Cumberland Advisors Market Commentary – New Trends in Charitable Giving & Declining Confidence in Institutions Examined

Author: Gabriel Hament, Post Date: December 19, 2019
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Over the last few decades, trust in key public institutions has been eroding.
Here are some recent figures compiled by Gallup (https://news.gallup.com/poll/1597/confidence-institutions.aspx) that document this trend:

  • In 1973, 42% of respondents said that they had a “great deal or quite a lot” of confidence in Congress. In 2019, only 11% expressed that level of confidence.
  • In 1979, 60% of the American public said they had a “great deal or quite a lot” of confidence in banks. In 2019, that number had dropped to 30%.
  • The categories of church/organized religion and public schools have exhibited similar trends.

For a possible explanation of why trust in institutions is evaporating—here in the United States and in other countries—please see this piece from The Atlantic (https://www.theatlantic.com/international/archive/2018/01/trust-trump-america-world/550964/).

Market Commentary - Cumberland Advisors - New Trends in Charitable Giving & Declining Confidence in Institutions Examined by Gabriel Hament

Unfortunately, even those institutions focused on eleemosynary activities are suffering from a decrease in public confidence.

According to Edelman, a global communications marketing firm, trust in nonprofit organizations “…dropped nine points from 58 percent in 2017 to 49 percent in 2018” (http://www.give.org/news-updates/2018/01/31/wise-giving-wednesday-drop-in-trust-in-non-profit-organizations-in-u.s).

Although the trend in the public’s attitude toward nonprofit organizations mirrored the overall decline seen across other institutions—such as the media and government—respondents believed that nonprofits (29 percent) were most likely to lead to a better future, “followed by business 22 percent, government 15 percent, and media 8 percent.”

The Nonprofit Quarterly recently published the first article in a four-part series in which author Shena Ashley, vice president at the Urban Institute, sends up an emergency flare to draw attention to a structural shift underway in philanthropy: the precipitous decline in small and mid-sized donors who are contributing directly to nonprofits, despite the fact that total dollars flowing to charities are reaching all-time highs. The historic levels of giving to independent nonprofits and foundations masks the decrease in the number of donors engaging in traditional philanthropy:

  • “According to the 2019 edition of Giving USA, giving by individuals totaled an estimated $292 billion… the second-highest amount in nominal dollars on record.”
  • But contrast this record-setting top-line number with the percentage of Americans making financial gifts to nonprofits: 65% made a donation in 2008; 53% in 2016.

Ashley suggests a series of reasons for the change in the behaviors of small and mid-sized donors:

  • “Kill two birds with one stone” consumerism is supplanting direct charitable giving as consumers purchase goods that support a social mission (e.g. Bombas: “ For every Bombas clothing item you purchase, a specially-designed donation clothing item of the same kind is donated to someone in need.”)
  • Via crowdfunding platforms, peer-to-peer philanthropy is proliferating at a rapid clip through social media channels, which allows users to give directly to an individual in need (see http://sparkgrowth.net/funding-continuum-and-landscape/).

The bottom line: “What is made clear by these trends, however, is that donors are seeking impact through forms of giving that are not intermediated by charitable organizations in the traditional sense.”

How can independent nonprofits and foundations navigate these trends to ensure long-term financial sustainability?

Many of our readers serve on nonprofit and foundation leadership teams. Others have established donor advised funds at a local community foundation. We welcome conversation on how Cumberland can assist with your philanthropic goals.

Read about the trends that NPQ describes as “an urgent matter for the entire sector”: https://nonprofitquarterly.org/why-the-decline-in-individual-donors-should-matter-to-institutional-philanthropy/.

Gabriel Hament
Investment Advisor Representative, Private Wealth & Non-Profits
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