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Motivations of High Net Worth Donors

Motivations of High Net Worth Donors. April 23, 2014 Indianapolis. Associate Dean for Academic Affairs and Research Indiana University Lilly Family School of Philanthropy Professor of Economics and Philanthropic Studies Indiana University – Purdue University Indianapolis rooney@iupui.edu

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Motivations of High Net Worth Donors

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  1. Motivations of High Net Worth Donors April 23, 2014 Indianapolis

  2. Associate Dean for Academic Affairs and Research Indiana University Lilly Family School of Philanthropy Professor of Economics and Philanthropic Studies Indiana University – Purdue University Indianapolis rooney@iupui.edu www.philanthropy.iupui.edu Patrick Rooney

  3. On April 9, 2013, IU President Michael McRobbieand other officials inaugurated the new School of Philanthropy and named it in honor of Lilly family. • Believed to be the world’s first school dedicated to the study and teaching of philanthropy. • Builds on existing strengths of the Center on Philanthropy. • Academic Programs • The Fund Raising School • Lake Institute on Faith & Giving • Women’s Philanthropy Institute • International Programs • Research The IU Lilly Family School of Philanthropy

  4. Educate students and sector leaders through Academic Programs • Degrees Offered: • BA in Philanthropic Studies (since 2010, first in the world). • MA in Philanthropic Studies (since 1993, first in the world). • MPA in Nonprofit Management (with SPEA). • PhD in Philanthropic Studies (since 2003, first in the world). • Doctoral minors in several disciplines. • Publications series. Academic Programs

  5. Improve and enhance practice • Home of the world-renowned The Fund Raising School (TFRS). • Trained ~98,000 practitioners in the last 25 years. • Currently, trains ~4,400 per year in ethical and effective fundraising to help build organizational capacity. • Provide online courses and other resources about fundraising and about charitable giving. The Fund Raising School

  6. Lake Institute on Faith & Giving, fosters a greater understanding of the ways in which faith both inspires and informs giving. Women’s Philanthropy Institute examines the role gender plays in philanthropy through research, education, and training. International Programs collaborates with colleagues worldwide to increase understanding of philanthropy through education, research and training. Institutes

  7. Increase awareness of philanthropy in society through Public Affairs. • 500 media interviews/year. • Dozens of presentations to national, local groups. • Provide info to policy makers. • Annual symposia. • Philanthropy Matters magazine and e-newsletter. Public Affairs

  8. Research informs practice and practice informs research • Academic and applied research about giving, volunteering, and nonprofit management. • Some key questions we study include: • What does philanthropy look like today? • How are the values, motivations, and expectations of donors changing? • How will current trends shape the future? Research

  9. The Study of High Net Worth Philanthropy • Sponsored by Bank of America. • Published in 2006, 2008, 2010, 2012. • Leading resource on high net-worth households. • Scientific random sample (in 2012, n= 701). • Prior research based on client lists. • Includes any household with an annual income of more than $200,000 and/or net worth of more than $1,000,000 (excluding the value of their home). All respondents had to have their primary residence in the U.S.

  10. High Net Worth Donors • Commitment to Nonprofits • In 2011, 95% of HNW donors gave to a charity. • In 2011, the average amount given by HNW households was $52,770 (a decrease of 7% from 2009). • Focus on major gifts • Disproportionately high share of all individual giving in the U.S. comes from HNW individuals • Top 10% gave 63% of all itemized contribution deductions in 2009. • Top 1% gave 37%. • Top 0.1% gave 18%.

  11. High Net Worth Households Reporting Giving to Charity in 2005, 2007, 2009, and 2011 Percentage (%) Notes: *2009 and 2011 results are statistically different. Source: The 2012 Study of High Net Worth Philanthropy.

  12. Average giving by education level of high net worth donors in 2007, 2009, and 2011 ($) Notes: ^°May not be statistically meaningful because, in some years, this group contains fewer than 50 respondents. Source: The 2012 Study of High Net Worth Philanthropy.

