Predictions often relate to generosity at this time of year. What will I find under the tree? Which gifts would my loved ones appreciate most? Of course, this generosity is guided by wish lists, letters to Santa Claus, not-so-subtle hint-dropping, and so on.
But what guides the generosity of charitable donors as the Dec. 31 tax deadline for giving approaches? At Charitable Impact, this question is at the heart of what we do, and it leads me to the first of three interrelated predictions for 2020:
1. The number of people participating in giving will continue to decline
Despite the fact that Canadian charities are spending more on fundraising than ever before — nearly $2.6 billion in 2016 — fewer people give to charity with every passing year, and those who do give are giving less.
This downward trend will continue for as long as fundraising dominates how most people interact with the charitable sector. While it does raise money for charities that ask well, or that ask most often, fundraising is essentially a sales mechanism that doesn’t have a good enough track record of engaging people to make giving part of their everyday lives over the long term. No wonder the wealthiest 10 percent of donors — those who are already engaged with the sector — make nearly two-thirds of total donations.
Data on fundraising shows that people tend to give more often simply when they are asked to do so — at the cash register, on the street, via online crowdfunding campaigns and so on. Charitable Impact’s research has revealed that this kind of unsolicited reactive giving leaves many donors feeling unfulfilled, which in turn is fuelling the donor fatigue that is leading to a very real crisis in the charitable sector. Donors who don’t experience the joy, purpose and impact that comes from giving more intentionally are less likely to invest the time and talent necessary to continue to develop as a donor.
2. More Canadian donors will start using donor-advised funds as they become more accessible and engaging
Historically, donor-advised funds (DAFs) have only been accessible to large donors seeking less expensive and more administratively friendly versions of private foundations. At the same time, tech companies focused on the charitable sector have tended to provide tools for charities and fundraisers. This had led to a lack of objective support for donors.
By using technology to democratize DAFs, their true potential as giving vehicles for the needs and wants of all donors is being realized. Like an online bank account, a free Charitable Impact DAF allows anyone to find and give as little as $5 to all their favourite charities from one place, and provides the means to take the time to plan giving, connect with other donors, and receive help from our team to make the biggest impact possible.
I predict that DAFs will play a critical role in the re-engagement and development of the Canadian donor, no matter who they give to, how much they give, or how experienced they are with charitable giving.
3. The Senate Special Committee will continue to look for problems when it should be seeking solutions
Every Canadian should be encouraged to create change in their own way, whether they are giving five or five million dollars. This is why the Senate Special Committee on the Charitable Sector should focus less on the perceived pitfalls of high-net-worth philanthropy, and more on finding ways for the sector to engage with as many Canadians as possible and develop them into becoming ongoing contributors of time, talent, and money. If Canada doesn’t succeed at reversing the decline in donor participation, the charitable sector is in deep trouble.
The minimum amount a registered charity is required to spend each year on its own charitable programs, or on gifts, is set at 3.5 percent of total annual donations. In reality, Canadian DAFs disburse an average of approximately 17 percent of their holdings each year. While I support regulators considering a change to this disbursement quota (or DQ), the real problem to focus on is donor engagement. I’ve never met or worked with an engaged donor who didn’t easily exceed the minimum DQ thresholds. You can’t regulate donor engagement. That’s why the Senate Committee needs to carefully consider the risks of donor attrition if and when it brings more regulation to the sector.
By building engagement, good intentions will turn into good deeds more consistently, more frequently, more extensively and yes, more joyfully.