New Trends in Philanthropy
3 important trends are occurring in Canada today…
..according to Gena Rotstein, Founder & Philanthropic Advisor at Dexterity Consulting. Each has an impact on how people are valuing and evaluating the charitable partnerships they are entering into.
- Intergenerational wealth transfer (where the money is) – Planned giving and mapping the ME generation.
- Micro-philanthropy and Micro-volunteerism – The role of social media and mobile giving.
- Social enterprise – Making money by doing good.
We have over 85,000 charities in Canada today and that number is expected to double by 2050 largely due to the country’s baby boomer demographic and wealth transfer factors. That wealth transfer is expected to be $8-10 trillion by 2050 ($40 trillion in the US).
Donations are growing too. Affluent Canadians are becoming more philanthropic; they’re giving more every year. In fact, since 1995 there has been unprecedented growth in terms of donations. This increase was given a big boost in 2007 when budget changes allowed Canadians to receive a tax credit for the donation of securities to charities without having to pay a capital gains tax on their appreciated value. The most recent information from Statistics Canada tells us that in 2010 over $8 billion are donated each year – and we only know about tax receipt filings for just 25% of Canadians who make a tax credit claim.
We are also seeing more private foundations created as part of financial planning. Dexterity forecasts that as these private foundations realize the work it takes to keep a charitable organization running, we’ll see mergers, conversions to charitable trusts or donor advised funds.
The baby boomers have a strong trend toward philanthropy which is why it is important that people understand their wealth transfer can only go to one of 3 places: taxes, back into economy or charity – that’s it. For this reason, it is important for donors and professional advisors work together, because when the shift happens someone will be needed to manage the money.
The ME generation and technology
This group of philanthropists (18-25 years) are technology savvy and they what to feel and see change happen almost instantaneously. According to the American Institute of Philanthropy, they do a lot of online research (60-80% Americans check out online website. 40% of donations are made online.).
Their charitable work can be categorized into 3 distinct areas
- Micro-philanthropy – typically loans to small businesses under 100 dollars
- Mobile giving – phone giving is big in Europe (probably because contracts more flexible); yet 39% of Canadians said they’d give by phone if asked.
- Micro-volunteerism – using new tech platforms people globally can connect for short period and do something really exciting; it is challenging for charities but the 20 something age group is pushing the envelope in this area.
There is also a strong grass roots movement to move the Social Enterprise space out of the non-profit and into the for profit sector. In the US and the UK trends are evolving. Social entrepreneurs are changing civic and human services, leadership and institutions to encompass market based approaches for appropriate scale, impact and sustainability.
This means looking at world from the perspective of cost benefit analysis; driving social change by using a business lens. It won’t work for every organization; but it is an important new trend. In Canada, we don’t have a Social Enterprise category for incorporation so it is hard to tell growth patterns. This is something Dexterity consulting is proposing through its submission to The House of Commons Standing Committee on Finance (FINA) study of Tax Incentives for Charitable Donations.
It would mean having a category for businesses that are social mission driven; trading goods or services for a social purpose. The profit from those businesses would be used in part to support related social aims; or the business itself accomplishes the social aim through its operation. Investors in these businesses will expect to see profit, but they will also understand the primary purpose is to drive social change.
The bottom line
So, here we are. Our market place will double the number of charities and donations are continuing to rise; a large baby boomer segment which is controlling the money is looking for opportunities to give and; the ME generation is looking for a high impact, emotional, FAST charitable experience.
How you can get engaged? Start by having a conversation around your client’s social capital and what their social vision is. Here are some questions you can consider to get the conversation going:
- How old were you when you made your first donation?
- How do you talk to your family about philanthropy? How did your family talk to you about community and giving back?
- What motivates you?
- When you look at your community what makes you happy? What do you wish you could fix?
- How would you feel if we could integrate your motivations for community with your overall wealth strategy to not only feed what makes you happy, but also help fix some of the things that you noticed are needed in your community?