  13. Average giving by employment status of high net worth donors in 2007, 2009, and 2011 ($) Notes: ^Denotes that the categories have been changed from the previous survey. Source: The 2012 Study of High Net Worth Philanthropy.

  14. Average HNW giving by region of primary residence in 2005, 2007, 2009, and 2011 ($) Notes: °May not be statistically meaningful because, in some years, this group contains fewer than 50 respondents.Source: The 2012 Study of High Net Worth Philanthropy.

  15. Percentage of high net worth households that gave to each recipient category in 2011^ Notes: ^Combined organizations include UW, UJA, and CC. “Giving Vehicle” represents gifts to private foundations, charitable trusts, and donor-advised funds. *2009 and 2011 results are statistically different (2009 data not shown).

  16. Distribution of high net worth dollars given to each recipient category in 2011^ Percentage (%) Notes: ^Combined organizations include United Way, or Catholic Charities. ‘Giving Vehicle’ represents gifts to private foundations, charitable trusts, and donor-advised funds. | Source: The 2012 Study of High Net Worth Philanthropy.

  17. Average amounts given by HNW households in 2009 and 2011, by charitable category^ Notes: ^Values adjusted to 2011 dollars for the year 2009. This table does not show outlier data. *2009 and 2011 results are statistically different.Source: The 2012 Study of High Net Worth Philanthropy.

  18. Charitable giving forecast for the next three to five years among high net worth households Percentage (%) Source: The 2012 Study of High Net Worth Philanthropy.

  19. What are HIGH NET WORTH donors’ motivations for giving?

  20. High net worth donors reporting giving based on motivation type in 2011^ Percentage (%) Note: ^Respondents were asked to rank answers from 1 “strongly disagree” to 5 “strongly agree.” Responses shown here represent those in the agree categories. *2009 and 2011 results are statistically significant (2009 data not included here).

  21. The largest proportion (74.0 percent) of high net worth donors reported giving to charity in 2011 because they were moved at how their gift could make a difference. • Hyperagency: world building, history-making, and self-construction in accumulation and allocation (Schervish, 2000) • Hyperagency refers to the enhanced capacity of wealthy individuals to establish or substantially control the conditions under which they and others will live Make a difference • Source: The 2012 Study of High Net Worth Philanthropy. • Schervish, Paul. 2000. The New Physics of Philanthropy: The Supply-Side Vectors of Charitable Giving

  22. A 2000 Internet survey of 1,000 high net worth individuals finds that 50 percent of respondents felt an obligation to give back The most recent BAML Study of High Net Worth Philanthropy (2011) finds nearly 62 percent report giving back to one‘s community as an important motivator Give back to the community • Source: The Center on Philanthropy at Indiana University. 2011. Review of Literature on Giving and High Net Worth Individuals

  23. Greatest portion of giving and volunteering takes place in one’s own community and helps support activities from which donors is directly associated • The question for generating generosity is how to expand those very familiar sentiments of identification to include human beings that relationally, spatially, and temporally to a wider circle of human beings in wider fields of space and time • To extend the sentiments of family-feelings to the realms of fellow-feelings Give back to the community • Source: Schervish, Paul. 2000. The New Physics of Philanthropy: The Supply-Side Vectors of Charitable Giving

  24. Over 70 percent of donors reporting contributions to religious causes in 2009 • However, only about 40 percent reporting that religious beliefs are an important motivating factor in their giving • Other research suggests that religious donors may show more consistency in their philanthropy • Among donors at all income levels, nonreligious donors giving to secular causes were more sensitive to tax rates and income compared to religious donors (Helms and Thornton, 2008) Religion • Source: The Center on Philanthropy at Indiana University. 2011. Review of Literature on Giving and High Net Worth Individuals.

