtsleeves to shirtsleeves in three generations and making the case that philanthropy can be a differentiator there. That yes, it is hard for multiple generations of a family to sit down at the table and come to some consensus about their philanthropic strategies. But if they can get there, it's hard work. But if they can do that hard work and get there, I think that it really it forces them to reckon with their values and to reconcile those, and it increases the likelihood that that family is not going to be one of the ones that's in shirtsleeves again in a couple of

10:06 - 10:41

But really, and I can think of many examples of the clients we've worked with and they're wonderful donors of multigenerational families who do that. So it's up to the nonprofit organization, though, to say, grandma and grandpa were our first donors. It might have even skipped a generation because, frankly, sometimes the next generation resents all the time and money. But now we're to the grandchildren and how do we make the case that our arts organization is speaking to racial justice? How do we make the case that our private school is speaking to sustainability and the environment? Yeah. Laura, that's something that you both hit

10:41 - 11:22

So I want to go back to education, right? And also in terms of issue areas, we're seeing folks that we work with thinking differently about how they will give to or, you know, be involved in different issue areas, education being one of them, but also the different types of charitable vehicles they might use. And so with education, we work with lots of community colleges, smaller colleges, Historically Black Colleges and Universities, schools that tend not to have gigantic endowments, right? But really these organizations that are just building their savings and really building these endowed funds over time. And so we saw enormous growth just as

11:22 - 11:35

a firm working, partnering with organizations, I'd love to hear a little bit about what you saw, both from donor advised funds. I know you both work very closely with donor advised funds and other types of Giving on the education front and elsewhere.

11:35 - 12:29

I'll share that education is something that I think historically people have given to their alma mater, and that's been the support that they've given. They've helped grow those endowment funds. And I think now what the shift is is that people are saying, I benefited. I want people who haven't benefited to be able to have the chance to go to a school that will provide them the same, the same educational opportunity that I received and that that type of approach is something that is becoming more common as people are looking to [...] What I see most often is that people, when they are looking at, OK, I want there to be equality, I want there to be some kind of social justice. I want people to be able to have an even, level playing field. If they haven't been in the space of philanthropy, their number one place that they go is education, and in some cases that makes perfect sense. They know that they are where they are because of education, and so they want to be able to give others that opportunity.

12:29 - 12:57

But what ends up happening is they sometimes don't recognize what else is around in the social structures that they need or the support that individuals need to be able to persist through education. And so being able to get them there is great. But making sure that they're able to stay, persist, and succeed is sometimes a little bit of a different narrative, a different conversation. And so it isn't solely having that scholarship. It has to be a bit more nuanced than simply that.

12:57 - 13:29

I agree, Kristin. We're working with a number of institutions in the education space, generally higher education in particular. And what we're finding is that right now, donors are all about the students, not so much the fancy buildings. So that's really what they want to invest in. And oftentimes it is they come to it thinking a scholarship. That's what I'll do. Many institutions have a lot of scholarships, some of which go unawarded because of all the administration that a scholarship requires, when really what they need are programs that help that kid come back to school in years two, three and four.

13:29 - 14:05

You know, I talked to a college president in the Boston area last week who said, we do a great job with getting the average student who would struggle at another institution. They come to us for a year. They figure out how to cobble together a little bit of financial aid and a part-time job and maybe some loans. But at the end of the first year, they're exhausted and they don't come. Yeah, that's tragic. So what we see is, you know, let's really focus on those retention programs, helping students make it all the way through. And then, yes, Giving to higher education is the second-largest slice of the pie. In 2020, it was $71 billion and it grew by nine percent.

14:05 - 14:27

And I think a lot of that growth was, to your point, HBCUs and other access institutions, digital inclusion and outreach initiatives, and even early learning and the importance of providing that level playing field right from the time a child is two or three, not waiting until they're struggling in ninth grade.

