Episode 262: Nonprofit Predictions - Looking into 2026
As Mr. Rogers would say, it's another beautiful day in the neighborhood right here on this edition of Around with Randall. We're going to look into the future a little bit, try to figure out what 2026 might look like, give you some insights. I have been very pleased and somewhat surprised that over the years, as I've done this prediction show, that I'm running between 80, 75 and 80% correct or accurate.
When you look at the kind of the pronounced occasions that I have looking forward into a year. So hopefully that continues for you here. And maybe there's some things out of this that you can take toward looking at making adjustments, changes, alterations in your strategy for 2026. I have ten different predictions that I want to attack today.
Looking into the future starting January 1st of 2026, for the 365 days, that will be 2026. Let me start right at the top. I think there will be a continuation of what might be thought of as a shrinkage of our donor base, that we will continue to hear about. Talk about, feel the changes that the annual giving programs that we maybe more traditionally have depended on for a lot of baseline nonprofits.
It's part of the culture that that is going to continue to shrink. At the same time, I do believe that there will be a either a steadiness or a increase to philanthropy. When we hear about the giving you a say report, a little school philanthropy partnership with the giving a suit, which I'm a proud member of, that there will be a continuation of either steadiness or growth in the overall philanthropic numbers.
What this means is, is that the model that we need to worry about, think about, deal with, which there's pushback at times. But I think the numbers show it to be true. It's we're in the 97 three model that 3% of the people are making up 97% of the dollars. So your ability to identify who those 3% are, that have means that are connected and have a likelihood build great relationship with them.
Think about how the organization can do things. That is transformational meaning, impact, value, quality, change in lives and be able to articulate those to the right people are going to be a hallmark of success. And so the implication here is, is that we have to not only identify, but maybe more importantly, and I don't talk about this enough.
Steward, those who we know might have resources who are giving to higher levels of relationship opportunities. The other thing is, is that we're going to have to individualize more of what we do when it comes to cultivation and stewardship. So the first is a continuation of a shrinkage of our kind of totality of donors. But yet fewer people are going to make a bigger difference, particularly those with wealth.
The second thing is, is that I think there's going to be a full embrace of donor advised funds becoming maybe even dominant in terms of growth for U.S. philanthropy. They will become the center point of which we're going to have to make radical changes to the way in which we build relationships with our donors, as they're using third parties.
Can you foundations. Fidelity. Schwab. Other investment houses that hold those resources and by the way, hold those relationships as well, which makes it more difficult for us to build kind of the individual relationships that we've known in our past. At the same time, I believe that there will be major conversation around not only donor advised funds. So the answer is that donor advised funds will see continued growth.
But number two is a policy conversation. What we know is, is that donor advised funds have seen dramatic increase in the average size of the fund. And then if you throw in the, privately held foundations, so their own fully formed foundations for individuals, families or entities that the average size of these endowments or funds has grown dramatically.
And I think there's going to be some push in Congress. I think it may depend a little bit on the election for the House, but I think there's going to be a larger scale discussion around should there be more requirements to push that money out of donor advised funds, out of private foundations, to get them to be used in the community?
Remember that you receive a tax deduction when you put it in the donor advised fund, but you don't have to spend it. And to some degree, that's similarly true of private foundations, although there are minimum requirements of 5% of the distribution. But it's not major dollars, particularly if you're making ten, 12, 14% on your investments. All this is to say, I think that we're foundations and donor advised funds are going to be, at least in the discussion.
I'm not sure legislatively, we'll get to all the policy change where they're going to have to provide more resources into the community based on the fact that they're getting tax breaks for this. And that money is, in some cases, sitting and not being used for the betterment of community. Definition. Philanthropy. The reason that we have tax deductions from a social, economic perspective, as well as a societal perspective, is to encourage people to help their community.
The funds are sitting and holding funds. I'm not sure that's actually doing the intent. And so I think there will be a conversation here. It'll be interesting to watch. So number two is increased donor advised funds really pushing the envelope as becoming for many people with wealth a huge player in what we do. And number two is that there will be some policy conversation about the large size of some of these funds and getting that money into the community.
Number three is, is that particularly with the stock market that we have seen this last year, that cash giving, check giving pledge giving with cash, or what I would think of as cash equivalency will be begin a trend of diminishment. And that for those with means it'll be into stock, private equity, real estate, even crypto. It will begin to overtake cash or cash equivalency for the most affluent donors.
What's happening is, is we've seen this K, recovery economically where people are doing better smaller part of the K going up more doing, probably having more challenging times at the bottom part of the case. Think about the letter. And not being able to maybe to give quite as much is that people at the top end of the K are invested in the markets.
