It’s been three years since the Covid-19 pandemic swept the globe and wreaked wide-ranging havoc on so many areas of the economy. Then came inflation, rising interest rates, and a volatile stock market. Now, advisors and clients are also dealing with concerns about the health of the banking system in the wake of Silicon Valley Bank’s collapse.

Your philanthropic clients may seek your advice on how the recent banking world events could impact their approach this year to charitable giving. Here are three factors to keep in mind as you counsel charitable individuals and families. 

1. The outlook is chilly for tech startups and the venture capital firms who fund them.
When tech was hot 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, though, 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 occur 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.

2. 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 nonprofit boards are well 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 the Community Foundation might be a wise move to maximize its financial position–whether through an endowment, a rainy day reserve fund, or both–to ensure that the organization can meet community needs for the long term. A fund at CFAAC can be a cost-effective opportunity for a nonprofit to access investment options that might not otherwise be available. Furthermore, CFAAC is committed to helping an organization exercise outstanding stewardship of its funds, including honoring donor intent.

3. The positive effects of technology on philanthropy.
The softening of the tech sector may negatively impact tech and bank stocks, at least in the short term, and therefore could diminish enthusiasm for your clients to transfer those assets to their Donor Advised or other funds at the Community Foundation. That said, there is plenty of evidence to suggest that technology itself is increasing the opportunity and efficiency of charitable giving overall. In addition, even in the midst of 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 always CFAAC is here to help. Contact our team anytime to discuss your clients’ options for meeting their charitable giving goals at info@cfaac.org or 410.280.1102.