14:27 - 15:20

This is really helpful, and I'm curious about, because you both work with donor advised funds and I know, Laura, you could speak directly from the donor advised fund special report that Giving USA just released this past fall. And, Kristin, you were on the advisory board for that, so I'd love to hear what parallels there are and if there are any differences in what you found from donor advised funds versus other types of Giving, or if it's similar. The Giving USA Foundation partnered with the Lilly Family School of Philanthropy to produce a really landmark report on donor advised funds. It was published in November of '21, and part of what makes it, I think so authoritative is we had great people like Kristin and some of her peers from the Community Foundation world serving on an advisory council that helped us make sure that it answered the questions that are being asked and frankly provided information to, for example, policymakers that are thinking about some regulatory measures

15:20 - 16:11

where donor advised funds are concerned. We did see some different grant making patterns. For those who have donor advised funds, it differs a little bit from the general philanthropy picture. Some of that has to do with some mechanical elements. For example, some donor advised funds do not or are reluctant to fund gifts to houses of worship because donor advised funds are not allowed to fulfill pledges. And so often, you know, at my own church, you know, there's a stewardship campaign and I sign a pledge form and I'm going to fulfil it every month. Donor advised fund is not supposed to be used to fulfil a pledge. Some of it has to do with the profile of those that are currently donor advised fund holders, that they tend to be later in life and higher net worth. And so we see patterns of Giving to alma mater, or at least in the past, alma mater, arts and culture, some of the areas that the more affluent donors have tended to support in higher numbers.

16:12 - 16:33

But the other thing that we're beginning to see is donor advised funds becoming more democratized. So, for example, we see employers providing their employees an opportunity to create a donor advised fund for very modest, you know, maybe there's a $0 point of entry, and then using payroll deduction to fuel that so that they can then do their charitable giving. How about you, Kristin?

16:33 - 17:02

Yeah, and we have joined. There are some other deaf sponsors who have done this as well, but we have lowered our minimum to zero so somebody can set up a donor advised fund without any assets in it to begin with. And so, yes, the democratization of using this as a tool to really focus and be more strategic in your Giving is really what donor advised funds are all about. And so that's why I think in the special report, it really elevates this, that there is more intentionality about where it is that people are giving.

17:02 - 17:52

So when somebody has a donor advised fund, and it's true, there are so many nonprofit organizations that are always questioning, how do we access those dollars, and thinking of it as something that is more akin to a private foundation, which they really aren't. They are extensions of the individuals. And so being able to cultivate those individuals, it may lead to a donor advised fund grant. And frankly, if somebody receives a $250 check from their personal checking account versus a donor advised fund, that donor advised fund may indicate that there are more resources behind that. And so that intentionality that has been created, if you're getting a grant from a donor advised fund that indicates that the person behind that is really being very thoughtful about where it is that they want their funds to go in a way that may, may be different than the way they're thinking about, just writing the check from their personal checking account.

17:52 - 18:38

So a lot of what we've seen is just an increase. And the special report, I think does a really good job. It's actually been years and need for us as a sector to be able to see how is it that donor advised fund dollars are being distributed out, it's previously the Giving USA report, which Clare said, Yes, we're all salivating before that comes out every year. And it talked about what dollars were going to the donor advised funds, but we really didn't then get a sense of, OK, so what? What kinds of organizations are benefiting from the distributions that are going out? And that's what this report does in a very deep way. But hopefully it will continue with the annual report as well going forward. So that's the, I think that's just a fantastic addition to Giving USA is fantastic data that already exists.

18:38 - 19:34

And will that donor advised piece be in the next annual? So now it's going to be a part of the total pack. Part of the investment that we made in creating this special report was also to create a replicable methodology so that we can have an estimate of gifts into and out of donor advised funds, in one annual report, we assume, for as long as we continue publishing. That's great. And so while we can draw some conclusions from this report, I think what we really want to do is begin to create that longitudinal understanding of how Giving to and from donor advised funds is changing over time or reacts to specific conditions like a global pandemic and calls for social justice. Mm hmm. Yeah. No. I think that it'll help to demystify the whole idea of donor advised funds for so many folks that we work with too. And some of the listeners here are development officers right there out there raising funds for their organizations. And so that is, Kristin,

19:34 - 20:09

I'm glad you mentioned the question. You know, how do we, you know, how do we gain access to more donor advised funds? And it's really about working with the individuals and thinking of them as an extension? I do have a question, though, because we get this often and, Kristin, You've mentioned some things in the past that I think might be helpful to folks, which is thinking about recording the gift. So can you give us a little bit, I don't want to get too far into the weeds, but thinking about recording a gift from a donor advised fund versus an individual versus the DAF sponsor. What are some ways that you would recommend a development team think about that?

