The global philanthropic sector is growing fast as more people acknowledge charitable donations can go a long way in solving environmental, social, and governance issues. Some of the factors driving the sector’s tremendous growth include a persistent increase in private wealth accumulation; governmental and private efforts to support philanthropic institutions. While philanthropic advisory services have also had a hand in accelerating growth, the burgeoning sector faces significant challenges.
Some of the challenges curtailing the growth and expansion of philanthropic advisory services businesses include:
Legal and Financial Environment
Challenges in the legal and financial environment pose the biggest risk to a philanthropic advisory services business. While some countries boast of solid legal frameworks that encourage growth, others come with multiple legal and tax impediments that limit the ability of philanthropy advisors to optimize their operations and encourage more people to become fully engaged in philanthropy.
The full benefits of philanthropy will not be achieved unless the legal barriers that inhibit the creation and operations of philanthropy advisor firms are lifted. Some of the obstacles include restrictions on capital formation and endowment building. Taxes on income from investments and laws regarding taxation of charitable gifts also pose some of the biggest challenges.
” There is a general consensus that in countries with limiting and restrictive legal and tax structures, improving the legal environment will go a long way in encouraging more philanthropy. Governments need to create a more sympathetic legal and regulatory environment to enhance philanthropy giving,” said The Altruist League Managing Partner Ekaterina Chernova.
Cultural attitudes and values
Cultural attitudes and values are also having a significant impact on the provision of philanthropic advisory services. The businesses can only flourish if the target market and society have a strong and vibrant role for civil societies.
The general public attitude toward civil society can significantly influence whether the philanthropy advisory services businesses succeed or fail. The benefits of corporate philanthropy have been curtailed in communities where there is a pervasive lack of trust and confidence for nonprofit organizations and civil societies.
In countries where there is greater trust in small local NGOs and civil society’s philanthropy, strategic philanthropy advisors have operated efficiently, therefore, allowing societies to realize the full benefits of charitable giving.
Individual donor engagement
Charitable giving is mostly influenced by historical, cultural, and religious trends. While some societies boast of established practices and charity and mutual aid trends, the same cannot be said about others. Therefore, it becomes extremely difficult for Philanthropy Advisory Services to penetrate such societies and accrue the full benefits of philanthropy.
Gone are the days when philanthropy was the domain of the filthy rich. For the sector to flourish and full benefits of philanthropy services are achieved, more individual donor engagements are essential. More individual donors need to get involved in charitable giving to promote greater cultural giving.
Capacity and infrastructure
The lack of institutional capacity and professionalism has also been one of the biggest impediments to philanthropic advisory service growth. In countries where charitable giving and the nonprofit sector are still in the early stages of development, philanthropy advisors have hit brick to encourage people to pursue charitable giving.
Additionally, it has also emerged that some of the philanthropy advisors’ firms lack the professional training in management, fundraising, and communication, highly needed to build capacity and infrastructure in such societies.
“Many philanthropy advisors lack policies and processes highly needed to create the transparency and accountability needed to build trust and attract more donors. The weakness in supporting institutional infrastructure has exacerbated such organizational challenges,” said Milos Maricic, The Altruist League President.
For the longest time, philanthropy has been the domain of high net worth investors. However, this needs to change if the full benefits of philanthropy are to be accrued on a large scale. Philanthropy advisory service will have to navigate some of the challenges that have crippled their operations to optimize their services.
Increasing the number of efforts and tailoring programs to specific populations should help philanthropy advisors firms reach out to more individual donors instead of concentrating on a small population subset. Donor’s segmentation can significantly impact the number of people mobilized to enhance charitable giving, ensuring more charitable resources are pulled together.