High Net Worth Giving – Conversation at the Top of the Pyramid

October 5, 2015

Two recent studies about the philanthropic activity of those with high net worth (HNW) offer promising news and helpful lessons for the education sector. The 2014 U.S. Trust® Study of High Net Worth Philanthropy and the 2015 U.S. Trust Insights on Wealth and Worth® Survey cite a number of positive trends. Graham-Pelton notes that donors are beginning to have confidence again in a slow but growing economy. The wealthy believe giving back to help society is part of the “living life well” equation.  Large transformative giving is on the rise.

Selected findings from the 2014 U.S. Trust® Study of High Net Worth Philanthropy that bode well for educational institutions include:

  • Giving by households with at least $5 million in assets rose by 43% over the two-year period ending in 2013. The average gift reached $166,602.
  • Giving by donors in the $1 million to $5 million bracket also rose substantially.
  • 85% percent of HNW donors plan to contribute as much as 50% or more over the next three to five years.
  • High net worth households were most likely to give to education (85.2%); 73.1% give to higher education and 59.9% give to K-12 education.
  • The highest share of high net worth households also prioritized education as the most important current policy issue (56.0%).

Graham-Pelton subscribes to the tenet that having wealth does not directly translate to sharing wealth; motivating that behavior is key to the fundraising profession. The 2015 U.S. Trust Insights on Wealth and Worth® Survey provides helpful “color commentary” to the above report on giving behavior. We learn about HNW donors, for instance, that:

  • 55% support interests and causes that matter most to them.
  • 43% are philanthropic to set an example for their children.
  • 33% want to change the world for the better.
  • 32% feel a moral obligation to share their good fortune with the less fortunate.
  • 30% are grateful for the support they received when they needed it.
  • 15% use philanthropy for tax advantages.

In the aforementioned 2014 U.S. Trust® Study of High Net Worth Philanthropy, there is evidence that major donors are laser-focused on the perceived “efficiency” of the institution, with 81% of HNW donors scrutinizing the institution’s administrative and fundraising expense in proportion to total operating revenues. Other expectations include:

  • Full disclosure of financial statements
  • Honoring requests for privacy/anonymity
  • Acknowledging the donation with a tax receipt

No less important than how and why HNW families donate to an institution is what makes them stop doing so. The 2014 study uncovered these reported reasons for why a HNW household stopped supporting an organization:

  • 42% stop because of too frequent requests or because of the inappropriate amount of the request.
  • 35% stop due to a change in philanthropic focus.
  • 18% stop because the institution was not effective.
  • 16% stop because of new leadership and/or focus of the institution.

Graham-Pelton sees the bottom line as this: Significant donor attrition can be avoided through careful management and preparation, and conducting solicitations in an appropriate time frame – one that is aligned with the donor’s propensity and capability. To mitigate against HNW donor attrition, Graham-Pelton recommends the following:

  • Stretch giving is about enlarging a donor’s opportunity and perspective – be certain you have done adequate cultivation preparation and homework.
  • Always continue building relationships with HNW donors after they have made their commitments. Value their advice and counsel.
  • Be transparent as possible. Impact reports demonstrate effective and efficient philanthropic leadership.
  • Keep databases up to date. Wealth analysis develops statistical frameworks by which HNW donor patterns can be reviewed, studied, and leveraged.
  • Engage HNW donors in strategic visioning discussions; even invite some to be on committees dedicated to this work. An inspired heart is the prerequisite to a significant contribution.

In reviewing this data, we believe a clear pattern is being confirmed regarding the philanthropic support of the wealthy:

These HNW donors seek to make an impact more than take a tax break, but they will do so where their hearts direct them – and organizations can lead hearts to their missions with a compelling demonstration of philanthropic impact.

As an independent school leader and fundraiser, you have every opportunity to tap into this promising pool of wealth.

-Lawrence Sykoff, Executive Senior Counsel

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