  25. Personal fulfillment through charitable activity Source: The 2012 Study of High Net Worth Philanthropy. Donors often report being personally fulfilled through their philanthropic engagement. Fulfillment relates to the feelings that a donor’s own charitable activity engenders. In this study, almost 80 percent of all reporting high net worth donors indicated that their charitable activity is personally fulfilling, while only 3 percent reported that their personal charitable activity is not fulfilling.

  26. Levels of fulfillment through charitable activity among high net worth donors^(%) • Note: Respondents were asked to rank answers from 1 to 5, with 1 being “strongly disagree” and 5 being “strongly agree.” Responses are collapsed into three categories. • Source: The 2012 Study of High Net Worth Philanthropy.

  27. Personal Satisfaction Through Charitable Activity Source: The 2012 Study of High Net Worth Philanthropy. Personal satisfaction from their charitable activity relates to the perception that donors have about the outcomes and effects of their charitable activity. Three-quarters of all high net worth donors reported being satisfied with their charitable activity, while about 22 percent reported feeling neutral. Four percent reported not being satisfied with their charitable activity.

  28. Levels of satisfaction through charitable activity among high net worth donors^(%) Note: Respondents were asked to rank answers from 1 to 5, with 1 being “strongly disagree” and 5 being “strongly agree.” Responses are collapsed into three categories. Source: The 2012 Study of High Net Worth Philanthropy.

  29. The greatest proportion (76.4 percent) of high net worth donors reported feeling a sense of accomplishment when the organization benefiting from their gift creates results or impact. The second-highest proportion (38.2 percent) of high net worth donors reported that they were able to learn about organizations and causes through their giving. Nevertheless, a slightly lower percentage (34.5 percent) reported the opposite. This suggests that donors derive benefits from engagement opportunities provided by nonprofit organizations Benefits derived from charitable activity • Source: The 2012 Study of High Net Worth Philanthropy.

  30. High net worth donors reporting benefits derived from charitable activity^(%) • Note: Respondents were asked to rank answers from 1 to 5, with 1 being “strongly disagree” and 5 being “strongly agree.” Responses are collapsed into three categories. • Source: The 2012 Study of High Net Worth Philanthropy.

  31. Family traditions and high net worth giving • Note: Responses do not include households that do not have children or grandchildren (whether living at home or not) • Source: The 2012 Study of High Net Worth Philanthropy.

  32. Children and the transmission of philanthropic values • Note: Responses include households that may or may not have children. • Source: The 2012 Study of High Net Worth Philanthropy.

  33. In 2009, most high net worth households depended on their own family’s efforts to educate younger relatives about charitable giving (85.4 percent). By 2011, only 51 percent of high net worth households relied on their family or family’s network of friends and peers to educate their children, grandchildren, or other younger relatives about giving. Children and the transmission of philanthropic values (continued) • Source: The 2012 Study of High Net Worth Philanthropy.

  34. Children and the transmission of philanthropic values (continued) Source: The Center on Philanthropy at Indiana University. 2011. Review of Literature on Giving and High Net Worth Individuals Similarly, in 2009, about 45 percent of high net worth households indicated that they rely on their church, synagogue, mosque, or other place of worship to transmit charitable values to their children. By 2011, that percentage dropped to 34 percent. High net worth donors were least likely to report the use of an independent advisor, bank or trust company staff, or independent philanthropic advisor in 2009 and 2011 to transmit philanthropic values to children or younger relatives, with response rates at 3 percent and below.

