Episode 63: 2021 Year in Review and Prediction Recap - How Did We Do?

Welcome to another edition of “Around with Randall”, your weekly podcast making your non-profit more effective for your community, and here is your host, the CEO and Founder of Hallett Philanthropy, Randall Hallett.

I’m always so appreciative for anyone who joins this or any edition of “Around with Randall”. Today, as we enter the final month of 2021 we want to look back a year ago at the predictions that I put out about the nonprofit world for 2021 and see how we did, and then check out the other half of this podcast which will be the predictions for 2022. So, just as a reminder, a year ago Hallett Philanthropy and “Around with Randall” put out predictions of what we thought would be things to watch, things to consider, things to be aware of for 2021, and eight of them came to the - rose to the top, and frankly I’m pretty proud. We're not that far off. Not sure how, I guess so well. But today's episode we want to take a look at these eight, think about them in terms of what they meant in terms of what we discovered based on the predictions, and then start thinking about what's going to happen for next year so you're better prepared to take care of your nonprofit; getting it ready for a lot of unknown. 

Certainly, when we think of 2021 we will always start with the pandemic and how it's affected certainly nonprofits, but life in general. How it's been challenging for citizens, for those who are business owners, for communities, and most importantly for individuals who were affected by Covid, either directly or through a loved one. It's been a challenging year, and by the way, things look it may get a little better but we're going to be dealing with this for a while. And so the first thing is, I’m not sure it was predicted, but is the ability to be flexible is just critically important. How do you create flexibility in your professional life, in your personal life, financially, so that you have options, so that you can deal with the unknown. 

A year ago we predicted eight things looking into the unknown and i'll run down them real quick and then we'll kind of pick them off one at a time. Number one was, we talked about that when the stats were released, really more for 2020, that there would be a strong increase in the percentage of philanthropy that's a part of GDP and it would probably reach its highest level in history, and even predicted that it would get as high as 2.3 or 2.4 percent of GDP. The second basic prediction that we made or thought was is that basic service giving will increase and will be predominant in much of philanthropy-based on the needs of human beings locally and around the world. Number three is we'd see a strong increase in stock or marketable securities for their attraction, attractive nature, and in-part because we also kind of predicted the stock market would go up and and business would continue and that that would give options for stocks to be much more attractive in terms of donors making financial decisions for profit or for nonprofits. Number four was an increase in usage of cryptocurrency for donations and philanthropy. Fifth is is that there would be a lot more conversation and even some formal investigations into the breach that affected the nonprofit world dramatically, which came from Blackbaud, and what is coming out of a lot of conversations regarding data privacy. Number six was is that we will find a way, we will adjust to doing more cultivation, more relationship-building activity virtually. Number seven was that we're going to see a trouble or reduction in colleges, that universities are going to struggle to stay open and there would be mergers that come of it. And the eighth is is that, interestingly enough, as we look at government and the needs of our world that there would be more interaction between governmental support and non-profits, private-public partnerships, to meet basic needs in a very quick fashion. So those were our eight and so let's break them apart here real quickly. 

Number one was the GDP. Traditionally GDP, percentage of GDP that's philanthropies somewhere just at or below two percent. I had said that I thought it would go up - even predicted 2.3 or 2.4 percent. If we have a bell, tada! It hit 2.4 in 2020. That there was more charity done, $471 million or billion in nonprofit work in the united states, and it's a real tribute to the American spirit and to the generosity of people who wanted to make a difference. And I’ll jump real quickly to the idea of of basic services, which was my second prediction, that it would be an increase. There we saw a 70 or, excuse me, a dramatic increase in basic services in their philanthropy and it reached 70 percent of all philanthropy. Human need in the United States, whether that's housing, food, clothing, basic necessities, people gave to those organizations in the highest levels in our history to help people who needed the most amount of help. So not only did we see philanthropy go up, the idea of the percentage of GDP, but we also saw where it was focused more and more towards basic services. And I talk a lot about this this idea of Maslow's Hierarchy of Needs. We can't elevate ourselves in terms of growth without basic needs being met first: Do I have a place to sleep? Am I safe? Do I have food? Can I care for myself and my loved ones? And I did a podcast on that just recently, so think about the fact that people realized this and said I want to help people who are the most affected by the pandemic so one and two was about increases in philanthropy, we got both of them right. Maybe I’m lucky. Maybe they weren't that great of a guess or that complicated but positives for our industry. 

