NEWS & VIEWS
Inside the Minds of Wealthy Donors
The past 15 years have seen a big influx of new major individual donors into philanthropy. Nearly as many private foundations have been created since 2000 as were created in the previous century. And the explosion of donor-advised funds has been even more striking. This surge reflects the staggering accumulation of wealth by America’s upper class in a second Gilded Age. The top 1 percent is now worth about $30 trillion. And while they only give away a small amount of their wealth annually—less than 0.5 percent—that’s a lot of money. Roughly a third of all charitable gifts made in the U.S., totalling $390 billion last year, come from the top 1 percent. Really, though, it’s the top 0.1 percent who are the main players making large gifts.
Tens of thousands of fundraisers spend their days pursuing major donors, and myriad nonprofits depend upon their generosity. But how much do we know about these philanthropists? Not as much as we should, say the authors of a new study on high-net-worth donors titled “Going Beyond Giving,” just released by The Philanthropy Workshop (TPW), a leader in educating donors through immersive learning.
For all the knowledge TPW and its network have about high-wealth donors, the authors of this study stress that much is unknown about a group that is constantly expanding and changing as new donors emerge. Learning more was the impetus for the study, which is based on surveys of 219 donors, and offers a rich look at a realm of elite philanthropists that tends to be hidden from view—and which confounds fundraisers every day.
High-wealth donors are a diverse group in terms of how old they are, how much they’re worth, how much they give, how much time they spend giving, and what causes they favor. This study looks at all kinds of philanthropists—from veteran full-time givers moving millions in grants to part-time donors who give at a much lower level—and its findings cover a fair amount of ground.
Readers will draw different conclusions from the study, which is a must-read for any fundraiser who’s going after big game. To me, though, the dominant takeaway is that high-wealth donors approach philanthropy much more as an art than a science. They’re dedicated to giving, but not especially systematic or professional. They’re eager learners but mainly guided by their relationships and instincts. To a surprising degree, the philanthropists surveyed here seem to be flying by the seat of their pants, even as some give away sizable fortunes. Based on the study’s findings, here’s how I would distill the operating style of high wealth donors.
They Ask Around
When it comes to figuring out where and how to give, the philanthropists surveyed rely heavily on personal and professional ties. Advice from peers and friends is mainly how they identify which causes and nonprofits to support; only about a third said that research informed their choices of where to give and even fewer used requests for proposals to solicit ideas. It’s no secret that high-level giving tends to be about who knows who and word of mouth; this study confirms that fact and underscores why fundraising for major gifts is such god-awful hard work. You can’t get very far without the right connections. Just 1 percent of respondents said that cold calls had influenced their giving—slim odds, indeed.
They Meet and Greet
Once donors have identified causes they’re interested in, talking to nonprofit staff and board members is mainly how they engage in due diligence before making gifts. To be sure, donors also look at annual reports and grants proposals, but not as closely as you might think. Only around half of donors said that reviewing audited financial reports was part of their due diligence—a surprising finding that suggests concerns about administrative costs and salaries is not much on the minds of major donors. Less than two-thirds relied on grant proposals, and nearly 30 percent said that reviewing annual reports was not part of their due diligence.
The bottom line: It’s really meetings with donors, and the ability to win their confidence, that matters most in closing major gifts. Nonprofits that spend lavishly on fancy annual reports and agonize over their financials, or their Charity Navigator rating, may be fretting about the wrong things, at least when it comes to wooing high-wealth donors. Being able to get meetings and then convert these connections into gifts is what it’s all about. Again, no big surprise, here, but it’s helpful to have more data to confirm this familiar point.
They Don’t Care Much About Metrics
Likewise, this study confirms a finding of other surveys—that major individual donors aren’t actually obsessed with metrics or evaluation, despite the stereotype that they tend to be hard-nosed MBA types. Maybe these donors want to pore over spreadsheets in their day jobs as masters of the universe. But it seems that’s not the case in their role as philanthropists. Only around half of survey respondents said they required grantees to submit reports. And just 9 percent said they turned to third-party evaluators to assess the impact of their giving. Only a very small percent of donors said they had ever paused their philanthropy practice to reassess their giving—in contrast to professional foundations that periodically engage in strategic reassessments.
They Do It Themselves
The study also found that major donors don’t rely as much on philanthropy consultants and foundation staff to guide their giving as you might think. While it seems that there’s an endless array of would-be advisors to top donors, it’s not clear how much sway these folks really have. Sixty percent of donors reported having no staff, and only 9 percent said they had engaged with a philanthropy advisor in the past three years. While 38 percent of donors said they had a family foundation, almost a quarter relied on a far simpler vehicle for giving: their checking accounts. Notably, this study didn’t find big differences across the age spectrum in terms of the how donors do their giving, except that veteran givers were more sure of their own decisions.
How can major donors be sure they’re having impact? Well, it seems like they just know. The survey found that 78 percent of donors said they had a clear understanding of their contribution to social change. The authors noted dryly that “this sample is highly confident about their impact, which begs the question of where that confidence comes from.”
Here, the study seems to confirm one leading stereotype of wealthy donors: They place quite a bit of stock in their own views and instincts, even though they’ve typically spent most of their careers outside the social sector making money in business. Much has been said about the dangers of hubristic donors, especially from the tech sector, and this study would seem to confirm such fears—unless, that is, you think that giving away money thoughtfully isn’t actually rocket science and that most smart people can probably do a perfectly good as philanthropists.
Maybe one source of confidence among major donors is that many invest time in learning through philanthropic networks. In fact, the 219 people surveyed reported that they collectively belonged to 101 such networks. Three quarters said they had attended a workshop or training and over half had attended a conference. Sixty percent reported collaborating with other funders. The authors write: “the vast majority of our respondents showed they want to understand how to practice philanthropy, and pursued relationship-based as well as more technical approaches to learning.”
This finding aligns with many anecdotal reports I’ve heard regarding major donors and my own study of these givers. In particular, the younger tech and finance donors are often huge consumers of information and love to dig deeply into causes they’re interested in. That would make sense since such donors have made their money in a knowledge economy and are often highly educated. They know how to absorb complex information and ask probing questions.
Does this study tell us anything new about wealthy philanthropists? Yes and no. It confirms observations that will be familiar to veteran major gifts officers and others who’ve hung around philanthropy. But the report is valuable in that it brings more rigor to our understanding of major donors and also raises some cautionary points about this group. The authors gingerly express concern that, for all their engagement and eagerness to learn, today’s philanthropists aren’t as strategic as they could be. Also, for all the advisory services and research now available to donors, this study reveals that many don’t engage with this expertise.
One major conclusion the authors draw is that much more needs to be done to systematize and professionalize individual philanthropy. They write, “We believe there is an opportunity to widen the philanthropy discussion so that the language and practice of strategy reach more individual donors earlier in their journeys. Donors need effective, professional services they will use.”