20:09 - 20:31

I'm actually very glad that you're asking this question because it is one of my little... the little problems that I see happen a lot. It's that in development offices, just they weren't geared up to receive this kind of gift. And so thinking through, well, if you received a contribution from an individual, this is what you do. That's clear. If you receive a contribution from a corporation or a foundation, this is what you do. That's clear.

20:31 - 21:19

And so recognizing that a donor advised fund is a charity unto itself, so it doesn't... you don't have to send a traditional tax gift letter to that DAF sponsor because there is no deduction that's being taken, that is more similar to a private foundation. But recognizing that you need to cultivate and steward the individual behind the donor advised fund is really critical. And so being able to recognize that there may need to be a different process created in order to send a Thank You, not a tax letter, but a thank you to the individual and saying you really are grateful for the contribution that you've made while also making a note, this is coming from a donor advised fund, which probably means that there are other resources out there, and so perhaps I should be spending a little bit more time with this individual.

21:20 - 21:40

And then some donor advised fund sponsors, they don't want to receive a letter because they just they don't want to have anything, and so making sure that there is a way to be able to, within the legal recognition within your system where it says it might be a DAF sponsor. But having the soft credit for who it is that the individual that you want to continue to cultivate.

21:41 - 22:10

And for those of you who are the donors out there, this is actually a good thing because I also hear from individuals who will reach out to me and say, Hey, we haven't heard from X Y Z organization, and they feel as though they're not being cultivated as much as they would like to be because they haven't heard, Hey, did you receive this contribution that I made to you? And so it is a way to make sure that... that you as an individual donor, are going to be able to be properly acknowledged for the contribution that you've made.

22:11 - 23:08

That's exactly right. So from my friends in the database world, they tell me that it is a soft credit. The donor is the Community Foundation, the National Donor Advised Fund sponsor. That's the donor. And yes, there isn't a tax. The transaction does not trigger any of tax consequences because the original donor took a tax deduction when they created the donor advised fund. But it's that original donor, the adviser now to the donor advised fund, the "A" in Donor Advised Fund, who, you know, there isn't some magic trick or secret to how to go about securing more gifts from donor advised funds. It's the same as how to go about securing more gifts from usually major gift prospects. It's the hard work, basic work of fundraising. But as Kristin said, once you see those gifts starting to come in through donor advised funds, that sense this is somebody who is thoughtful about their philanthropy and somebody who's set aside more resources to fuel causes that they're passionate about.

23:08 - 23:32

Yeah, absolutely. It's great advice. I mean, when we're working with individual donors, it tends to be people oftentimes with lumpy or inconsistent income. They might have some huge income years, and that's when we're moving dollars that they know they'll gift out in the future, right? But it makes sense to make the charitable contribution this year, you know, for a variety of financial reasons to the donor advised fund and also the other time,

23:32 - 23:59

You know, oftentimes we see with foundations next gen as we're talking about sort of family foundations having donor advised funds, smaller donor advised funds for different members of the family or different purposes. Again, both of those indicating there may be additional opportunity there, an additional discretionary wealth that folks may be happy to steer towards charitable purposes. So, really good stuff. So thank you for sharing all of that.

24:00 - 24:36

And I'll just affirm that by saying our firm has a donor advised fund that we add funds most years, but not all years. We use it to match our employees' Giving. We want to be able to match employee gifts every year, whether we're having a great year or an off year so you're right, that also kind of smooths out the lumpiness in some financial models. Yeah, and good for you. I'm glad that you guys have a matching program. We have a matching program and I love it at our firm. If you can, please do it. Employees love it. So, oh my gosh, working through intermediaries, I mean, just going through all of that with donor advised funds, I think it's really helpful for folks listening.

24:36 - 24:51

So we've covered a lot of ground today in terms of that sort of 2021 recap. What's your best advice for listeners as we're heading into 2022? So I'm going to turn it over to... I don't know, either one of you, take your pick.

