Home » Nonprofit Consulting » Fundraising » The Changing Nature of Philanthropy

The Changing Nature of Philanthropy

Six headlines from 2019 that indicate shifts in the philanthropy landscape

“Nonprofit is Sole Sponsor of Rolling Stones’ U.S. Tour” Nonprofit Times, July 8, 2019

Dripping with irony, a bunch of guys who don’t need the money went on tour to earn $415 million while promoting a service that promises to solve the retirement savings crisis for the little guy. The Rolling Stones ‘No Filter’ tour (an apt description for a bunch of old guys) had one major sponsor, the Alliance for Lifetime Incomea coalition of 24 of the largest financial services companies in the world, who have organized themselves as (what else?) a nonprofit.

The lines between commercial and charitable intent have been blurring for years and this trend is making it increasingly hard to spot the difference between nonprofit tax status and a truly charitable cause.

Six 2019 headlines that indicate how the philanthropy landscape is shifting. Learn how it's changing and how to navigate it. #nonprofit #philanthropy #majorgifts Click To Tweet

“How many Americans with $1 million feel wealthy? Fewer than you may think” USA Today, July 17, 2019

The wealth gap is growing and the U.S. now has close to 11 million millionaires, up 6 percent from 2016.

To fundraising professionals, this has historically meant someone with assets worth $1 million or more. But we’re now seeing the term “millionaire” used to mean someone who makes more than $1 million a year, apparently because it’s become so common. I don’t know about you, but would have thought most would feel wealthy in either scenario.

That’s not the case for most of them: only 13% describe themselves as “wealthy;” 1/4 actually believe themselves to be “middle class.” All millionaires shared the same top financial priorities: to save for retirement and protect their accumulated wealth. With all this anxiety associated with new wealth, we must wonder where charitable giving falls in the list of priorities.

It’s getting increasingly difficult to spot the difference between a nonprofit tax status and a truly charitable cause.

“Lawsuit Could Cool a Fast-Growing Way of Giving to Charities” New York Times, May 31, 2019

Donor-advised funds made a lot of headlines for all the wrong reasons.

Here’s a new twist: wealthy couple donates $100 million of stock including shares of Energous. They get a huge tax benefit because the stock appreciated while they held it. But the Fund Manager sells all of the shares at once, flooding the market and plunging the price of the stock.

Selling all assets quickly is legal. But is it ethical if it drastically decreases the amount of resulting capital available for charitable purposes? Can the largest wealth management firms also be the most charitable, given that they make money when holding and selling funds (not donating them)? 

This is the conflict of interest that big investment houses like Schwab and Fidelity have created for themselves.

“Silicon Valley Community Foundation Assets Plunge $4.6 Billion” Chronicle of Philanthropy, August 8, 2019

The increasing share of charitable giving coming from a small group of extremely wealthy people means that mega-donors don’t always give charities money.

Instead, they pass along assets and sometimes that means bitcoin. The urge to donate digital money, especially once the value of bitcoin surged and created the opportunity for investors to reap huge potential charitable tax breaks, was only natural. But, bitcoin is volatile and you can’t necessarily sell it all at once. This can be a problem when donors give away assets right before their value crashes – or a boon when those gifts precede a sharp rise.

If the amount is large enough, the charity could risk the market moving against it if it tries to dump it all at once, particularly on a small exchange. Ultra-wealthy donors are often more financially sophisticated than the charities they support.

The timing of an asset sale can result in millions or billions of dollars deployed for the collective good, or not. Should community foundations function as complex asset clearing houses just like the large investment firms? Should community foundations accept digital currency?

Nonprofit organizations will be paying a private equity firm for the right to retain their .org status.
If they stick to their stated plan, it will mean more than $750 million diverted from the work of nonprofits.

“Sale of .ORG Registry Raises Alarms” Grant Station Insights, August 8, 2019

On the same day Silicon Valley lost billions, a private equity firm announced they were buying the .ORG Registry used by more than 10 million. Yes, you read that right. It’s hard to put a price on credibility and legitimacy, which are both at stake here. Many groups, some with questionable motives, have exploited the trust associated with the .org label.

It’s even harder to swallow the idea that nonprofit organizations will be paying a private equity firm for the right to retain their .org status.

Currently, the annual fee per organization is $9.93 per year, which generates about $100 million in annual revenue for .org, excluding expenses.

“Even if they stick to their stated plan of raising prices by an average of 10 percent per year, that will mean more than $750 million dollars diverted from the work of nonprofits in communities around the world right into the pockets of investors.” Said Rick Cohen, Chief Communications Officer at the National Council of Nonprofits.

The sale will give Ethos Capital power to substantially raise .org domain fees and censor the speech of organizations. Concerned organizations can add their signature to the Save.ORG letter, and encourage their constituents to sign the Electronic Frontier Foundation’s online petition.

“Twitter Details its Rules for World Leaders” www.zdnet.com October 15, 2019

Admittedly, this has nothing to do with philanthropy and everything to do with the erosion of manners, common courtesy, and civil discourse (“saber-rattling on economic or military issues are generally not in violation but promotion of terrorism; clear and direct threats of violence or sharing intimate photos” would be).

I’m including this one as a fitting headline to end on because it sums up the year so well. Every day in 2019 it seemed that norms were bent or broken, and institutions changed or crumbled before our eyes. Just when it seemed things couldn’t get more surreal, they did.

We look to our leaders for steady reassurance in times of uncertainty only to find that they, too, are caught up in (or promoting) the incivility and blurring boundaries around us.

Disruption is only good when it births positive change. Otherwise, it’s just destructive.

During especially disruptive times, it might be best to remind ourselves of the true definition of philanthropy: (1) goodwill to fellow members of the human race especially an active effort to promote human welfare (2) an act or gift done or made for humanitarian purposes. As a sector, maybe it’s time for us to take a page from Twitter and detail our rules for philanthropists and the future of philanthropy.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.