Number three was the increase in marketable securities being attractive, and while we don't have numbers in totality for 2021, you don't usually see that until January, February of the next year. What we know is the stock market started the year at about $28,000. If we use the Dow Jones as an example currently trading just under $34,000 that you've seen remarkable increases in companies like Amazon and in Microsoft, and in Apple. People's individual stocks and their choices went up dramatically. Certainly, over the last couple weeks there's been some retrenching of positions but, overall, dramatic increase. I can tell you from clients that they are having more conversations with people about their stocks at the year-end than any time in their history, that this is very normal that people are saying “I can make a financial contribution with my stock and not have to pay the capital gains on the appreciation either this year or over the course of years,” incredibly attractive. What I didn't see that's somewhat connected, and I should have, is that the minimum distributions that come from retirement plans qualified plans 401ks, 403bs, Roths, whatever, IRAs, they also went up in the last couple of years, dramatically, and there's more discussion when you now, at 72, you have to begin to push money out, to instead of taking that money personally and paying tax on it, that increase has raised people's minimum distributions, dramatically. And they're finding that there's more opportunity to give through their funding plans, they're the qualified plans through that minimum distribution to give it right to the charity, no tax deduction, but no income or income tax. So it's interesting that that is a ancillary connection to this idea of marketable security. So again we hit that one.

Number four was the idea of cryptocurrency being used more and more often. So this one I don't think was that ingenious but the numbers are pretty staggering. So, according to some sources in, like, the New York Times printed article on this and some others that in 2000, 2020 they estimated that about $28 million was given through cryptocurrency mechanisms to nonprofits for 2021. Just in Fidelity, just in the Fidelity Charity where people who have Fidelity accounts can move money towards donor-advised funds and things of that nature there's been $250 million in crypto currency lining up for philanthropy, we have stories of like the University of Pennsylvania receiving a $5 million gift crypto in cryptocurrency, this is very much on the rise and in part it's because it's also seen dramatic increases. We began the year with, you know, somewhere between $10,000 - $15,000 in terms of value, well it's up - at some points threefold - if you're looking at something like Bitcoin. I’m not sure I understand everything about cryptocurrency. But what I do know is, we're beginning to see it more and more. The question is going to become how smaller nonprofits deal with this because it's not easy, and is there, or are there, places, partners like community foundations that could be the clearinghouse for some of these type of gifts for smaller nonprofits, but it's up dramatically. So we got that one, that's another ding in the positive column. 

The negative. So number five was the breach investigation with Blackbaud. I predicted that there would be some state investigations. Totally missed on this, however there is still a class-action lawsuit regarding the breach and it's obviously a challenge. And in some way, shape, or form, almost anybody I deal with is either directly affected or indirectly affected. So no state has really taken action like an attorney general or a formal investigation, as it yet, which by the way, take away legal, I don't want the nonprofit sector hurt by this credibility, and privacy is important. The other thing is obviously, Covid has dominated state legislatures, attorneys generals, state agencies, in a way that no one could have ever dreamed, so there may be not the time. What is interesting is, I’ve seen it in my business, for me to do my job much of the time I have to have data. Well the complications in me getting approved to receive data through compliant ways has become increasingly hard and costly because I have to have insurance called cyber insurance. That's jumped threefold. So this breach has affected the nonprofit community in a way I didn't quite see and is now personally affecting the kind of work that I do. Interesting. I think there's more to be written here. The lawsuit looks like it's going to go forward sometime in 2022. My guess is they're going to find a settlement of some level. We'll see what happens with that.

Number six is how we build relationships with our donors when we can't see them face-to-face, and a year ago the idea of face-to-face conversations was pretty much not even a thought process. As we got into summer, June, July, August, September things began to open up a little bit but what we found is is that it's really easy to develop relationships via Zoom, Go-To Meeting, FaceTime. It’s… you can do 90 to 95 percent of the relationship building. I’m not saying it replaces face-to-face communication but it's a wonderful augmentation. If someone is sick and you can't see them, maybe they're a long ways away and you don't have the budget to go see them, I think this is an advantage for non-profits that are smaller because they've struggled with travel budgets. If you're a major university you have a travel budget you get on a plane you would go see people. If they snowbird, I’m in Nebraska. If you went to Santa Barbara or or certainly Palm Springs or Phoenix or Scottsdale, if you're smaller nonprofit you don't have the money to do that, this provides an option that most nonprofits didn't have, and I’ve got multiple examples from clients who close million dollar gifts without ever getting in front of them face-to-face. They did it all via virtual and so this is an a tool in our arsenal that can be highly effective going forward and can augment to support the idea of personal communication, personal visits, personal face-to-face communication when we can't do it for various reasons. Big up there. So that was a plus. Got that one right. 

