More philanthropic funding coming from the super-rich | Wilnesh News

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While charitable giving has been rising, the number of donors is shrinking as philanthropy becomes overly concentrated among a small group of ultra-wealthy mega-donors, a new study shows.

A new report from Altrata found that ultra-high net worth individuals (those with assets of $30 million or more) now account for 38% of total individual giving globally. In other words, 400,000 people account for more than one-third of the world’s philanthropic efforts.

The picture is even more extreme when you look at billionaires. The world’s 3,200 billionaires (0.00004% of the global population) account for 8% of personal philanthropy.

The dedication of those at the top is certainly a positive.Although it is debatable whether the wealthy are giving enough support (see most recent annual letter Gates Foundation CEO Mark Suzman talks about how wealthy people need to step up) Overall giving continues to grow.

Altrata data shows that despite poor performance in financial markets, overall giving levels among ultra-high-net-worth individuals will still be 25% higher in 2022 than in 2018. North America remains the most philanthropic nation on earth, accounting for nearly half of global top-tier giving.

The challenge for wealth advisors and nonprofits is adapting to a new landscape in which philanthropy is highly top-heavy. Nonprofits that have benefited from a broad range of donors for years now have to rely on a smaller number of mega-donors who have been flooded with requests. Philanthropy rises and falls based on the interests and goals of a small group of mega-funders. Overall giving will become more volatile because the good deeds of billionaires and the super-rich are largely driven by stock prices.

Amir Pasik, dean of Indiana University’s Lilly Family School of Philanthropy, said the so-called “dollars are up, donors are down” phenomenon has caused nonprofits to rethink their fundraising and strategies.

“A lot of nonprofits are shifting to focus more on these major gifts and trying to figure out how to get wealthy donors and foundations,” he said.

At the same time, he said, some nonprofits are trying to turn the tide of wealth and use technology and more creative outreach programs to attract larger communities of smaller, younger donors.

“It’s a Catch-22,” he said. “Everyone is rushing to the top of the pyramid, but it’s become so concentrated that they may be overlooking the importance of reaching tomorrow’s donors.”

Altrata said today’s ultra-rich donors are predominantly male, most are over 70 years old and have a higher proportion of liquid wealth (i.e. cash) than the broader ultra-high-net-worth group. However, women are a rising force. Research shows that while women make up 11% of ultra-high net worth individuals, they make up 22% of larger donors.

Today’s ultra-wealthy donors also prefer to give through private foundations and donor-advised funds—which give them more control—rather than simply writing a check to the Red Cross or United Way . Since 2005, assets held by private foundations have more than doubled to more than $1.2 trillion, according to the Federal Reserve.

Almost one in five ultra-high net worth individuals owns a private foundation, while 30% of those with assets of $100 million or more own a foundation, according to Altrata.

The wealthy also have different giving priorities than the public at large, which can result in more money flowing to causes unique to the wealthy or even a few. According to Altrata, the top philanthropic cause of ultra-wealthy donors is education (54%). This is followed by arts and culture (32%), healthcare and medical research (28%), social services (23%) and environment/conservation/animals (14%).

While religion is undoubtedly the most important philanthropic cause for Americans, Alttrata said it does not rank among the top seven philanthropic causes of the super-rich, although Alttrata noted that because donations to religion are often “anonymous and are materially different” and the actual number may be higher.

“There is some evidence that ultra-high net worth individuals skew differently from the broader population,” Pasik said. “And a small number of large donations may also skew that goal.”

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