They're seeing immense growth over the years, particularly if we look at the last three. And that's going to really push the idea of how people can choose to give if they want to give, and that the bigger part of their assets. And I'm not even talking about planned giving. I'm talking about they want to make a gift. Now, the best way to do so is non-cash.
This will also put pressure for something for you to think about. Do your gift acceptance policies stocks. Easy, but are they aligned for more creative gifts like crypto or private equity, what is it that you can take? How you evaluate it? How do you, you can take it, sell it if you want. How do you steward those donors?
Gift acceptance policy. Back office capacity. The complexity of gifts is going to become more important. So these connections to the processes we have and the people we have are going to be important if we want to maximize giving options or opportunities. So number three is, is that non-cash giving is going to begin to overtake cash in terms of a viable way that the affluent or the wealthy can give.
Number four, I mentioned this not in number three, but I think it is its own standalone. I think that we're going to begin to see a really strong multi-year acceleration of a state and in giving discussions. This is where the assets are. I've talked about this in a number of podcasts, talk about with my clients all the time, the wealth transfer, the wealth of the United States, 90% or so is behind what I call a marketable wall, meaning it's not in savings accounts or checking accounts or stocks.
It's in 401 K's. It's in mutual funds land. It's in private equity. It's in business. What we're going to begin to see is, is that plain giving conversations, particularly with give you two examples, small business owners, I know that one or even physicians who will purchase into, let's say, a physicians group. Now they're getting to retire. Things like charitable remainder trusts are going to become really important, whether it's a lead trust or an annuity trust or a unit trust.
But there's a movement afoot, particularly with the assets of private equity, to buy out smaller companies, which makes entrepreneurs credibly wealthy very quickly. The problem is, is that wealth is not liquid and they're going to pay huge taxes on it. This becomes part of a plain giving conversation. So you had kind of where I kind of see a sense of entrepreneurship, particularly coming out of the kind of the technology driven, opportunities that presented themselves in the last 10 or 15 years.
And then on top of that, with Covid, a lot of small businesses started. And then the changes in health care, where doctors are buying into their own practices, like an orthopedic hospital. And then on top of that, the wealth transfer of 80, $90 trillion over the next, you know, 25 to 30 years, this multi year acceleration of playing, giving is going to become more important.
I think 2026 will be the starting point. I'm not sure we'll have all the data for that, but I think what we will have is some anecdotal like, well, people are beginning to really think about this more concretely when it comes to philanthropy. Number five is, is that there's going to be a continuation of acceptance when it comes to AI.
But I do think that there is a moment here where people are instead of just rushing for AI, the question becomes, does it actually work and do we use it? More importantly for a fact, I think donor identification is something that I has launched into pretty strongly. I think more and more people are accepting of that, but I think it's going to really begin to push itself on stewardship, portfolio management, and also the idea of forecasting that we may get finance offices, in particular with the forecasting, looking at AI based on all the data that may have come in to figure out what might be possible, particularly as the margins in nonprofits are narrowed
based upon either pay or sources, i.e. in health care or education, governmental sources where they're not getting as much. Or we're seeing a diminishment of annual giving, so we're seeing less dollars there that that forecasting using AI may become something that's much more important. Then on top of that, we're already beginning to see stewardship being, revolutionized by some organizations using AI to create individual stewardship opportunities or plans or connections to really important donors.
The implication here is, is that your organization's going to have to figure out what it can use and how it can be effective, and not just kind of assume that, hey, we're going to, I guess, do this at some point. What is it you want to do and how do we do it? Well, so increased ideas on AI for innovation and expectations of usage.
Really trying to use it more effectively. Number six is, is that when we look at the types of philanthropy, I think over based upon this last year with inflation, the government shut down things of that nature. There will be a continuation of basic services that will be increased attention for many philanthropists. Food, housing, basic things. This kind of the what I may call is sort of a safety net giving in that it what it is, is allowing people at their kitchen table to have more resources, in this case food, housing, whatever it might be.
I think there's also going to be a continuation in general around the human services components of nonprofits. So things like mental health, I think will also increase. I've said for the last couple years that when we talk about the different sectors, that there's one that I keep thinking it's going to see a bump, but I think inflation and economic upheaval has caused it to pull back.
And we'll talk about that at number seven. But I think basic needs mental health, housing, the safety net giving will see an increase in attention as more and more people are probably turning to that as a series of options. Number seven is what I was talking about a moment ago. I predicted this last couple of years that climate and environmental giving will continue to grow, but I do believe it's going to become more data driven, that there are some philanthropists who are asking really important questions about climate and environmental efforts by nonprofits about, show me the ROI.