The idea of smaller colleges struggling, or colleges mergers and closing, and this is really sad. So on average, according to some publications, nonprofit universities, colleges, about five-to-ten would close but a year before the pandemic, this last year alone, there were 253 as of this date. Some of the places include Newbury College in Massachusetts, Bloomfield college in New Jersey, Becker in Massachusetts, Concordia in New York, Marlborough and Vermont who actually merged with Emerson, so that was a merger, Wheelock College merged with Boston University, Wesley college in Delaware. I mean, you talk about an old school merged with the Delaware state university system. Holy Family College in Wisconsin just closed. Mount Ida College in Massachusetts was absorbed by the UMass system. There have been more schools that have closed this year than in the last five to ten years combined, maybe even longer. What's interesting about this and wasn't discussed is it at the same time you had these schools closing you saw Harvard announce that it had its largest increase in its endowment year-over-year in its history. So much so that they took money - billions - out of their corpus, out of the investments, and used it inside the school for support so those at the top end did brilliantly, those with investments have benefited it's the schools that had strong reductions. What we know is, don't forget enrollments down this last year about 3.5 percent across the country, the last two years it's down 7.8 percent. That's the largest drop in undergraduate population in 50 years, so their revenue stream of tuition diminished and they weren’t, many schools weren't able to substantiate their payroll and their structure and had to close. And so, unfortunately, I was right on that one. I wish I wasn’t, to be candid, but I think there's more of that to come.

The eighth and final was this idea of additional public-private partnerships. Totally missed this one. I think there's a reason why, though. Very few, very little conversation about how nonprofit can supplement government outreach. Informal ways, informally, I think that's done every day and that's why nonprofits are amongst the best organizations in the community, because they can adjust very quickly. What happened was is that the government put out immense amount of money in either payroll protection or in the Cares Act where they were pushing out money directly to people, and as a result there wasn't as much need for that partnership. People had support, particularly, those that needed it most, and so as a result that direct government relief probably mitigated the need for the partnership. I’m not sure I’m not saying it diminished the need for the nonprofit. We saw, if you watch the numbers and we talked about this early in this podcast, that food banks, shelters, raised more and gave more than they ever have in their past, healthcare had to worry about not just about the health of a patient but do they have the resources for the medicine and things of that nature ,which became more of a challenge. It's not that nonprofits weren't used as much. It wasn't - my my prediction was there'd be more partnership. It doesn't appear that's true. 

So we did okay, about six out of eight when we look at the totality. Not a bad, you know, shooting 75 percent. We'll take it. Some really positive things when we talk about growth. Challenging things when we talk about universities and colleges closing. Sad, but it's the world we live in. What we're going to look at here on the sister podcast of this one is what do we think about 2022. And if I can get 75 percent there, maybe that gives you an insight as to maybe some of the things that are coming for next year so you can be prepared and get ready for the challenges of the next year.

Don't forget to check out the blogs on the website hallettphilanthropy.com. Two, three a week - 90 second reads, kind of of different things I read about, think about, maybe of applicable in your world. Also don't forget to email me if you have questions or concerns. That's podcast@halletphilanthropy.com. Always a privilege and a pleasure to be with you. Don't forget you're making a difference. Your community needs non-profits more now than in any time in its history. There is chaos and concern. Covid, financial issues, people struggling, organizations struggling. Our job is to be the people who can get things done and help others. Don't forget my favorite saying, some people make things happen, some people watch things happen, then there are those who wondered what happened. At the end of the day we are people who make things happen for people who are wondering what happened and there is no better way to live a professional life. I appreciate you. Thank you for your time. Make sure to tell a friend about this, leave me a review on Apple Podcasts or Downcast or Spotify or wherever you grab this, or YouTube. Appreciate it very much. I’ll look forward to seeing you next time right here, looking forward to 2022, on “Around with Randall.” Don't forget, make it a great day.