HOW THE TRANSFER OF BABY BOOMER WEALTH COULD DISRUPT THE PHILANTHROPIC LANDSCAPE
HOW THE TRANSFER OF BABY BOOMER WEALTH COULD DISRUPT THE PHILANTHROPIC LANDSCAPE
Andrea McManus, ViTreo Group Inc
February 5th 2019
There’s a lot of focus on and news in our sector about the dramatic decrease in levels of giving by lower- and middle-income donors, which are due in part at least, to a weak economy. In the U.S., federal tax reform has also significantly lowered incentives for giving. AFP Global addresses the tax reform issues in a January 2019 article AFP Global Hard Scrabble new year's challenges -- tax reformation.
In contrast to that situation, more mega gifts by the super rich have been bestowed upon causes in ways which may or may not be for the greater good, depending on your perspective. I wrote about this in last week’s blog — The Provocateur Top Heavy Philanthropy.
But I believe there’s also good news on the horizon. When the expected, and definitely historic, transfer of accumulated wealth by the baby boomer generation to millennials starts to occur in the next decade, if even a small percentage of these inherited funds is used philanthropically, it will shift the giving landscape in a meaningful way. And that is definitely welcome news for our sector and for the organizations and people we seek to help.
“If only 5 percent of the assets projected to pass from Americans’ estates over the next decade were captured for philanthropy, it could create the equivalent of 10 Gates Foundations, according to a new analysis of household wealth data.”
Transfer of wealth studies are now taking place in both Canada and the U.S. One study recently published by The Chronicle of Philanthropy with the Centre for Rural Entrepreneurship/LOCUS Impact — was reported on by the United Philanthropy Forum in a 2018 article:
“…..Americans held $75 trillion in household net worth in 2017. Nearly 57 percent of this wealth is held by baby boomers, the oldest of whom are turning 72 this year.
The study estimates that over the next 10 years, if the U.S. economy grows at an average of 3 percent annually, nearly $9 trillion in wealth will transfer from one generation to the next. Over the next 50 years, $97 trillion will transfer across generations. If even a small fraction of that transferred wealth were to go to charitable purposes, the positive impact on the nonprofit sector would be enormous.”
United Philanthropy Forum goes on to say, "Many communities across the country have already been using transfer of wealth (TOW) data for their state or region, combined with demographic and market data, to better understand the opportunities for wealth transfer in their areas and as a way to reach out to potential new donors and investors. This can be particularly useful data for community foundations.” (United Philanthropy Forum Transfer of wealth offers big opportunities)
COULD WE BE APPROACHING A GOLDEN AGE OF PHILANTHROPY?
If we view the combination of the enormous financial gifts being given by the incredibly rich, and the potential for giving by those millennials who inherit, do we have a ‘perfect storm’ for improving the communities and lives of those we help? Are we looking at what could be a wonderful opportunity for nonprofits and fundraisers to have even more impact and influence? And if so, are you having the ‘right’ conversations with your donors and potential donors?
Are you focusing appropriately on the area of planned giving as the oldest baby boomers reach age 73 in 2019? For sizeable estates, donating even a small fraction could mean a substantial gift or endowment, and make a significant difference.
And if you’ve been working with baby boomer donors who have a history of giving, are you setting the stage for continuing that work with their millennial offspring? With families who view philanthropy as important, typically new generations will also give — perhaps not in the same way, and not to the same causes. This is a time when, as fundraisers and nonprofits, we can and should be developing relationships with the next generation of donors.
One of ViTreo’s most listened to podcast episodes in 2018 was on millennials. In another more recent podcast, ViTreo’s Vincent Duckworth hosted a discussion with four members of two different families on philanthropy Generations of Generosity -- a discussion with two generations of two Calgary families.
Two earlier blogs — The Provocateur -- Millennials -- Are they really disrupting philanthropy and The Provocateur -- Tomorrow's Philanthropist — dig into the topic of the new pool of philanthropists. What are they looking for in the way of opportunities to give? What matters to them?
Another circumstance which offers opportunities for our sector, and which I’ve written about extensively, is the emergence of the female philanthropist — women are now earning more and they are also going to be the recipients of inherited wealth — another favourable situation for us.
In its white paper, Women and Wealth The Changing Face Of Wealth In Canada and its implications for financial advisors, Strategic Insight, a prominent research firm, conducted interviews as well as used third-party data and research undertaken by reliable and respected firms in Canada and other markets. Their findings indicate that by the year 2026, Canadian women will control close to half of all accumulated wealth. This increase is at least partially the result of Canadian women of all ages inheriting significant sums — some of which will come from baby boomer parents as well as spouses and partners. Strategic Insight also predicts “that at some point in their lifetime, 90% of women will be required to play the role of sole financial decision maker.” (Investment Planning Council -- Women and Wealth)
This situation is mirrored by our friends south of the border. The Economist reports “most of the private wealth that changes hands in the coming decades is likely to go to women." (Economist - Investment by women and in them is growing)
Evolving our approach and a focus on innovation must always be part of our strategy. It’s critical to understand our audiences — whether they be baby boomers, men or women or millennials. What worked yesterday may not be effective tomorrow. As part of any strategy we build, we also need to consider some of the unknowns facing us. In the future, where will giving take place? The impact of crowdfunding, micro-giving and Donor Advised Funds must be taken into account.
All the more reason for us to be paying attention, providing good donor stewardship and building relationships with families. At the ViTreo Group, we work with nonprofit organizations to elevate their performance. As a fundraising and nonprofit leadership development firm, we have extensive expertise in every area of major gift fundraising and philanthropy.
ViTreo offers a clear approach in an industry that can be overwhelming & often overcomplicated. Let us know your thoughts on what’s happening in the fundraising environment — and if we can be of help.
Check out ViTreo's Braintrust as we bring you additional insights into what is and what will be important in philanthropy through our Weekly News Recap and our Podcast.
ABOUT THE AUTHOR
Andrea McManus, Chair, Board of Directors, Partner
ViTreo Group Inc
Andrea McManus is a Partner with ViTreo with over 30 years’ experience in fund development, marketing, sponsorship and nonprofit management. A highly strategic thinker and change maker, Andrea has worked with organizations that span the nonprofit sector with particular focus on building long-term and sustainable capacity.