What is the measurable impact? Not the ideology or the messaging. I think this is an important delineation as climate and environmental philanthropy has grown up much of the time. I kind of viewed it not doesn't mean it's not impactful, but it's more about the ideology and the messaging. And I think there's some people finally beginning to say, what are we actually doing?
What can we show us results. And I think that's really, really important in this discussion. So climate, environmental giving continuing growth. But I think we're going to start seeing a multiyear move towards really analyzing the ROI of the of the different opportunities that climate and environmental giving provide to show impact, which I think is pretty important. Number eight is, I think, a strong continuation of what I think of as mergers, acquisitions, network restructuring.
You can call it a lot of different things. I think the small universities colleges are going to continue to see challenge. I think some independent schools at the high school or lower levels will begin to see those challenges more often. I think there's going to be mergers in places like the YMCA and the Boys Girls Club as they look at trying to reduce exposure expenditures that they are strong, likely candidates for that consolidation or restructuring that donors are going to become.
It may begin to push this issue of asking questions about sustainability and long term viability. And so organizational decisions by boards of this idea of based upon financial stress, of making decisions about who we are and what we do, is going to become more and more of an ever present question for nonprofits. And I think I mentioned in the review of 2025 predictions, I have a client who this they happen to be the big dog, but they're being approached by a number of nonprofits saying, we're not sure how we are going to continue, and we'd like to find a way to partner or to merge or to consolidate however you want to put it, to allow the organization's mission to continue. I think that's going to be predominant in a lot of different parts of the nonprofit sector.
Number nine, based on all of this. So when we talk about certainly about mergers, consolidations and closings, hopefully not as many, but also about the prioritization of I, when we talk about DAFs, we talk about the changing nature of what I think philanthropy is going to see over the next 5 to 10 years in particular, that board expectations are going to become more of a conversation, more focus on financial literacy, fundraising, accountability and strategic governance that the days of a board showing up and having lunch and doing a mission moment, reviewing some finances that they may not have understood individually.
So, they were presented very well. They're accurate, but maybe not every board member gets the finances, that there's a conversation about what the CEO is doing or the executive director, and then all of a sudden we move on to the next board meeting in a month or two are coming to an end. Boards are going to have to become more sophisticated, more ownership responsibility for the nonprofit.
This is all based on economic insecurity, increased public scrutiny, the fact that the donor environment is changing. The implication here is, as a nonprofit, you can have to invest more in board training, orientation, governance and structuring to ensure that the board is the owner's representative. Now, the owner of a nonprofit is the community, but the representative is the board members, and they have a responsibility fiduciary to do their jobs.
The question is, is going to the meetings and not being actively involved, asking questions. Is that considered involved or fiduciary responsible? I think the move is going to start being no. You have a responsibility to go out and make connections to make introductions, maybe even to be a part of a solicitation. And that's on top of the fiscal responsibility that approval, the 990, an approval of a CEO or an executive team, approval of a budget that there's going to be more strategic.
Who do we want to be in five years, and how do we get there? That's about board engagement, and I think we're going to start hearing more and more about that. Number ten. And this relates back to number five in terms of I. But I think that the ability to individualize communication stewardship for donors with video I messaging segmented storytelling, you know, even things like virtual reality experiences, that's where stewardship is going to land.
Now I can handle some of that. But some of that is actually building out the processes and procedures that are really important. I think that that because of the limited number of major donors, as we see that 97 three model becoming more and more present, larger dollars coming from fewer people, then the ability to steward the people to get to those dollars becomes more important.
I think that's something we're going to be talking more about. The implication here is that stewardship is going to become more and more of a strategic initiative, not only of the organization, but the board, and it's going to become a driver of pipeline development at higher levels eventually, hopefully into, as I mentioned, with number two, donor advised funds and plan giving transformational gift opportunities through alternative, not terribly alternative, but we've depended on cash and pledges.
Now we're going to start changing that. And if there's fewer people doing it, the ones that connect with their donors are the ones who are going to drive success. So all this has to do with up a really elevated discussion about how do we personalize, at a bare minimum, this idea of stewardship. Is it that at least some moderate personalization becomes the new standard?
