Recommendations For The New Normal: Trends in Ultra High Net Worth Giving 2019

We take a look at the top 3 trends in giving in 2019.

The New Normal: Trends in UHNW Giving 2019 is the fourth edition of Wealth-X’s report on global giving trends of ultra-high net worth (UHNW) donors. It examines the top causes to which they give and regional differences across sources of wealth and gender.

Analyzing UHNW donors with a net worth over $30 million and a demonstrated commitment to philanthropy, the report explores the behaviors, giving trends, preferences, demographic shifts, and society’s views of those donating at least $50,000 over the last five years (2014-18). It also looks into innovative models of philanthropy and investment being driven by this group of donors as they invest in nonprofits and educational institutions.

According to The New Normal, the ultra-wealthy gave a total of $153B in 2018, approximately equivalent U.S. federal government spending on healthcare, education, and energy COMBINED in 2019. Additionally, Wealth-X estimates that 20%-30% of individual giving in the U.S. stems from the UHNW.

This group that comprises of 1.2% of the world’s millionaires, and holds 34% of its collective net worth is too important to ignore. They should be the top focus for every non-profit and educational institution’s major giving efforts. Such a pool of donors can propel organizations into realizing their vision, creating financial stability, endowing critical programs, and building new programs.

We’ve paired the critical findings from the Wealth -X study with Make Philanthropy Work's recommendations for building deeper relationships with ultra-wealthy donors in this new normal.

1. Rising Ultra-Wealth: And Greater Expectations

As the population of ultra-wealthy continues to grow, so have expectations that this group should be giving back to society. Rising wealth inequality, initiatives such as the Giving Pledge, globalization and global issues, and changing attitudes toward civic engagement, have fueled the sentiment that the UHNW should be giving back.

Taking into account that the ultra-wealthy account for 20% - 30% of individual giving, how can your organization better engage this group and capitalize on the public perceptions that they should be giving back and giving to you!

• Get hyper-focused on any donors in your network or orbit that are perceived to be UHNW no matter their current giving. Discover why they give to your organization and determine their level of connection or engagement

• Stick with those that love you - spend time with the UHNW donors that are responsive and are willing to share insights on why they are involved in your organization

• Understand their desire to make an impact and build comprehensive engagement strategies to connect with these donors on how they want to make an impact through your organization.

• Convey how being involved and making an impact through your organization addresses a major societal issue, improves lives, ends injustice, or cures disease

• Understand their need to be recognized for their giving and how you can demonstrate that they are fulfilling their civic duty

2. Ultra-Wealthy Donors and Their Giving Preferences

According to The New Normal, education is by far the leading area for UHNW investment. Almost 9 out of 10 of the ultra-wealthy gave to education-related causes. Their largest gifts continue to go to higher education. Following higher education, social services,

Healthcare, and medical research, and arts and culture, round out the top areas of giving with around six in every ten donors giving to these areas.

Wealth-X points out that investments in social services and medical research can create a powerful impact in the quality of life and health outcomes. While arts and culture and public affairs provide opportunities for donors to take a high-profile approach, these types of gifts tend to attract media attention and interest from other wealthy individuals.

Additionally, The New Normal points out that a large portion of North American donors tend to be those with self-made fortunes as opposed to the Middle East and Latin America, where a majority of UHNW individuals inherited some or all of their wealth. The report further finds that there are more UHNW donors who solely inherited or made their wealth via a combination of inheritance and their own efforts, than those who built their own fortunes.

This finding is critical because entrepreneurs tend to spend their wealth on building their business and even reinvest in new companies, only to give later in life when they are finished business creation. They tend to be builders, dreamers who can relate to big visions that require significant investments. Conversely, those with inherited wealth might be more inclined to give at a younger age.