  35. In an analysis of philanthropy among wealthy donors in New York City, Ostrower (1995) notes that some donors use philanthropy as either an entrée to or a demonstration of high social standing. For this reason, high net worth individuals are more likely than average donors to contribute to educational and cultural institutions, which are perceived as being more elite. Findings from other research • Source: The Center on Philanthropy at Indiana University. 2011. Review of Literature on Giving and High Net Worth Individuals

  36. Sargeant et al. (2005) also found that a prospective donor‘s trust in an organization and its ability to impact the selected cause can be a strong motivating factor for giving • trust appears to be significantly affected by the performance of the charity and its communication • trust is created when a nonprofit is perceived to have had an impact on the cause and by maintaining appropriate communications with the donor • The development of a personal connection to an organization or cause, coupled with trust in the organization‘s ability to make an impact, can have an enormous effect on giving. Findings from other research • Source: The Center on Philanthropy at Indiana University. 2011. Review of Literature on Giving and High Net Worth Individuals

  37. Taxes • Perhaps the strongest material incentive for channeling this burgeoning major wealth to major gifts revolves around making positive use of the current estate tax laws • Rooney et al.’s research shows that estate tax rate has a significant impact on bequest giving Findings from other research • Source: Schervish, Paul. 2000. The New Physics of Philanthropy: The Supply-Side Vectors of Charitable Giving

  38. Findings from other research Source: Schervish, Paul. 2000. The New Physics of Philanthropy: The Supply-Side Vectors of Charitable Giving • Gratitude • Theologian Robert Ochs has remarked that there are three ways to take a gift: it may be taken for granted, taken with guilt, or taken with gratitude • For wealth holders, taking their fortune with gratitude is the single most crucial aspect of their consciousness • They recognize that their wealth and abilities are unearned gifts—the recognition of a life graced by unearned opportunities, unachieved benefits, and ultimate contingency is at the core of the inherent transformative capacity of wealth to induce charitable giving

  39. Findings from other research Source: The Center on Philanthropy at Indiana University. 2011. Review of Literature on Giving and High Net Worth Individuals Karlan and List (2007) examine the effect of donor matching and find that revenue per solicitation increases 19 percent and the probability that an individual donates increases by 22 percent when match money is available. These findings support the notion that potential donors are more likely to contribute if they perceive an additional incentive

  40. The 12 Portraits of Donors Source: Rooney, Patrick, and Heidi Frederick. 2007. Bank of America Study of High Net-Worth Philanthropy: Portrait of Donors. Center on Philanthropy at Indiana University.

  41. Total Giving, 2005 (donor household only) Source: Rooney, Patrick, and Heidi Frederick. 2007. Bank of America Study of High Net-Worth Philanthropy: Portrait of Donors. Center on Philanthropy at Indiana University.

  42. What are HIGH NET WORTH donors’ strategies for giving?

  43. High net worth donors reporting strategic approaches to giving in 2011 Percentage (%) Source: The 2012 Study of High Net Worth Philanthropy.

  44. HNW donors’ awareness of philanthropic tools to advance social or charitable goals Percentage (%) Source: The 2012 Study of High Net Worth Philanthropy.

  45. HNW donors who currently have or plan to establish a giving vehicle in the next 3 years Percentage (%) Source: The 2012 Study of High Net Worth Philanthropy.

  46. HNW donors who consulted with others before making a charitable giving decision Percentage (%) Notes: The percentage of high net worth donors reporting consultation with an outside advisor by category includes only those who consulted at all. For the 2008 and 2010, the “Other” was not given as an option in the surveys. | Source: ibid.

  47. How high net worth donors gave in 2008-2011 and how they intend to give in 2012-2014 Percentage (%) Source: The 2012 Study of High Net Worth Philanthropy.

  48. How decisions about charitable giving were made by high net worth household in 2011 Percentage (%) Source: The 2012 Study of High Net Worth Philanthropy.

  49. Factors ranked as important to high net worth households when making a charitable gift^ Percentage (%) Note: ^Respondents were asked to rank answers from 1 “strongly disagree” to 5 “strongly agree.” Responses shown here represent those in the agree categories. *2009 and 2011 results are statistically significant (2009 data not included here).

  50. Number of organizations HNWH stopped supporting in 2011 which they previously supported^ Percentage (%) Notes: ^Responses here include only those HNWH who stopped giving to at least one organization. The percentage of HNWH who stopped supporting at least one organization in 2011 in which they had previously supported (30%) is not shown in here.

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