Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

September 22, 2008

Wall Street plunge a wake-up call for charity

The financial quicksand swallowing some of Wall Street’s biggest players is a powerful reminder that nonprofits must find solid ground rooted in the basics, and that givers can dig deeper to address urgent social needs.

Instead of stressing, nonprofits should focus on strengthening their operations, stepping up their fundraising, and diversifying and cultivating their donor base, experts say.

“These situations are always a reminder of the importance of saving and preparing as a nonprofit for the lean times, whenever possible,” says Fred Stang, director of development at the Triangle Community Foundation in Durham, N.C.

Nonprofits “should not go into panic mode” and should “be patient and see how the financial picture falls out,” he says. “They might need to readjust fundraising projections to be more realistic, but they should not make the assumption that their donors do not have any funds available to support their mission.”

Nonprofits that previously may have taken a “fairly passive approach to their fundraising” by limiting their efforts to distributing newsletters and an annual appeal, for example, now have the opportunity to “step up” and use more active tactics like phoning donors, he says.

The slumping economy and turmoil on Wall Street will put more pressure on nonprofits that serve people who are “on the edge financially,” Stang says, with more people likely to lose their homes and jobs, and to find it harder to get loans.

“Things will most likely tighten up for a lot of their clients,” he says.

Doug Bauer, senior vice president at Rockefeller Philanthropy Advisors in New York City, says that, with last week’s roller-coaster ride on Wall Street, “people on both sides of the ask and give are kind of holding their breath.”

Nonprofits should have “as diversified a fundraising base as you can have,” he says.
“So when you hit rocky times like this, you can navigate through it.”

And because the markets “have not performed to anybody’s liking,” he says, investment returns on endowments and donor-advised funds are down.

Individual givers, whether high-net-worth, ultra-high-net-worth or middle class, are “thinking twice about who they’re giving to and why, and probably sticking to groups close to them,” he says.

So givers likely will focus on “need-to-do giving rather than nice-to-do giving,” he says, and will “support institutions that really matter to them.”

The skidding economy, particularly in the New York metro area, is likely to reduce tax revenues, a reduction could cut into discretionary spending for nonprofits that support the social safety net, he says.

Charles Collier, senior philanthropic adviser at Harvard University and the author of Wealth in Families, says nonprofit fundraisers should “try to be a non-anxious presence when you meet with donors.”

Even if nonprofits do not plan to solicit prospective givers immediately in the increasingly grim economic climate, he says, “you can still have a cultivation visit with your best donors and that is a good thing to do.”

In the face of donors’ fears about the economy, he says, “you listen and try not to be reactive to their anxiety.”

At a visit with an older Harvard alumnus last week, for example, Collier says he “asked about and talked about his family, and in doing so got new information.”

Collier also asked about the alum’s estate plan “without asking if we were in his estate plan.”

Many prospects “will value and enjoy a conversation surrounding their family or their estate plan without having to focus on the downturn in the capital markets,” he says.

But he also says a couple he was scheduled to visit last week cancelled the meeting, most likely because “of their own anxiety about where the economy is headed.”

Stang of the Triangle Community Foundation says the economic slide represents an opportunity for givers to “step up to the plate.”

Those who are more fortunate, he says, can “realize that, though our own stock portfolios might have decreased, we still can eat, we still have shelter, we still have a job,” he says. “And that brings out the generosity in people.”

2 Comments:

  • At 1:31 PM, Blogger CharityNetUSA.com said…

    I think all nonprofit bloggers are thinking about this. My thoughts have been that donor retention will become more important now than ever.

    www.charitynetusa.com/blog

     
  • At 12:47 PM, Blogger Gonzalo A. Peña said…

    Thank you for writing such great article. The effects of the storm at Wall Street are being felt across the non-profit world. Given these turbulent times, creativity is more expedient than ever.

     

Post a Comment

Links to this post:

Create a Link

<< Home