Philanthropic giving expected to dip

When adviser Randy Beeman met with his clients toward the end of last year, he noticed a marked change in their charitable-giving habits. Most of them, including those who have been donating to charities for decades, were suspending their philanthropic plans for 2009.

Even the “handful” of clients who are still giving are contributing smaller amounts, said Mr. Beeman, a financial adviser with the Reston, Va., office of Milwaukee-based Robert W. Baird & Co. Inc., which manages $1.5 billion in assets.

One of his clients who had taken a hit in the stock market had been in the process of setting up a charitable remainder trust for the university he attended. He decided to stop that process because he’s not sure the income he would get from the trust would be enough in the current economic environment, Mr. Beeman said.

He is just one of a number of advisers who are dealing with clients who don’t want to give away any more money until they have a sense of when the economy might improve, he said.

Adviser Rick Kahler, principal of Kahler Financial Group in Rapid City, S.D., which manages $90 million in assets, said that while most of his clients continued to give to charities last year, “2009 is going to probably bring a different story.”

Most clients have placed their giving plans “in a holding pattern right now,” said David T. Phillips, chief executive of Estate Planning Specialists LLC of Chandler, Ariz., which manages $150 million in assets.

“With the market being clobbered the way it has,” people are focusing on whether they and their immediate families are being taken care of financially, he said. “The charitable side doesn’t come into play until they are confident they are okay.”

Meanwhile, those who raise money for schools, hospitals and other non-profit groups recognize the challenges they face.

“It’s a very difficult time in which to be doing fundraising,” said Tim Seiler, director of The Fundraising School at the Center on Philanthropy at Indiana University in Indianapolis. “Donors’ income and assets are being hit. It’s a double whammy.”

Totals for 2008 philanthropic giving aren’t out yet, but if history repeats itself, non-profit groups likely experienced a significant dip. The longer the recession — which the government estimates began in December 2007 — the greater the percentage drop in philanthropy will be, Mr. Seiler said.

A look at philanthropic giving over the past four decades shows that in years in which there were at least eight months of recession, donations fell an average of 2.7% a year, according to research conducted by the Center on Philanthropy and published by Glenview, Ill.-based Giving USA Foundation.

Certain types of groups also typically fare better than others. Religious-based groups tend to be recession-proof, Mr. Seiler said. Others are affected to different degrees, with colleges and universities taking some of the greatest hits, he said.

At the Anne Arundel Community College Foundation in Arnold, Md., staff and volunteers are expending about 30% more effort raising money today than in 2007, said Stacey Sickels Heckel, executive director of the foundation, which has an endowment of just under $5 million.

The foundation is asking existing donors for more specific gifts. For example, it is asking donors to boost gifts by 14% from previous years because the system is seeing a 14% increase in student financial need, she said. Such an approach helps show donors how they are directly helping students.

The foundation also has been successful in asking existing donors to make an annual contribution equal to the amount that their previous endowment gift would have generated over the past year if market performance hadn’t been so poor, Ms. Heckel said.

With that extra effort, the foundation last year attracted “a bit more” in annual contributions, she said. But new gifts to the endowment are at a low and foundation investments are down about 16%.

In addition, donors are asking the foundation for more financial information and have more questions about how funds are invested and doled out to students, Ms. Heckel said. Many are still finding the resources to give, she said. “There is still generosity out there.”