Taking giving preferences into consideration, Make Philanthropy Workrecommends the following UHNW engagement strategies:

• If you are not a higher education institution, it’s essential to demonstrate the impact the UHNW donor can make through your organization. Additionally, you can leverage your promotion of giving to position your UHNW donor in front of his/her peers and the community
• As a higher education institution, 9 out of 10 UHNW alumni are likely to give to your institution!
• Have smaller portfolios for your most experienced gift officers (principal gift officers), and focus their efforts campus-wide instead of designated to a specific school are college
• All UHNW should be managed and highly engaged
• Allocate resources to understanding your UHNW alumni’s desire to make an impact and to deepening their engagement
• If you are not already focused on international alumni – now is the time!
• Even the most successful entrepreneur might not be ready to give a substantial gift if they are still building their company. While you should always keep these people close and engaged, those that have inherited wealth might be more likely to give at a younger age

3. The New Normal: Sustainable Investment, Engagement, and the Next Generation

As The New Normal notes, there is a significant shift taking place in philanthropy with donors moving to impact investing, and this is very much the case with UHNW donors. The instruments of impact investing and impact bonds have grown substantially, and donors now realize that returns are similar to other portfolio investments. Venture philanthropy is also on the rise. This is the utilization of venture capital finance applied to philanthropy, where the fund invests in the capital and works with the organization to scale and measure impact.

Additionally, UHNW donors want and expect to be very involved in the process. They not only want to be engaged as a volunteer or board member, but they also to want to co-create. This is accompanied by a desire for accountability and an understanding of how funds are utilized and the impact of their giving. It’s more important than ever to be able to measure impact.

Ultra-wealthy are also continually seeking a more collaborative approach with family and involving their family in their giving decisions through advisors - something an institution is ideally suited at facilitating in an open, positive, and transparent way.

Based on these findings, Make Philanthropy Work recommends development and advancement operations embrace the following:

• Develop a deep understanding of impact investing, impact bonds tools and techniques as well as venture philanthropy. There are many courses and training available.
• Put the systems in place within your institution to accept and manage these types of investments.
• Promote your acceptance and desire to benefit from impact investing and impact bonds just as you promote gift planning products.
• Create a culture at your institution where donors can not only be involved in co-creation but are encouraged to be part of the creation.
• Develop the systems to monitor the impact of giving; it’s not about the cost to raise a dollar anymore, it’s about the impact created through the investment. Be sure to manage these expectations and set reasonable goals, just be sure to measure it. Consider BlockChain functionality to track impact.
• Understand family dynamics and give donors the space to work with their family and advisors. You can ask how you can help them make the case to their family and even help facilitate the process.
• Establish a network of accounting, legal, and philanthropic advisors that work with UHNW individuals.
• The Next Generations
• The younger generations are using their time and skills in a way that has not been done before. They are more concerned with the social impact of their business. They give to similar causes as their elders, just fewer of them, and take a very targeted approach to their giving. This focus is influencing their older family members who are following their lead.

The giving values of millennials and generation Z are different from the greatest generation and the boomers. Fundraising practices were built for the later generations, and Make Philanthropy Workrecommends the following to connect with younger generations.

• In the coming years, it will be critical to understand the value and behaviors of younger generations.
• The idea of having young professional groups is now more important than ever. Utilize these groups to discuss why they are engaged and participating in philanthropy, and how to improve their experience. While social gatherings and the parties are important, learn from this group and let them help you to adapt your fundraising to their different philanthropic behaviors.
• These are the connected generations. You need to have a strong online presence and digital strategy to engage. Social media is a must, your website must be responsive, and your digital communication engaging and segmented towards what they care about.

To sum it up UHNW donors have changed in the way they connect and give to nonprofits and higher ed institutions. They are investing through sophisticated models and tools. They expect to be able to monitor impact and even co-create programs, centers or new projects. They want to be heavily involved in the outcomes of their giving, and make decisions through a collaborative approach of family and advisors. As institutions, we need to not only adapt to these changing values and behaviors, but put the mechanisms in place to engage the ultra-wealthy. It’s only a matter of time before all donors have these expectations and behaviors if it hasn’t already happened. It’s time to embrace the new normal and build the systems and structures to engage UHNW in more meaningful ways.

So what do you think? These are just some of the methods in which you can engage ultra-wealthy donors,and I invite you to comment below on other ideas and experiences that you feel would be effective.

If you would like to learn more about growing your major giving efforts, please connect with us below.