Understanding High Net Worth Donors
(May 18, 2010) A new study of high net worth individuals in the U.S. and the U.K. found that those that gave the most did so out of a sense of responsibility or duty.
The study by Barclays Wealth and Ledbury Research, which surveyed 500 individuals with assets of more than $1 million, found that of all the potential motivators to give used in the survey, the three motivators most closely related to high giving levels were religious beliefs, a desire to further the legacy of parents, and societal duty.
Conversely, those high net worth donors who were not motivated by religion, family or society gave much less to charitable causes. In fact, the study shows that high net worth donors who did not list any of the three top motivators (religion, family, society) were three times more likely to give only at low levels. Donors who listed at least one of these motivators were much more likely to give at a high level.
Barriers to Giving
A feeling of financial security is a major barrier for high net worth donors from giving larger amounts to charity, the study finds. Although 50 percent of high net worth donors surveyed listed "I can afford to" as a motivator for giving (the most frequently mentioned response overall) the results above show that this does not necessarily motivate large giving levels. Furthermore, the feeling of being able to "afford to give" is very subjective.
Many millionaires feel that they are unable to afford to give to charity and will not become major donors until they feel financially secure--a subjective measure and one strongly influence by factors such as a faltering economy. Only when people are very wealthy are they likely to give at high levels despite the economy. Only those with $5 million or more in assets are consistently likely to be high level donors, according to the study. (High level donors are defined here as donating cash of more than £10,000 (roughly $14,500) per year.
Once an individual decides to donate, a charity's efficiency and the amount it spends on administration are the two most important factors when selecting an individual organization to which to donate. The majority of wealthy (53 percent) believe that charities are inefficient at managing donations. Men are more skeptical than women and the very wealthy (with assets of $5 million or more) are the most skeptical, the study finds.
Economy Not the Whole Story
Although the economy certainly plays a role in giving, the study shows that many wealthy have become more passionate about supporting causes in the economic downturn. As both the U.S. and U.K. experienced recessions in 2008 and 2009, 23 percent of the wealthy decreased their donations in 2009, with 10 percent cutting back the amount they gave by over a quarter. However, at the same time, 49 percent of the wealthy asked were planning to give the same amount as last year and a core of 26 percent were planning to increase their donations.
The research has found evidence that the economic downturn has galvanized many. Thirty-five percent of the wealthy are "more passionate in supporting charitable causes in an economic downturn, when they are struggling for funds." Amongst those who are most passionate are the high-level donors, in particular the U.S. high-net worth community.