The Future of Fundraising: 3 Trends That Will Impact Nonprofits in 2023

In 2022, Americans experienced record inflation, interest rate hikes, a declining GDP and a struggling stock market. Many economists predict the US will enter a recession in early- to mid-2023, and a recent survey that explores Americans’ perceptions of the economy found that Americans are increasingly pessimistic about the economy.

With all this uncertainty, what do nonprofits need to consider when it comes to fundraising?

We know that giving increases when donors feel good about their financial stability. Historical data from Giving USA shows that during years of economic growth, average giving increased 4.7%. But during years of economic downturn, average giving decreased 0.5%.

That said, I don’t think nonprofits need to despair. In periods of high inflation or market uncertainty, donors of all demographics are likely to become more strategic about their giving. So, now is the time for nonprofits to be truly aligned with their donors’ goals and individual situations to find a giving option that works best for the time that we find ourselves in.

Donors concerned about the impact of inflation may be more open to gifts after their lifetime, such as gifts in a will or beneficiary designations. And encouraging percentage giving is a better alternative than a fixed-sum-gift because it allows for inflation or changes in an estate’s value. 

Promoting donor advised funds (DAFs) is also smart in an uncertain economy. These funds are already earmarked for philanthropy, just waiting to be granted. According to the National Philanthropic Trust 2022 DAF Report, grants from DAFs to qualified charities totaled an estimated $45.74 billion, representing a 28.2% increase compared to 2020, which itself was 28.3% higher than in 2019.  Nonprofits should talk to their donors about recommending such grants to their organization.

Don’t be afraid to promote appreciated stock during this time. Although the stock market was down in 2022, many long-term investors still have a lot of gain in these stocks. For example, someone who purchased Apple stock 30 years ago paid, on average, 30 cents per share—it’s now worth about $139 per share.

Some donors may be hesitant to create fixed life income gifts such as charitable gift annuities (CGAs) or charitable remainder annuity trusts (CRATs) given that the annuity rate will not adjust for inflation. However, others may crave the stability of fixed income in this volatile period.

A charitable remainder unitrust (CRUT) may appeal to some donors because payouts increase if the trust assets grow, allowing a donor’s income stream to keep up with inflation. Still others may want to create testamentary CRTs to extend the payout period of retirement plan assets from the current 10-year period to lifetime payments for non-spousal beneficiaries.

And now, there is a new option available to IRA owners to fund one of these life income gifts. If they are 70½ or older, they can make a tax-free charitable distribution from an IRA (up to $50,000) during a single calendar year and receive income in return. Special rules apply, so this option will be most popular with gift annuities.

The real key for fundraising professionals is to know their donors’ situations and present giving options that will work best for them in today’s economic climate.

Kasi, you work in the health sector for Stelter. What are you seeing at the forefront where charitable giving is concerned?

That’s right, Nathan. I partner with many of Stelter’s healthcare and medical research clients, and I can tell you—many are hurting right now. 

All were significantly impacted financially throughout the pandemic and 2022 was no exception. Kaufman Hall’s National Hospital Flash Report: December 2022 revealed that despite a slight rebound near year-end, median hospital margins remained negative for the year. Staffing shortages, longer patient stays and heightened expenses (among other things) contributed to this.

At the same time healthcare providers are being challenged with addressing pressing short-term needs (i.e., staffing, supplies), they are also charged with making progress towards their long-term goals (i.e., advancing technology, service line expansion).

Association for Healthcare Philanthropy CEO Alice Ayres recently blogged to AHP members that “everyone is having a bad year.” Ayres stressed the importance of charitable giving as a revenue stream. She’s spot-on. Now more than ever, charitable giving is critical to ensuring communities have healthcare options available today and well into the future.

Finding creative fundraising solutions can play a major role in addressing the short- and long-term needs health organizations face. Blended giving options can provide donors the ability to make a significant impact today and tomorrow. One example is the Impact CGA, which combines a traditional charitable gift annuity with an outright gift of the annuity payments to the nonprofit for a term of years. Or, donors could consider making qualified charitable distributions from an IRA now, as well as making the nonprofit a beneficiary of the account in the future.

Kit, are you seeing this same concern with the nonprofits you work with?

Absolutely. In the environmental space, fundraisers and donors alike are feeling increased urgency to fund bold climate action now as it becomes harder and harder to reach global warming goals. But there are also long-term goals that need attention such as climate resilience and environmental justice—planned gifts will be critical in determining what the future of our planet looks like.

As Kasi mentioned, blended giving can be a great strategy—particularly with mid- and major-level donors. I’m also seeing a lot of organizations continue to invest in marketing basic legacy gifts: gifts in wills and beneficiary designations. As Lynn stated, these opportunities to give after one’s lifetime are especially appealing for donors sensitive to economic uncertainty. Environmental organizations often have a high volume of donors who are very loyal but who give at lower dollar amounts. Legacy gifts allow these donors to make a bigger impact for our planet than they may have thought possible.

Is balancing short-term needs with long-term goals an issue facing the nonprofits you partner with Renee?

Yes, particularly in the disaster recovery space. A recent article from the Chronicle reports that 90% of the $5.2 billion donated to disaster relief in 2020 was earmarked for immediate disaster needs. This leaves longer-term needs such as disaster preparedness and community recovery woefully underfunded.

It sounds like you all agree: Gifts that allow nonprofits to address today’s concerns while still looking to the future are vital in this economic climate.

Yes, I think that’s right Nathan. Also important to being successful in this balancing act is the right messaging. In the higher education sector, I find that most organizations are in a campaign or getting ready to launch a campaign. If they can identify specific funding priorities in their messaging, donors will be able to focus on what the nonprofit needs—be it a short-term need or a long-term goal.

Building a well-articulated case for your priorities helps donors understand more clearly where help is needed and how they can be part of the solution. And it provides donors with the power to align their giving with initiatives that resonate with them personally—with where their passion for making a difference lies.

With worries about the economy’s impact on giving and less money coming in to cover priorities, nonprofits may see their budgets cut this year. Often, those cuts impact the fundraising department (and in particular, planned giving efforts). What advice do you have for fundraising professionals if they are faced with this reality?

Well, first things first—stay the course. Or consider increasing your outreach. I know that is easier said than done. But history has shown that in previous recessions, nonprofits who cut their fundraising efforts lost market share in their area. While you are pulling back, other organizations are stepping up.

Second, be sure you are targeting the right audience…and my advice on this may surprise you.

Traditionally, the best planned giving prospects have been long-term supporters. Here we are talking about loyalty, affinity, recency of giving, age and number of gifts made over a donor’s lifetime. And this still holds true.

However, I think the last few years have provided nonprofits with an additional audience segment—especially international aid and human service organizations.

Global crises and natural disasters have increased in intensity in recent years and people have responded. The escalation of need has spurred tremendous frequency of giving and support from millions of individuals looking to extend their compassion. 

This influx of giving provides these nonprofits with an opportunity for outreach to a new audience. I think it makes good sense to start the legacy conversation with a select portion of these newer donors. Look for those who are displaying growing commitment and whose life stage makes legacy giving a relevant option for them to consider.