Turmoil in banking and technology: Optimism for charitable giving?
The wild ride continues! In the wake of Silicon Valley Bank’s collapse, your philanthropic clients may seek your advice on how the recent events in the banking world could impact their approach this year to charitable giving. We’re sharing three factors to keep in mind as you counsel charitable individuals and families.
The outlook is chilly for tech startups and the venture capital firms who fund them.
The tech industry was once booming and it sometimes appeared that many startups could do no wrong. You might have noticed an uptick in conversations with entrepreneurs and venture capital clients about planning for pre-IPO gifts of closely held stock of a tech company or even investing in tech companies using philanthropic assets. Right now, opportunities like this may be rare. A silver lining may emerge, however. As both the failure of Silicon Valley Bank and the overall tech sector malaise shake out, what may emerge is a “more sustainable and streamlined asset class,” which, in turn, could lead to more stable future opportunities for your clients to make gifts of highly appreciated, closely-held shares.
Nonprofit organizations should closely examine their reserve funds.
A nonprofit’s accounts at a bank are subject to the same FDIC rules as a for-profit company, with a few additional twists that could allow a nonprofit to diversify. Many of your clients who serve on the boards of directors of their favorite nonprofits are aware of this and may be working with fellow directors and nonprofits’ executives to ensure that the money is safe. This is an excellent time for any nonprofit to review its reserve funds and consider whether establishing a fund at GCF might be a wise move to maximize a nonprofit’s financial position–whether through a rainy-day reserve fund, an endowment or both–to ensure that the organization can meet community needs for the long term. A fund at GCF can be cost-effective for a nonprofit to access investment options that might not otherwise be available.
Focus on the positive effects of technology within philanthropy.
The softening of the tech sector may very well negatively impact tech and bank stocks, at least in the short term, and therefore could diminish enthusiasm for your clients to gift those assets to their donor advised or other funds at GCF. That said, there is plenty of evidence to suggest that technology itself is increasing the opportunity and efficiency of charitable giving overall. Even amid an industry downturn, tech companies have made many people very wealthy, and their charitable giving stories are likely just beginning to be told. If your client base includes tech entrepreneurs and executives, it’s most certainly appropriate (and likely expected) that you would include charitable giving in your conversations. As with many things in life, there is no time like the present to start a conversation with your client about making a gift of company stock to their donor advised fund, even if they may be years in advance of a potential sale or transfer of the business to the next generation.
As always, GCF is here to help. For 60 years, GCF has been a trusted charitable partner for generous people in our region. Contact our team anytime to discuss your clients’ options for meeting their charitable giving goals, even in today’s challenging economic climate.