The invisible infrastructure of giving - and why it matters

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A society’s giving infrastructure does not exist in isolation. Its existence is connected to other societal infrastructures – economic, political, and social. How money is created in society impacts how giving occurs.

With this in mind, how might we think about statistics such as the fact that one per cent of the global population owns more wealth than the rest of the world combined? Or that poor economic conditions over the past several years have led to mergers of corporations, further consolidating the wealth of the few?

Or even the connection between economic and political infrastructures, whereby policy reforms benefiting the wealthy are said to help a free market? One such example being the continued discussions of removal of estate tax in the US, which would transfer billions of dollars in assets towards heirs and away from taxes.

All of these events have implications for civil society – and for the operation of philanthropy.

Philanthropic innovation

Is the creation of wealth by capitalism all bad news? Not at all. The wealthy who participate in philanthropy are spearheading some important new models of giving.

Innovation within wealthy philanthropic groups are leading to new forms of giving. Initiatives such as the Giving Pledge, Founders Pledge, and Entrepreneurial Giving help corral the accumulation of this wealth into philanthropic activities. These include impact investing: the blending of social mission and market returns.

Groups are developing which allow shared learning and investment, including Co-Impact, which brings together philanthropists to create system-level changes. And other groups are developing new uses for limited liability companies for philanthropic giving and investing, as used by the Chan Zuckerberg Initiative.

Innovation can be a good thing, as it forces us to ask what might not be working within the traditional fundraising relationship.

The traditional model

The traditional model seeks to attract annual donors, who initially may donate little but often. The relationship continues over time, allowing donors to give larger gifts of money. It further continues into legacy or planned gifts, which occur after a donor dies. The benefit of the relationship development of this model is in supporting the education of an individual as a philanthropist and providing the charity with a developing advocate.

But charities’ boards of directors often invest in short-term fundraising plans over longer-term relationship building with current donors, despite the expense, both in terms of time and cost, for charity to find new donors. These costs are what donors see in the flyers through their doors and advertising campaigns of charities. This short-term approach has additional side effects of burn-out within the fundraising industry. It can also lead to donor fatigue, the phenomenon by which too many requests for donations from multiple charities are met with apathy or refusal from donors who might otherwise have provided support.

Relationship building takes time and resources. Short-term fundraising might help with immediate financial needs for the charity. But without also being coupled with relationship development of longer-term gifts, the charity risks continued expensive fundraising costs and a limit to the number of long-term donors. The problem is not so much that charities are abandoning their long-term donors – but that they are facing increased competition for these donors’ attention.

Wealth management

Instead, supporting the agency of wealthy donors are wealth managers, lawyers, and accountants who are beginning to fill a “most trusted advisor” role. This is something that used to be filled by the traditional fundraising relationship.

Donors may have consulted with their financial advisers on philanthropic advisory in the past, but requests for philanthropic services from donors’ financial advisers are growing. One 2015 report found that UK philanthropic advisory services are increasing among wealth advisory professionals, lawyers, and accountants driven by inquiries from their wealthy clients. This has created new mandates for financial advisers and their firms to provide these services to support their clients.

The provision of these services also creates a image of a socially-conscious financial firm, which may be helpful for hiring employees and boosting public opinion.

From invisibility to visibility

So the agency of the wealthy may be creating an increasingly insular giving infrastructure. It has been pointed out that charities have become increasingly reliant on wealthy donations and political power is being consolidated by wealthy philanthropists. Perhaps evidencing this, one 2016 US-based report indicates that middle class givers are itemising less charitable gifts than a decade ago and low and middle dollar donors are giving less than in the past.

A sociologist recently asked me whether the wealthy and wealth managers will increasingly direct how social issues are managed within society. This is a scary prospect to some. But we can build the giving infrastructure anyway we want to. The challenge is that against a backdrop of financial and political inequality, it is difficult to imagine how philanthropy does not simply follow suit.

The relationships described here are fluid and subject to disruption by even newer innovations on the horizon. We can build, we can innovate, but we must constantly make visible the assumptions by which we are creating this infrastructure.