It’s the time of year when Americans tend to think about charitable giving. We’re moved by the spirit of the holiday season—and we also know we have to take care of tax planning before the end of the calendar year.
This year, as nonprofit leaders and organizations focus on their year-end campaigns, it’s also time to start thinking about the massive generational transfer of wealth that’s pending in this country. Baby Boomers have accumulated an unprecedented amount of wealth, and they’re getting ready to pass it on to their heirs. Over the next 20 years, a remarkable $61 trillion will be transferred, according to one study.
Naturally, that means organizations have big opportunities for planned giving from their most generous donors. The same study shows that another $9 trillion will be directed to recipients other than direct heirs.
But once that transfer takes place, it could leave nonprofit organizations in a bind. Put simply, is it possible for nonprofit organizations to continue to count on their most reliable donors once those donors are no longer alive?
I think it is. But it will require work—on the part of donors and on the part of nonprofits.
Donors can ensure their commitments live on by creating family foundations, donor-advised trusts, and otherwise working to educate their heirs about philanthropy and their own priorities.
What’s needed for nonprofits, says Gary Laermer, Pace University’s indefatigable vice president for development, is nothing less than a paradigm shift. We need to start connecting with families, not just individuals. We need to articulate a resonant mission, not just relying on tradition, legacy, or old school ties. And we need to learn how to steward donors of all kinds.
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The future of philanthropy, as Gary says, is moving beyond individual relationships to relationships with a donor’s wider circle.
The truth is that nonprofit organizations today spend a lot of time and effort connecting with their most generous donors—and just with that donor. And those donors are often motivated to give by a personal connection to the recipient organization—in our case, most often because they’re an alumnus or alumna.
Preparing for the generational wealth transfer means preparing to widen that aperture.
The first step, as Gary points out, is to begin building a relationship not just with the donor but with his or her family. At the most basic level, that means having contact information and biographical details about spouses, kids, and grandkids. More valuable is to connect with those family members and learn about them: their perspectives, their passions, their interest in your organization’s historical mission.
Ultimately, what will drive an ongoing relationship with the family, rather than just the individual, is maintaining relevance and connection. Organizations like ours need to be able to show how we’re making a difference in the world, and how what we do connects with what the younger generation is passionate about.
We need to build the capacity to engage and steward donors of new generations, with new backgrounds, priorities, new ways of thinking and working.
And we need to be continually telling our story, building our brand, and showing how we’re making a positive difference in the world. We can’t rest on laurels or tradition—we have to be able to make the argument for why we’re doing important work now. The future belongs to those who build it, not those that wait for it.
Of course, that doesn’t mean that tradition doesn’t matter. We have a leg up, a foot in the door. The case we must be able to make to the next generation is that their parent or grandparent built a legacy by giving to our organization, and that they now have the opportunity to build a future upon that foundation.
But we have to show that next generation that we’re doing something worth supporting.
