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A version of this article first appeared in CNBC’s Inside Wealth newsletter by Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up to receive future editions directly to your inbox.
Wealthy Millennials and Gen Z are redefining the world of charitable giving, seeing themselves more as activists than donors, according to a new study.
Wealthy donors under the age of 43 are more likely to volunteer, fundraise, and lead philanthropic efforts than just giving money, according to a new study from Bank of America Private Bank. It is said that there is a high tendency for people to work as individuals. The survey of more than 1,000 respondents with investable assets of $3 million or more found that younger philanthropists receive more public attention for their giving than Gen Xers or baby boomers. It turned out that he was thinking about collecting them.
Changes in the way the next generation donates and the causes they support are likely to reshape the philanthropic landscape. The next generation of donors wants to be deeply involved in solving the biggest social and environmental problems, rather than simply writing a check to causes they care about.
“They see themselves as agents of total social change,” said Diane Chips-Bailey, managing director and national philanthropic strategy officer for philanthropic solutions at Bank of America Private Bank. ” he says. “I think they have better agency in this world. They’re really thinking about moving capital in a more inclusive and robust way to achieve their social impact goals. .”
Both young and old millionaires are very passionate about philanthropy. According to the survey, 91% of respondents had donated to charity in the past year. More than two-thirds of both older and younger respondents said they were motivated by “making a lasting impact.”
However, the reasons and methods for donating vary greatly depending on age. Donors under the age of 43 are slightly more likely to volunteer and twice as likely to help raise charitable donations from friends and colleagues than to donate directly. They are more than four times more likely to act as a mentor. And they are more interested in serving on nonprofit boards than limiting their capital contributions.
Older donors give out of a sense of responsibility. People over the age of 44 were more than twice as likely to donate because of an “obligation” compared to younger donors. People under 43 were more likely to cite self-education and the influence of their social circle as drivers of their philanthropy.
Some of the differences between generations may be rooted in life cycles and wealth. Because young wealthy individuals are still building and inheriting wealth, they are more likely to take the time to help raise money. Still, Bailey said the focus on peer networks and activities will continue even as they grow older and wealthier.
“You can think of philanthropy as the five T’s: time, talent, treasure, testimony and bond,” she said. “The older generation is focused on (funding) treasure. The younger generation is leaning towards the other four.”
Young wealthy people also support a variety of causes. They are twice as likely to support initiatives related to homelessness, social justice, climate change, and the empowerment of women and girls. Philanthropists over the age of 44 were far more likely to support religious organizations, the arts, and military charities.
“Given what[younger generations]have gone through in recent years, in 2020, with everything laid bare, they’re leaning toward that response,” Bailey said. “And it continues. So many people tout donations in the headlines, but they really dig deep. It’s not a moment, it’s a movement.”
Advisers say the implications of this generational shift in giving will be profound for wealth advisors and nonprofits. Because many younger donors have inherited their wealth, they are much more likely to take advantage of family-created giving vehicles. They were more than four times more likely to use charitable trusts, family foundations, and donor-advised funds.
Bailey said the next generation wants to talk about philanthropy as part of their initial discussions with wealth advisors, even before talking about investment plans.
“They have a hunger to know more, to know more about philanthropy,” Bailey said. “The education part is important for both nonprofits and advisors because they already have these complex (donation) vehicles in place.”
With philanthropy increasingly dominated by wealthy donors, and with the next generation expected to inherit more than $80 trillion in the coming decades, engaging young wealthy individuals will be important. Probably.
“We need their perspective and we’re going to need their funding,” Bailey said.
Advisors to young wealthy individuals should also lavish praise on them. Research shows that young donors are more than three times more likely to judge the success of their philanthropy by public perception. Nearly half say they are more likely to link their name to a charity, but more than two-thirds of older donors give anonymously.
“Praise them, celebrate them, give them attention,” she said.
Don’t call them “philanthropists.” According to a report from Foundation Source, 80% of young donors want to be seen as a “donor,” and 63% prefer the terms “advocate” or “changemaker.” Only 27% accepted the label “philanthropist.”
