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| Path: Main Street : Resources & Library : Research Articles : Feature Article |
Prepare now for the great Canadian wealth transferby John Hochstadt
September 11, 1995; Canadian FundRaiserTen years from now, will the charitable sector be recognizable? Is hospital consolidation the thin edge of the wedge which will tilt the entire sector onto a slippery slope which will see some charities "merged" and others simply closed? If so, is there any way to avoid that fate through private funding?
Hundreds of Canadian charities have discovered or implemented gift planning over the past five years, and hundreds more will undoubtedly follow. As far as it goes, this is a good thing - we should take pride in enabling acts of philanthropy through creative gift planning. However, there is little evidence that charities are changing their strategies as the much-anticipated "intergenerational transfer of wealth" approaches.
In Canada, billions of dollars will pass through probate over the next decade, and gift planners will work diligently to attract as many of those dollars to charity as possible. But what will happen next? What demographic and economic forecast will we contemplate in 2005?
At the moment, it appears unlikely that future generations will feel as wealthy as the one now passing from the scene - and aside from perceived wealth, there is compelling evidence of the widening gulf in Canadian society between the haves and the have-nots. As more wealth is concentrated in fewer hands, more charities will be pursuing fewer donors ever more vigorously. Fewer donors are unlikely to each support more charities, and the field of fundraising in 2005 may resemble nothing more than the cod fishery of 1995.
A bleak picture indeed - but what is to be done? I believe charities must move now to ensure their future to whatever extent is possible by not only planning more and larger gifts but by endowing those gifts. To continue the fishery analogy, the last great migration of wealth is about to start upstream, and not every charity will catch enough to live on. Every charity and every gift planner needs to start thinking about endowment gifts, and educating their donors about the compelling arguments for endowments.
It seems more than likely that charities will shadow the demographic profile of individual wealth, and that in 2005 there will be some universities, museums, hospitals and others with hundreds of millions of dollars invested and providing annual income - that is, with a greater share of the wealth.
There will be many more, however, facing increased demands for service as their donor base shrinks, and who will end up with a much smaller share of the wealth than they enjoy at present. I know of at least one health-related charity in Ontario that treats all bequests as annual revenue and spends them to the tune of $2 + million annually. Ten years from now, the flow will begin to falter and the millions of dollars received will be spent - and what strategy will preserve the charity then?
I am not a social darwinist, but there are some very good reasons why some institutions survive while others do not. Charities that act now to ensure their future will likely survive; those who fail to recognize and act on this unique opportunity will, unfortunately, become the atlantic cop of the third sector, fading if not into extinction then at best into insignificance. This should be a call to action for the leadership of the charitable sector; a unique opportunity is on the threshold. Make of it what you will, because this offer will not be repeated.
John Hochstadt is Director of Planned Giving and Major Gifts at Mount Sinai Hospital Foundation, Toronto ON.
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