Noreen Rasbach’s recent Globe & Mail article suggests that “perpetual giving” – establishing endowed funds – is falling out of favour in modern philanthropy. And it’s raised more than one eyebrow in the charitable sector.
A little background. Many donors choose to give a charity a lump-sum gift, which the charity uses as a capital investment. Annual interest from the investment is then used by the charity in perpetuity to fund a program of the donor’s choice. In a university, that might be a scholarship or bursary, or as a fund for operating expenses for a new academic program. The annual disbursement rises and falls, depending on the performance of that investment in a given year. (Carleton’s average annual disbursement is about 4%. You can read more about how we calculate it here).
It’s an arrangement that works well for many donors, and for many charities. Donors get to leave a permanent legacy; an endowed fund ensures their program remains a priority for their charity, no matter what. It can be helpful for charities too, as it ensures stable and consistent funding is available year over year.
But as the article suggests, times might be changing. Today’s donors aren’t as interested in legacy giving, it says. The return on endowed funds – even substantial ones – is proportionally small, which means impact is limited. In a nutshell, an endowed gift does not a transformation make. New philanthropists are often ambitious visionaries; they choose charities that can change the world or solve a problem in one fell swoop. Perpetual giving, in their minds, fusses around the margins of problems.
That’s an overly simplistic summary to a nuanced argument. Truth is different donors have different reasons for giving, and the giving arrangement for one might not make sense for another. But if the article is correct, it’s telling us things are changing, and the trends are clear. Charities might just have to transform the way they structure gifts if they want to attract the donors of the future.
Lots of charities are reacting, including Carleton. Our new FutureFunder allows donors to pick short-term, small-dollar projects that can be funded with a one-time gift (or many small ones, a la crowdfunding). We also collaborate closely with all our donors so that we can understand the scale of your vision; if immediate change is your objective, we can develop gift arrangements that deliver (and provide you with the best possible tax benefits). And don’t forget: sometimes endowed funds may just be the best option. We’ll be sure all the possibilities are clear before you make your decision to give.
What say you, Carleton donors? Is perpetual giving an outdated idea? Send us an email at email@example.com with your thoughts.