Published in collaboration with the Center on Philanthropy at Indiana University, a partnership that began in 2006, the 2010 Bank of America Merrill Lynch Study of High Net Worth Philanthropy reports on the philanthropic activities of wealthy individual donors. The 2010 study examines giving and volunteering habits of wealthy Americans in 2009, a year that saw substantial economic instability. Did giving habits change during this time?
To discuss the results and implications of the current study, the Foundation Center and Bank of America Merrill Lynch partnered to conduct a panel presentation on February 1 titled High Net Worth Philanthropy: Issues Driving Charitable Activities Among Affluent Households. The panel consisted of Claire Costello and Kenneth Goody of Bank of America's Philanthropic Management division, who explained the results of the study, Nancy Raybin of Raybin Associates, Inc., and Sharna Goldseker of the Andrea & Charles Bronfman Philanthropies, who each explored the implications of the study's findings. Here are a few of the things they discussed:
In 2009, giving as a percentage of income remained mostly steady among the wealthy, but dollar amounts for charitable gifts declined. Our panelists were largely optimistic concerning donor activity during this time. It is to be expected that in a year of considerable economic difficulty, individual giving would drop. However, survey results indicate that 98% of high net worth households still made donations in 2009, and wealthy donors contributed approximately 9% of their income, a relatively modest drop from the 11% reported in 2007. Average dollars amounts of charitable gifts did decrease, but Claire Costello explained that there was also a slight shift in the types of causes that were funded.
Two of the top areas for giving, health and education, declined in dollar amounts, but some other areas – arts, environment/animal care, and international causes – saw notable increases. In addition, the number of wealthy households donating to basic human needs increased by 10%, which is promising in the current economic climate. Nancy Raybin emphasized to the group that 90% of charitable giving is individual giving, and that based on the numbers collected in the 2010 report, fundraisers should not shy away from continuing to pursue high net worth prospects, as these gifts will be crucial for nonprofits' continued survival.
Donors have become more sophisticated and more strategic. Another interesting finding is that high net worth donors increasingly use strategic plans to direct their charitable activities and incorporate their giving into their overall wealth plans. A substantial number also use advisors such as accountants and attorneys in their giving decisions, and over 70% of households reported that they decide where to give based on whether they believe their gift will make a difference and based on the level of confidence that their money will be spent efficiently. Also, donations have increased to foundations, trusts, and donor-advised funds, indicating an interest in providing long-term support to causes. In addition, more than half of the surveyed households gave their largest donation toward general operating support.
This demonstrates a growing understanding of nonprofits' needs, with unrestricted funds being the most necessary and desirable among organizations. What is also promising is that the younger members of wealthy families have been exhibiting a strong interest in and knowledge of philanthropy. Nancy Raybin and Sharna Goldseker both urged fundraisers to help educate these families even further on their charitable interests, taking care to focus initially on the older generation's charitable plans, and then to devote time to engaging the younger generations as well.
Donors are becoming more involved in the causes and organizations they support. The study's results indicate that high net worth donors are not simply writing checks and walking away. Rather, they are attending more meetings, volunteering more (over three quarters of donors volunteered in 2009, and those who volunteered donated more money than those who did not), and holding charities to higher expectations. Survey findings indicate that donors are adamant that the nonprofits they support demonstrate sound business practices, spend appropriately on overhead costs, and offer full financial transparency. Because of this increased involvement in causes, combined with the growing use of strategy mentioned earlier, it was recommended by Nancy Raybin that development professionals apply additional research to their high net worth prospects, investigating the potential donors' motivations for giving, their preferred types of giving vehicles, extent of family involvement, and volunteering practices. Furthermore, she stressed that among the significant number of wealthy individuals who volunteer, their voluntarism should ultimately lead to an even greater commitment, and that these volunteers should therefore be asked for a monetary donation as well.
Wealthy donors involve the whole family in their philanthropy. According to the study, charitable decisions in high net worth households tend to be made as a collaboration between both spouses/giving partners, with only 16% reporting that giving decisions are made by a single decision maker. Furthermore, the vast majority of donors reported that they teach their children about the importance of philanthropy, and over 70% of families claimed that they involve children and younger relatives in their own charitable giving decisions.
All of our panelists agreed that this signifies the importance for development professionals to include the entire family when meeting to discuss philanthropic decisions, not just the head of household, and to include adult children as peers in decision making. This trend also demonstrates the importance for nonprofits to build their skills in soliciting gifts from younger generations, who can often be quite knowledgeable and sophisticated in the field of philanthropy. Sharna Goldseker’s organization 21/64 offers information on philanthropy among younger generations, and one of our blog posts from 2010 also includes a breakdown of generational approaches for philanthropy.
You can read Bank of America Merrill Lynch’s report on high net worth philanthropy in its entirety here and find their studies from previous years here. For even more information on giving trends, Giving USA publishes extensive data on charitable giving; their 2010 data can be found online; access to those digital files and many reports from earlier years can be found in the Foundation Center's New York library. You can also search our Catalog of Nonprofit Literature using the subject/descriptors "Individual giving" and "Individual giving—statistics".
-- Tracy Kaufman, Library Assistant