Survey Highlights Mindset of High Net Worth Donors
The 2008 Study of High Net Worth Philanthropy conducted by the Center on Philanthropy at Indiana University for Bank of America, sheds light on what wealthy donors are thinking, and what impacts their charitable giving decisions. The 2008 study comes as a follow-up to the original 2006 study – the first of its kind – of philanthropic activities of high net worth donors. The 2008 study was a random survey of high net worth households in which 700 individuals responded. The average income of those surveyed was $12.6 million. The survey highlights the changes in philanthropic giving of high net worth households between 2005 and 2007. Overall, all giving decreased 1.8% between 2005 and 2007; giving from wealthy donors decreased by 9.7%. The study highlighted three key findings that will assist nonprofits in securing donations from high net worth donors:
1. Community Impact. While over 50% of high net worth donors want to make an immediate difference in the world around them, many believe that their contributions have a greater impact on their personal satisfaction than those who receive their gifts. Connecting donors to a cause that is personally interesting will help them to feel fulfilled, and more likely to give. Additionally, over 50% stated that the leading objective for their biggest gifts was for general operating support; start-up funding and venture philanthropy were the second leading reasons for their gifts.
2. Key Criteria. The 2006 study examined the factors high net worth individuals look to when choosing a nonprofit to support. The 2008 study continued in this vein, and identified several key aspects of a promising nonprofit:
- Sound business and operational practices (93%)
- Spend appropriate amount on overhead (88.3%)
- Acknowledgement of contributions (including receipts) (83.7%)
- Protection of personal information (82.7%)
- Full financial disclosure (77.7%)
3. What happened? It is hard when a significant donor walks away from an organization, and in 2007, 38% of donors discontinued support of a charitable organization. The survey found three important criteria that influence wealthy donors to stop support of a nonprofit: 57% of respondents stated that they discontinue support when they no longer felt connected to the organization; 51.3% chose to support other causes; and 42% felt that they were getting over-solicited. Interestingly, very few respondents reported that they ceased giving to an organization as a result of donation mismanagement or asset mismanagement.
High net worth households make up 65-70% of all individual giving. Although donations from wealthy individuals fell in 2007, there is a significant correlation between charitable giving and the current economic climate. The United States economy grew at a slower rate in 2007, therefore impacting the donations of wealthy individuals. However, with the gradual recovery of the US economy, wise organizations should be prepared to cultivate and steward these high net worth donors, and be able to capitalize on all that these philanthropists can bring their organization.