24:51 - 25:37

Sure, I'll go. So I think the biggest thing for those of you who are individuals who are listening, make sure you continue to give, give even more. We'd love to see that, we do want to see there to be more philanthropy going out to support the nonprofit organizations that are making such a difference in our communities. I do think that we need to also be taking care and thinking about who those people are who are working at those nonprofit organizations. For those who are direct service organizations, they are frontline workers in many cases. And so they are, we hear about the nurses, we hear about the teachers that have had so many challenges. But many of the frontline workers at nonprofit organizations are similarly feeling that heft and that weight that has come over the past couple of years, so be nice to them and try to encourage them to be able to give.

25:37 - 26:09

I do think that we're going to continue to see this trajectory of wanting to focus on quality and helping people to be able to be either better employed or better educated to be able to do more. We at the Trust are very focused on race and the racial and ethnic wealth gap, and along with that is helping to build community and community voice, individual household wealth and then also catalyzing neighborhood investments. So thinking about how it is that neighborhoods can be best invested. And I think that what we're seeing is that in 2022 people are right there with us.

26:09 - 26:46

I think that's right, Kristin. We're seeing the same thing and saying to our clients, how do you articulate your message in terms of a cause, not a need and not a conquest, but a cause? How is your organization a cause, cause and how do you authentically align it with some of these larger social issues, like social justice, pathways out of poverty and economic mobility, from rural areas to urban areas? So how can you capture the moment authentically? Because donors can tell when something is inauthentic and pasting a message on top of the same old programs and services.

26:47 - 27:16

The other thing I'll say is that while we're off to a bit of a rocky start in the stock market this year, the impact on philanthropy is really year over year growth. So you remember back in 2018 when we had a great year and then the last two weeks of December, the whole market swooned? It's year over year growth that has the impact. So we've got now, what, 50, 48 weeks to make up a little bit of lost ground. And we've got time. We've got time.

27:16 - 27:27

It's also where donor advised funds come in. So people who give to... set up a donor advised fund gave the appreciated stock last year when it was at its height. They now are able to give it the same level, even now.

27:27 - 27:54

Bingo. Exactly. We are keeping our eye on inflation. And this is the value of Giving USA. I just went back to all of the data going back to 1967, and I simply highlighted the years in which WhiteHouse.gov said that there was inflationary pressure, inflation greater than 5 percent for at least a portion of the year. So I highlighted all of those years. They have absolutely nothing in common. It doesn't seem that inflation influences charitable giving, at least on the Giving side.

27:54 - 28:28

Now, where it will become a problem is that donors giving big round numbers. So if they're used to giving a thousand dollars to your organization, they're not going to be giving $1070. So you know that thousand dollars they've always given doesn't have the same buying power. So it may also mean getting creative about things like, How do we move our thousand dollar donors society up to the $1200 level? How do we talk to our million dollar donor about the fact that that building we were going to build, the steel just went up? So it's going to be more on the expense side that inflation becomes part of the conversation.

28:28 - 29:00

I don't think that it impacts the magnitude of Giving. I think that's a really great nugget for folks to take away, that thousand dollar gift or whatever size gift is not going to go necessarily as far, right. And so how do we then navigate around that? Same within our investment portfolio. So thank you both so much for joining us today. For more of what we've discussed today, please, listeners, check out the link to the donor advised fund report in today's episode description. And thank you all for listening.

29:00 - 29:30

If you'd like to learn more on Bernstein's Foundation and Institutional Advisory, please see the link to our blogs in this episode's description. If you enjoyed this episode and you haven't subscribed to our podcast yet, please go to the iTunes store, to Google Play or wherever you listen to podcasts to subscribe and rate us. Also, please e-mail us with your thoughts, questions, feedback to insights@Bernstein.com, and be sure to find us on Twitter at BernsteinPWM. Thanks, everyone.

29:42 - 30:11

Hi, I'm Beata Kirr, host of Women & Wealth, a podcast that aims to educate and inspire women to make the right choices for their wealth. In an upcoming episode, I'm going to talk to Jennifer Risher, the co-founder of Half My DAF and author of We Need to Talk, about what it's like to come into significant wealth and how to manage the impact that it has on identity and relationships. To hear that interview and more, look for Women & Wealth on Apple Podcasts, Stitcher, or anywhere you listen to podcasts.