In October, U.S. Trust released its most recent study of high net worth philanthropy, examining giving patterns, priorities and attitudes among the wealthiest households in America in 2015. The study, published with the Indiana University Lilly Family School of Philanthropy, surveyed 1,500 U.S. households that had either a net worth of $1 million or more (excluding the value of their primary homes) or an annual household income of $200,000 or more.
Among the more striking findings, the overwhelming majority of high-net-worth households surveyed (91%) gave to charity in 2015, and on average they gave more than ten times what the general population gave—$25,500 per high net worth household, compared with $2,124 per household at-large. And only 58.8% of non-high-net-worth households donated at all.
In addition, nearly half of high-net-worth families volunteered their time to a charity they cared about. Here's a closer look at charitable giving among high net worth households, and what advisors should note as they work with these clients. (For more, see: How to Discuss Philanthropy With Financial Advisory Clients.)
Overall, values drive giving decisions, according to the study. About 76.4% of respondents said their giving decisions were based “completely” or “a lot” on personal factors like values. High net worth donors are impact-driven—94.3% give where they think they can make a difference.
But giving profiles differ along with demographic lines, like age, sexual identity or orientation. On average, the survey respondents gave to eight different nonprofits, but the older the donor, the more organizations they tended to donate to. The 70-plus cohort of high net worth donors gave to 11 organizations on average, while the under-50 respondents averaged five. Female and LGBT donors reported being more issue-oriented than other donors.
When households don’t give to charity, they cite family financial needs as a leading factor in the decision. Other households say they don’t have a connection to a particular organization or that the timing was not right. Some plan to make donations at the end of their lives. A significant percentage of those who don’t give (25.4%) say they’re unsure why.
What Are These Values?
High net worth donors say their giving decisions are driven by their own personal values; by their experience with a given organization, its reputation and its needs. Unsurprisingly, they say they believe in the mission of the recipient organizations they donate to. Most donors say they are interested in the organizational profile of the group they’re donating to. Themes such as shared faith or geography also influence giving.
The highest share of donations from high net worth households went to religious organizations (36.1%), the first time that has happened in the history of the study, though the authors cautioned against making comparisons year-over-year. Average wealth levels were lower this year than in previous years—in part due to changes in methodology—and households with lower incomes have tended to be more likely to give to religious groups. Also, two large gifts may have pushed up the average.
In addition to religion, basic-needs organizations (27.9%) and education organizations (12.4%) attracted donors’ attention. (For related reading, see: 6 Estate Planning Must-Haves.)
Making a Difference
High net worth donors are often driven by impactful work that is important to them. In the study, 94.3% said they give where they think they can make a difference. High net worth givers have a high degree of confidence in their ability, and in the abilities of other individuals, to address complex global problems, according to the study. They also have confidence in non-profit organizations to effect change.
More donors say giving to charity is a good way to impact society than say voting or contributing to a political candidate. Still, 24.4% of high net worth donors said they give to political causes.
Donors also monitor the impacts of their giving. Donors who self-identify as “experts” in charitable giving donate more, on average, and they are more likely to follow up with the organization to assess the impacts of their donations. (For related reading, see: Finding & Retaining High Net Worth Clients.)
The Bottom Line for Advisors
The study also found that one of the challenges advisors face is convincing high net worth givers of their usefulness. Donors rate the need for technical help lowest of the challenges they face when it comes to making charitable gifts. Only 3.2% of respondents said finding an advisor who understood their goals and priorities was a problem. Only 21.7% said structuring gifts in a tax efficient matter was a top challenge. But on the other hand, the large majority of donors (93.8%) said they’d like to be more knowledgeable about “at least one aspect of charitable giving.”
This is an area where financial advisors can demonstrate their abilities. About 23.1% of respondents said they’d consulted with at least one advisor priority to making a donation. African-American donors, LGTB donors and female donors were more likely by a significant margin to say they’d consulted with an advisor. Advisors can proactively identify clients who may need further guidance about charitable giving, if it seems those clients are unlikely to ask for help themselves.
A solid majority of high net worth donors (67.3%) responded that, “identifying what they cared about and deciding where to donate” was a top challenge. The study also offered cause for real optimism about future giving levels among high net worth donors, the sponsors say. Eighty-three percent of wealthy donors said they planned to give as much to charitable causes in the next three years as they had in the past.
High-net-worth donors also appeared to care about engaging the next generation in charitable giving projects. Though most respondents (72%) reported not involving younger relatives in their giving, those who did said they found the experience personally rewarding. This is another area where advisors can add value, helping clients set up giving strategies for future generations and educating clients' children about the benefits of philanthropy. (For related reading, see: How to Plan for the Charitable Giving Boom.)