Note: This article was updated January 9 at 3:45 p.m. to add information and advice from Schwab Charitable.
Charities are still tallying their gifts from the frenzy of the holiday season. But the performance at year’s end of organizations that offer donor-advised funds provides a window into the mood of the most crucial class of supporters: affluent donors, whose giving makes up the bulk of most charities’ revenue.
Though many big fund providers are also still crunching their fundraising numbers, a spot check by the Chronicle indicates that many affluent donors, spooked by the worst December on Wall Street since the Great Depression, held back on gifts of appreciated stock at the end of 2018, a trend likely to continue while the markets remains volatile.
For instance, the National Philanthropic Trust, a provider of donor-advised funds, told the Chronicle this month that it’s received more contributions of cash and fewer of equities than usual at year’s end.
At Vanguard Charitable, which is still counting its 2018 gifts, fewer new accounts were started in 2018 than in 2017, though contributions to existing accounts were bigger. The donor-advised-fund provider lets people start accounts with a minimum of $25,000. Anecdotally, says Rebecca Moffett, chief strategic planning officer, it seems that fewer small accounts were created in 2018 than in the previous year.
Another trend at Vanguard bears consideration as 2019 unfolds: The fund holders most likely to give stock in December were those at the higher end of the wealth scale. “They may be looking to de-risk their portfolio. They may have a different crystal ball than the rest of us,” says Ann Gill, the organization’s chief philanthropic officer. “They may have decided to, quote-unquote, cash out.”
Schwab Charitable, another big donor-advised fund provider, also saw fewer accounts opened in the last month of 2018 compared to December 2017. But the accounts that were opened had a higher average contribution, says Kim Laughton, president.
Like its peers, Schwab is still tallying gifts from December. But thus far, Laughton says, its looks as though both contributions to and grants made from Schwab’s funds have been up roughly 30 to 35 percent thus far in its 2019 fiscal year, which ends in June.
“What’s great is that despite the market correction in December, people had appreciated as-sets to give, and wealthier individuals still had those to give,” Laughton says. Some donors were feeling so flush in October and November that they gave appreciated assets then rather than waiting for the end of the tax year.
Stock Transactions Down
For the Communities Foundation of Texas, year’s end was a mixed bag. Contributions over all in November and December rose 10 percent over the same period in 2017, according to Monica Egert Smith, the group’s chief relationship officer.
“Everything we’ve seen so far indicates that our giving numbers are up. So we’re very encouraged,” Smith says.
But stock gifts were down, both in number and in value. In the last two months of 2018, the community foundation saw 57 such transactions, down from 89 in the same period of 2017. The value of those gifts was $5 million in November and December, down from $12.7 million at the end of 2017.
“The economy has been very good in North Texas,” Smith says of the Dallas-based organization, which manages assets of $1.2 billion. “People may have had a good year financially, but they weren’t going to give stock when it’s not worth as much. Or if they were going to give stock, maybe they decided to give cash instead.”
The organization has reasons for optimism as it heads into 2019, including a record-breaking annual giving day in September, which raised $48 million, up from $39 million in 2017. Smith attributes the rise in donor-advised-fund contributions at year’s end in part to more people becoming aware of the giving vehicle and its advantages.
She’s not swayed by estimates released during and after the 2017 tax-code debate that giving could drop if fewer Americans had a tax incentive to make charitable donations. “I don’t think that the drop-off in charitable giving will materialize as predicted,” Smith says.
However, she adds, “as long as the market is still on this roller-coaster, people will be hesitant about gifting stock because they want to donate it when it has the most value.”
Sitting on the Fence
The Greater Kansas City Community Foundation is among those organizations still tallying its 2018 results, but so far support appears to be up roughly 6 percent over 2017, says Debbie Wilkerson, the foundation’s president. It might have been even bigger, she suggests, if Wall Street had been less volatile.
Contributions were strong for the first 11 months of 2018, she says — then the markets started to swoon. “We didn’t have as big of a surge in December” as in 2017, says Wilkerson, whose foundation has more than $3 billion in assets under management. “It was donors saying, ‘Oh, what I was going to give you isn’t worth as much. I’m going to wait.’ "
At the Greater Washington Community Foundation, contributions were down roughly 25 percent in December compared with December 2017, says Bruce McNamer, the organization’s president. That’s a ballpark estimate, he says; the group’s fiscal year doesn’t end till March. But the markets’ roller-coaster performance at year’s end probably played a role, he says, making donors cautious.
Grants from the community foundation’s donor-advised funds were down roughly 30 percent in December also, according to the organization’s estimates. Donors “sat on the fence a bit” at the end of 2018, McNamer says: “The jostling of the markets’ volatility caused people to hold off.”
The new federal tax code also played a role, he thinks. McNamer says he’s had conversations with some supporters who opted for “bundling” their gifts, making a larger-than-normal contribution in one year and not the next, a means of maximizing their tax benefits.
Donors may have more to give, he suggests — and be less anxious about digging deep for charity — after they have filed their 2018 taxes.
Advice for 2019
What should fundraisers do in 2019 if the markets keep rocking and rolling, the overall economy slips, or other events affect big supporters?
Know your donors. “It’s important for charities to understand who their supporters are and which ones have donor-advised funds,” says Moffett, of Vanguard, because they may decide to give through their fund rather than directly.
Be available to your biggest donors — timing matters. At year’s end, as the markets roiled, Wilkerson and her fundraisers at Kansas City’s community foundation tried to keep donors aware of their options and stayed ready to fly into action if a supporter’s gift of stock was ready for transfer.
“Be available and timely,” she advises. “If today’s the day, then today’s the day! We made sure we were there for donors up until the very last day of the year.”
Help affluent supporters think about the full range of their assets. If donors’ stocks are tumbling, what other assets could they give that could further their philanthropic goals? At Vanguard, donors gave limited-liability corporations, international securities, and life insurance in 2018. Real estate, art, and other holdings could be easier and more desirable for a donor to give than cash or equities right now.
“Fundraisers, when they’re having conversations with their own [donor] prospects, should be looking holistically at their whole portfolio,” Moffett says. “They should be ensuring that they’re having a broad conversation.”
Update your charity’s online presence. Make sure the organization’s profile on GuideStar, for example, is as complete as possible. Donor-advised-fund providers often use GuideStar or other online databases to give supporters information on specific causes they can make grants to.
Says Moffett, “The more information that charities can put into their profile, the better.”
Stay alert for opportunities. “Based on our year, donors are thinking about this all year long as opposed to just in December,” Wilkerson says. “Which is the good news.”
Emphasize a charity’s work. Nonprofits, says Laughton of Schwab Charitable, should keep appealing to their donors’ values. “Continue to focus on the mission and relating to donors around the mission and what they’re trying to accomplish,” she advises.
