Inflation is having a somewhat negative effect on all forms of economic activity, including philanthropy, but giving overall is holding up, say donor-advised fund managers. “In 2021, the U.S. had a strong year economically and also experienced inflationary pressures not seen in several decades,” said Una Osili, associate dean for research and international programs at the Lilly Family School of Philanthropy at Indiana University, writing in the school’s annual report.
“While the stock market performed well in 2021, there were some economic factors that may have affected nonprofits’ operations, such as labor shortages, supply chain interruptions and ongoing high demand for services,” Osili continued. “The growth that we see for the majority of the [charitable] subsectors in 2021 is a reminder of the resilience and innovation that help to drive the philanthropic sector.”
Amir Pasic, the Eugene R. Tempel Dean of the Lilly Family School of Philanthropy, added in the report, “The environment for giving is evolving in multiple ways. Robust economic growth translated to strong performance by institutional forms of philanthropy such as foundations and corporations. Yet these economic indicators may differ from what most people experience in daily life. The broader effects of the pandemic may have shifted individual jobs, incomes, lifestyles and family and financial priorities, potentially affecting their giving habits.
“The novel circumstances of the current giving landscape,” Pasic continued, “underscore the need for this report and other high-quality research, which help us understand how widespread these changes are and how they are affecting philanthropy.”
“Philanthropy is what our country was built on, which is why it has been sustainable even in economic hard times,” says Jodi Rosen, director of business and product development, at Vanguard Charitable. “The current inflation only affects the world for a short time period. Philanthropists are looking at the long term.”
For the first half of this year, donors increased giving by 14% at Vanguard Charitable to just under $1 billion, Rosen says. The average grant is up 6% to $11,000. Possibly because of the pandemic and the invasion of Ukraine, which is causing such suffering, grants to human services causes are up the most, she says.
At the beginning of the Covid pandemic, Vanguard Charitable launched the Nonprofit Aid Visualizer, or NAVi, to help donors locate particular causes that aligned with their interests. This tool has now been expanded for the post-Covid era and is available to the general public on the Vanguard Charitable website. The tool was developed to help donors focus giving on “the communities that are being overlooked with charitable donations,” says Magda Guillen Swanson, research project strategist at Vanguard Charitable.
A donor-advised fund such as Vanguard Charitable is in a good position to help people convert a noncash asset, which they may not otherwise know how to turn into cash, when there’s a need for emergency services in the community, Rosen says.
Schwab Charitable says that it and other donor-advised funds reported an overall increase in giving for all types of assets, including cash, despite growing volatility and high levels of inflation. By the end of fiscal 2022 on June 30, Schwab Charitable donors had made an average of 13 grants each, supporting a total of 117,000 organizations, which was 11% more than they did during the previous fiscal year. A total of $4.7 billion was given to the fund in fiscal 2022, an increase of 27% over fiscal 2021.
What’s more, Schwab Charitable donors increased the proportion of grants not designated for a specific purpose. The unrestricted grants reached 72% of the total, “affording even more nonprofits greater flexibility to put donations toward immediate needs,” said Schwab’s report.
Donor-advised funds are now the fastest-growing philanthropic vehicle in the U.S., exceeding one million individual accounts in 2020, according to the National Philanthropic Trust’s report on the funds. Total giving to donor-advised funds reached $47.85 billion, an all-time high, in 2020, the latest figures available. Grants from the funds to qualified charities totaled an estimated $34.67 billion, another new high. At the same time, the average size of an individual donor-advised fund account is estimated to be $159,019.
The increases in giving are bolstered by the growing interest in donating noncash assets, Heisman concludes. “More than ever, donors are looking beyond their checking accounts for ways to support their favorite organizations and causes,” she says. “Complex assets have become a growing funding source for donor-recommended donor-advised fund grant-making. National Philanthropic Trust donors have supported more than a hundred thousand charities in the last five years, in part due to complex asset contributions.”
And that’s important for advisors as they embrace philanthropy advice using donor-advised funds as a vehicle. Kaynor says that in Schwab Advisor Services’ “RIA Benchmarking Study,” advisors listed charitable giving planning as the number one value-add service they provide.
And donor-advised funds have “become an integral part of their overall planning tools,” he says.