Gift Giving In Today’s Tumultuous Times

It’s 9:00 am on Wednesday, November 26 and my inbox is already flooded with emails. Everyone, including our very own Chief Investment Officer, has taken the time to let me know that the BCE Deal has imploded and it’s probably not going to close.   While the Deal’s funders are likely jumping for joy (mostly because it allows them to gracefully back out of a deal that is no longer cost-effective), charities are hanging their heads. Why? Across Canada, charitable organizations were counting on the fact that many donors would take advantage of the potential tax problem (in the form of realized capital gains) that the forced disposition of BCE shares would create for thousands of shareholders. Charities actively marketed to donors, advising them that they could mitigate this tax problem by donating some or all of their BCE shares. A great solution for donors? Absolutely. A happy ending for charities? Absolutely not.

At the end of the day, the BCE Deal failed because of the devastating marketing conditions. While the volatility of our stock markets is now old news, we are only starting to understand the impact on our economy. How will this economic downturn impact donors and charities? How long will it last? How bad will things get?

The answer is simple. No one knows. I was at a conference last week where several notable investment professionals made some pretty bold predictions on the market. One well-respected analyst said we had reached the bottom. The other predicted than we were in for another six months of trouble. The third believed the next 12 months would witness the greatest period of growth in the stock market’s history. Then it was my turn to speak.

I stood in front of the podium looking every bit as professional as the other speakers (note that I am the furthest thing from an investment expert and had been invited to speak on another topic). In my most sober voice, I advised the audience that I was also prepared to make a bold prediction. I proceed to tell a quick story that my five-year-old son had relayed to me that morning. He told me that he had met a girl in kindergarten and that he loved her and was going to marry her.

Staying solemn, I continued with my prediction: “I predict that my son will not marry little Sophie. Rather, I predict that he will likely marry another woman (or man) or perhaps not get married at all.” The audience remained hushed, not knowing whether I was joking or serious. Then, after a few seconds of agonizing silence, everyone finally broke out into a collective laughter. After hearing several dire predictions from the “experts”, I think they were ready for an injection of silliness – and a reminder that if we had sat in the room six months earlier, none of the speakers would have come close to predicting what has transpired in the last quarter of 2008. And maybe I’m wrong too. Maybe my son will marry Sophie (please check the December 2033 edition of GPIC for an update).

So what’s my point? The markets are unpredictable? Yes, that’s undeniably true. But donors are unpredictable too. While it’s important to acknowledge that the market may have eroded the capital of many of our donors, it is impossible to predict what impact this will have on individual donors.

As gift planners, we are carefully taught to explore the distinct philanthropic objectives of each donor. In fact, the purpose of a “gift plan” is to develop a giving strategy that reflects that donor’s charitable goals and their financial circumstances. In these trying times, I would suggest that the fundamentals of charitable gift planning have never been more important. For example, the 45 year old executive’s stock options may have evaporated in value causing him to rethink or even defer some of his short-term giving strategies. The same retooling, however, would likely not be required of an 80-year donor with a very conservative portfolio and a relatively fixed income.

Let’s make no mistake about it. The current market conditions are unprecedented and could potentially usher in a level of economic chaos and hardship unseen by anyone who has not lived through the Great Depression. Everything, from endowment fund granting to charitable golf tournaments will likely suffer. The psychological aspect could be even more devastating. Confidence in every sector (including fundraising) is at staggeringly low levels. But amidst all of this pessimism, the gift planner must do her job. Sit down. Meet with the donor. Listen to the donor. We’ve never been about the quick win or the capital campaign. We’ve been about achieving donor goals over the long term.

(I should note that I do have one nagging fear. My fear is that fundraising departments, impacted by declining revenue, may turn to gift planning as an immediate target for cost cutting. Since revenue generated by gift planners is largely deferred, a kneejerk reaction might be to focus the organization’s efforts on the quick wins, leaving gift planners in the proverbial dust. I can only hope that fundraising executives and their respective Boards do not proceed with this myopic course of action.)

Historically, there is good reason to believe that we will weather this storm. Swings in charitable donations have traditionally (and thankfully) been far less dramatic than market ups and downs. Donations have increased in good times and bad. While there is strong evidence to suggest that this downturn may be more profound, this cannot and should not discourage the gift planner from continuing with the ultimate goal: building long-term healthy relationships with donors and satisfying their philanthropic dreams.