Philanthropy is always evolving, and this pace of transformation is set to accelerate over the coming decades as we witness the confluence of societal change with the largest wealth transfer in history. Cerulli Associates projects that $84.4 trillion will switch hands between now and 2045, with $72.6 trillion going to heirs and $11.9 trillion to charities, which could reshape the landscape of philanthropy.
The next generation of donors will look markedly different from their predecessors, as this new wave of philanthropy will be driven by individuals from more diverse professional, socioeconomic and ethnic backgrounds. We will also likely see more women taking the reins of their family’s giving than ever before.
Still, the next generation will likely encounter many of the same obstacles to giving—structural, emotional and logistical—that their predecessors faced. Donors often get tripped up by a set of nearly universal psychological barriers that cause them to delay, stall or curtail their giving—hindering impact and stripping the joy out of philanthropy.
It’s important to anticipate and plan for these hurdles in order to be more efficient with and find greater satisfaction from giving, with less stress.
“Addressing these barriers early on is crucial for overcoming the overwhelming feelings often associated with philanthropy and achieving the impact donors seek,” says Joseph Brooks, a managing director at Arabella Advisors, a consulting firm that helps clients navigate the complexities of charitable giving to maximize their philanthropic impact.
A recent report titled “Overcoming Psychological Barriers to Giving” from Arabella Advisors and the National Center for Family Philanthropy (NCFP) explores the mental impact philanthropic giving often has on donors. Here are three challenges identified in the report and practical advice to overcome them.
Barrier #1: Too many choices
Charitable giving involves a series of complex decisions, from defining the purpose of giving to narrowing down areas of interest and selecting grantees. The practice of philanthropy itself has become increasingly complex, with multiple vehicles and tools available, each with its own advantages and tradeoffs. Add the ever-more-pressing societal and environmental challenges, and this can overwhelm even the most seasoned philanthropists.
While having options can be appealing at first, too many choices can lead to decision paralysis, especially when options are difficult to compare or a donor is new to giving.
“Many clients feel stressed about choosing what vehicle to use, what area to focus on, or which organization to grant to,” says Angie O’Leary, head of Wealth Planning and Insured Solutions at RBC Wealth Management–U.S. “This pressure is compounded by the worry that they might make a bad decision or receive scrutiny or judgment.”
Barrier #2: Feeling unprepared to make decisions
Deciding on grant allocations, particularly significant ones, can be daunting—especially for new donors. Despite being more than capable, next-gen and women donors often suffer from imposter syndrome and feel ill-equipped to make strategic grantmaking decisions. They may feel a constant need to learn more in order to prove their competence, make older generations proud and deliver results.
Ironically, gathering too much technical information or consulting too many experts can lead to feeling less competent, making it harder to feel confident in decision-making and take calculated risks. This may manifest as hesitation to disburse funding.
Barrier #3: Lack of time
Between juggling the demands of numerous personal and professional responsibilities, many donors feel like they don’t have adequate time to devote to philanthropy, which can be demoralizing and overwhelming. This can lead them to deprioritize philanthropy—putting their impact on pause.
“This barrier can be especially challenging for women, who often play multiple roles in business, the community and at home,” says Liz Jacovino, a wealth strategist at RBC Wealth Management–U.S. “The same can be true for next-generation donors, who may be starting or growing careers, raising children, taking care of parents, or assuming new roles within their families. Philanthropy often lands at the bottom of the to-do list when a person is tired and overstretched.”
Addressing these barriers
The first step to overcoming these hurdles is to recognize them and understand their manifestations. It’s common to experience multiple barriers simultaneously, so the most effective solutions address more than one.
If you find yourself experiencing these challenges, try the following steps—whether you’re new to philanthropy or not:
Set priorities and simplify processes
Streamlining workflows and establishing deadlines can reduce procrastination and make philanthropic work feel less burdensome when you have limited time. Additionally, articulating priorities, such as deciding to focus on learning, can help you sort out what is most important. Tackling philanthropy in digestible phases with clear steps and realistic deadlines can help you make sound decisions and realize your charitable impact.
Reframe perspectives on success and risk
Shifting your mindset about what success looks like and what risks are acceptable can alleviate anxiety and encourage experimentation. If you’re struggling with decision paralysis and are worried about making the wrong investment, try to redefine your criteria for success and embrace a learning mindset. You may consider experimenting with small grants to build your expertise through doing. Starting with lower stakes can help you feel more confident and find greater joy in giving.
Seek a blended team of advisors
“Families with wealth operate with a high level of complexity, so they benefit from teams of integrated advisors who bring specialized expertise and work together in support of the family’s goals,” says Bill Ringham, director of Private Wealth Solutions at RBC Wealth Management–U.S. Having a financial advisor and an expert philanthropic consultant on your team to provide tailored guidance can save you time, relieve stress and increase confidence about your philanthropic decisions.
Amid this unprecedented transfer of wealth, philanthropists both new and experienced should work to recognize and address these common psychological barriers early on. By simplifying processes, reframing success and risk, and seeking expert guidance, you can achieve greater clarity, confidence and impact in giving.