We just, you know, your annual giving report that says the same thing to everybody may not be enough anymore? I think that's what we're going to start to see in 2026. So there's ten real quickly that the donor base continues to shrink, dollars continue to stay same or go up, which means fewer people are doing more. Number two is that donor advised fund and plan Givings are going to become part of more common vernacular in terms of way people make gifts, but there's also going to be some policy conversation or direction on, you know, these huge sums of money just sitting on the sidelines in community foundations and other fiduciary response are organizations like Schwab
or Fidelity or other brokerage houses. Number three is it non-cash? Giving is going to become an elevated conversation as we have more and more people who will have IRAs. And for one case and Roth and things of that nature, how do we work with them? And plus that includes on top of it the incredibly elevated stock market and investments that people have to give appreciated stock throwing crypto on top of it kind of worthy conversation.
Make sure you're prepared. Number four is a plan. Giving begins a multiyear acceleration around because of the wealth transfer because of entrepreneurship training, people try to figure out how do I minimize my tax on sell something opportunities there. Number five is that I fundraising innovation expectation are going to become more of the norm. We're going to start pushing into stewardship portfolio management.
And as I mentioned, forecasting that finance may want more of a handle on how much money we're bringing in and what we think of. And I'm going to use AI to figure that out. Number six is that basic needs kind of that safety net giving housing, food, things of that nature are going to become more prominent because of the inflation that many people have felt.
And the fact that I really believe there's kind of a whole of those that may not receive as much support, they may not be at the eye needs of snapper, of housing support, but all of a sudden they're also short money. So there's more pressure on them to find ways to make sure they take care of themselves and their family.
Climate will continue, an ever present growth, but it's going to become more based on data driven decisions rather than what we might be thought of as ideology or messaging. What is it you're actually doing? Hey, prove it's getting done. Number eight is is it works? Can you see mergers, consolidations and restructurings depending on the circumstances? As nonprofits are fighting increased costs from personnel to inflation to just lack of support, depending on the organization where the revenue streams are, number nine is an increased, conversation or role for the board to actually own the organization would be the owner's representative.
Being more engaged with, you know, certainly with the finances, but also with, and we think about financial literacy, fundraising and strategic governance and strategy. And number ten is a personalization of stewardship that becomes the norm. It's not okay just to send one thing out that it looks the same to everybody. How do you moderate that to meet donors where they are, to elevate that conversation?
There's ten my best thoughts for 2026 I'm hopeful that when you listen to these you're like, wait, we could do a little piece of that. We could do a little piece of that. We if you're really wanting to do something with this, what I recommend every year is take these ten have staff meeting and say, look, what are we doing about this?
This crazy guy says he's been not too bad on predicting what might be coming, maybe a year ahead. Are we prepared? What what's our plan here? And what you'll get is a great discussion and a staff meeting, or with a board to talk about what it is we can and should do to be ready for whatever happens. And that strategy at its finest.
We're not sitting back waiting for it to happen. We're planning to have options on the table no matter what happens. Big difference. Not only in the way you perceive or take care of yourself or plan, but how you execute it as well. Being the last episode of the year in 2025, I want to thank everyone who has joined at any one episode.
I'm always stunned at how many people are listening. I hope that means that there's value in this. There's also, I hope, value in the blogs. I mention them every podcast at hallettphilanthropy.com/blogs. Two per week, just to give you something to read about, think about. I read an awful lot. I sleep a lot less, so I'm always trying to pick up stuff.
Where is there an interest or something of worthy of note and then pass it along to you? How of philanthropy.com backslash blogs. You can get an RSS feed right to you, and if you'd like to number of them. In the last quarter, there have been episodes where there have been individuals who've emailed me saying, hey, can you talk about this?
I've got a comment or concern or question, please email me podcast@hallettphilanthropy.com. I hope you've had a good year. I hope you understand the value that you bring to your nonprofit, to your community. Whether you're a board member, a CEO, CFO, beach gift officer, infrastructure special, that's, you know, giving me to make a difference. We all have something to give back.
And my hope is, is that you sense the value of that. I hope that's recognized by others, but also by yourself. Remember three kinds of people in this world. In any one second we're breathing. Some people make things happen. Some people watch things happen. Then there are those who wondered what happened. Were people in philanthropy and nonprofits, particularly with our donors, partnering with them to be people who make things happen for the people in the places and things in our community that are wondering what happened.
That's a great way to spend a career, a life, a professional engagement, knowing that you're making a difference. I hope you can see that in the media. When you look at yourself today, tomorrow, whenever, and I want to thank you for the opportunity to serve you not only in 2025, but as I look back, more than five years of doing this on my own, and I look forward to continuing in 2026 as well, I wish you the best of 2026.
My fondest and most heartfelt wishes for a great New Year. I look forward to seeing you on the next edition. Right back here on A round with Randall. Don't forget, make it a great day.