Wealthy Still Giving, Just Less
October 29, 2012 Patrick Sullivan
Almost all the highest net worth households in the United States, those with either a net worth of $1 million or more (excluding home value) or an annual household income of at least $200,000, gave to charity in 2011. Fully 95 percent gave to at least one charity, 30 percentage points more than the general population.
The 95 percent number is down slightly from 2009, when 98.2 percent gave to charity. However, despite a challenging economy, those households donated 9 percent of their yearly income, on average, about the same as 2009. The average dollar amount declined 7 percent since 2009, from $56,621 to $52,770.
Those are among the findings of the new 2012 Bank of America Study of High Net Worth Philanthropy prepared in conjunction with the Center on Philanthropy at Indiana University in Indianapolis.
The study’s authors believe the drop is due to an uncertain financial climate. “The vast majority (of high net worth donors) gained a lot of satisfaction from giving and they remained very committed to causes,” said Una Osili, Ph.D., director of research for the Center on Philanthropy at Indiana University. “Combined with a great deal of confidence they have in nonprofits, their commitment to philanthropy was maintained” in the face of economic uncertainty, she said.
Osili added that while the average percentage of income remained the same, average total income was probably lower for these donors, resulting in a decline in total dollar amount. “An uncertain financial landscape plays a role in average gift amount,” she said.
The wealthiest Americans also volunteered more last year than in 2009. The rate of volunteering among households with either a net worth of $1 million or more or annual income of $200,000 or more jumped 10 percentage points to 89 percent. About 89 percent of those volunteered more than 100 hours in 2011. Those who volunteered more than 100 hours gave about twice what those who volunteered less than 100 hours did, $78,000 as opposed to $39,000.
“(High net worth donors) don’t want to just write checks,” said Osili. “They really want to learn more about organizations and apply their talents and skills to help solve the problems nonprofits are facing.”
The 77-page biennial study is based on responses from about 700 households and conducted jointly by the Center on Philanthropy at Indiana University and Bank of America. Responses were collected between April 2012 and September 2012 and examined 2011 giving habits.
The number one reason that respondents gave for philanthropy was making a difference, cited by 74 percent of respondents. When donors volunteered with an organization and felt their gifts made a difference, they gave on average 40 percent more in 2011 than 2009, $102,642 compared to $73,301. Fewer than one-third cited taxes as their reason for giving, and about half would not change their giving habits if the charitable tax deduction was eliminated.
“Philanthropy has less to do with recognition and taxes than with passion and fulfillment,” said Claire Costello, philanthropic practice executive for U.S. Trust, Bank of America Private Wealth Management in New York City.
New this year were questions on future giving, and the results are encouraging. About one-quarter (24 percent) said they would give more through 2016, while 52.4 percent said they would donate about the same. Only 9.4 percent said they would decrease their contributions, and 14.2 percent said they didn’t know. “Given the trepidation out there and the need for nonprofits to plan for their futures, we wanted to really see if people were feeling beleaguered of givers or if they had the steadfastness being shown in the data,” Costello said.
Wealthy donors give strategically. Some 71 percent had a giving strategy last year, and 61 percent had a budget for philanthropy. The majority of those surveyed, 81 percent, said they focus their giving either geographically or by a specific cause. Giving through vehicles such as donor-advised funds and private foundations was up last year, with 19 percent reporting they utilized such methods, as opposed to 16 percent in 2009. About 40 percent consulted an outside advisor, and of those, more than half (53 percent) sought advice from accountants.
Education organizations received the lion’s share of attention from high net worth donors; at 80 percent, more wealthy households gave to education charities than other types, and 28 percent said they gave their largest proportion of gift dollars to education charities. Basic needs organizations came in just behind education in terms of percentage of wealthy households donating to them at 79 percent, followed by arts organizations (69 percent), health charities (65 percents) and religious organizations (65 percent).
Giving vehicles received the second highest proportion of donations, with 23 percent of respondents giving most of their gifts to vehicles. Some 13 percent of respondents reported giving their highest proportion of donations to religious organizations. More respondents gave their highest gifts to religious organizations (36 percent) and education organizations (25 percent) than other categories.
Finally, high net worth households trusted nonprofits more than any other group to solve societal or global problems, with 91 percent of respondents saying they had either some or a great deal of confidence in nonprofits. Individuals came in at 90 percent, while Congress was dead last at 25 percent. “(High net worth individuals) really believe they can make a difference in partnership with nonprofits they support,” said Costello.