What Can We Learn from High Net Worth Individuals?

16/11/2010 at 09:35 Leave a comment


To continue from my post last week on high net worth individuals, I was pleased to read the Bank of America/Merrill Lynch “The 2010 Study of High Net Worth Philanthropy”. You can download your own copy of the report here. This study helps inform the fundraising strategies and priorities for nonprofit organizations. If your fundraising pyramid has a big gap in the middle with a few very generous donors at the top (individuals, corporate or foundation), and many donors at the bottom, this report can convince you of the importance of engaging and involving your donors so they want to move up the pyramid. In addition, maybe it’s time to do some wealth screening to see who in your donor base you want to focus some of your time and effort to eliminate the gap in your fundraising pyramid. Italics are mine.

  • Despite our new economy, high net worth households continued to support nonprofit organizations – at the same levels as 2005 and 2007! 66% of those surveyed said they supported the same causes year after year. Almost 95% put their confidence in nonprofits who solve society or global problems. If we are raising less money, it may be because we stopped asking for gifts, from high net worth individuals and other donors. And if we haven’t started a major gift effort – better late than never. This is an important effort for any nonprofit organization. A focused, strategic plan is necessary to be successful in starting and maintaining a major gift program. Admitting you have a problem is the first step to solving it.
  • Despite the continued commitment to giving, there was a change in giving levels by high net worth donors. Average giving dropped more than 34% – from $83,034 in 2007 to $54,016 in 2009. Health organizations took the biggest hit here. So as a health care organization, how are you better engaging with your patients, concierge services and maintaining a relationship with these important donors. In general I have found keeping a relationship with donors on the uptick AND down is very important. Engaging them not only in programs of interest to them, but in the major gift strategy is a way of bringing them closer to the organization.
  • Major donors are very strategic in their philanthropy – more than 70% all said they give when they:
    • Believe their gift will make a difference
    • When they feel financially secure and
    • When an organization is efficient in use of gifts

    They are also concerned about the percentage of funding for programming v. administration (54%) and more than 33% want to learn from the organization about their impact. The importance of effective communication with our donors is shown in this survey. We need to be as strategic in our communication and engage with them as they are with us!

  • Effectiveness and transparency is still important to high net worth donors:
    • Sound business and operational practices (86.9 percent)
    • Acknowledgement of contributions (including receipts) (84.9 percent)
    • Spend appropriate amount on overhead (80.1 percent)
    • Protection of personal information (80.1 percent)
    • Full financial disclosure (61.7 percent)

    We have to run our nonprofit like businesses if we expect donors to invest with us and for our programs. Standard operating procedures, donor stewardship and transparency must be a part of the way we operate every single day.

  • Those who responded to the survey use a number of charitable vehicles for their philanthropy. Giving to or through a private foundation, fund or trust increased 21% in 2009.
    Almost 21% have an endowment fund with an organization and 17.5% gave through a donor advised fund. More than 46% have a will with a specific charitable provision and another 12% would consider making a provision in the next three years. We need to be well-versed in the options available to our donors and be able to talk with them about how they want to make their gift. If you don’t have a planned giving program in place, start one yesterday. It is a complicated program and the lawyers, accountants and financial advisors on your Board can help. To have a planned giving program the will allow your donors to leave a legacy for your organization, you need to start now.
  • Arts, environment/animal care, international causes and charitable giving vehicles saw increases in giving from high net worth individuals. Health, education and combined purpose organizations (United Way, United Jewish Appeal or Catholic Charities) experienced a decline.
  • Volunteering is an important part of efforts by wealthy donors. More than 75% volunteered in 2009, an increase over 2007. They more they volunteered, the more they gave.
    • Non-volunteers gave an average of $46,414
    • Volunteers who spent 101-200 hours average giving was $48.860
    • Those who volunteered more than 200 hours donated an average $75,662

    Investment follows engagement….Lather, rinse and repeat.

  • Over half made gifts to support general operations.
    I have said it before and I will say it again, to fund operations and diversify funding we must engage more individuals.
  • Those surveyed were less likely to support capital campaigns in 2009 than in 2007. 11% gave to support long-term investment in an organization (i.e. endowment) – 37.2% gave for endowment in 2007.
  • Donors continue to consult legal and financial professionals in increasing numbers in 2009. Keep forming relationships with your donors and financial professionals.
  • Both giving partners are involved in charitable decisions. Approximately 41% confer with their spouse or partner and make joint decisions about their gifts. This is not new news and we know it is important to include a spouse or partner when cultivating and soliciting a major gift.
  • Those donors who stopped giving (35.4%) to some organizations because:
    • They were too frequently solicited or asked for an inappropriate amount (58.9%)
    • They decided to support other causes (34.2%)
    • Household circumstances changed (29.4%)
  • In this survey 67% said they would dramatically decrease they received no income tax deductions for their charitable contributions. In 2007, only 47% responded this way. They also indicated a shift in giving through planned giving if the estate plan tax was repealed.

I hope you take a look at the report and determine how it can inform your fundraising strategy and priorities. Any questions, I would be happy to help.

Entry filed under: Fundraising, Nonprofit fundraising, Nonprofit Research, Resources You Can Use!. Tags: , , , .

Pursuing Happiness and Krista Tippett on Being Yeah! Network for Good Ideas You Can Use!

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