ISSUE 32: 2017

Philanthropy

Getting Your Giving Right

Adopting philanthropic best practices can make one’s charitable giving both more impactful and more satisfying.

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“To give away money is an easy matter and in any man’s power. But to decide to whom to give it and how large and when and for what purpose and how is neither in every man’s power nor an easy matter.”—Aristotle  

Giving back to their communities remains a priority for the vast majority of wealthy families because they believe philanthropy is the best means of effecting positive social change, but many are uncertain their gifts are having the impact they seek.

These are some of the important findings from the 2016 U.S. Trust® Study of High Net Worth Philanthropy, a biennial study of the philanthropic behaviors, attitudes and priorities of wealthy donors. Conducted in partnership with the Indiana University Lilly Family School of Philanthropy, the survey found that 91% of American high-net-worth households donated to charity in 2015, on average giving ten times more than the typical American household.

Augmenting their financial support with their time and talents, half of wealthy individuals also volunteered at one or more charitable organizations, a rate twice that of the general population. 

In fact, more wealthy donors (63%) report significant personal fulfillment from volunteering than from giving (42%).

Not surprising given their commitment to philanthropy, high-net-worth donors put a premium on charitable giving as a means of strengthening their communities. When asked what they believe has the greatest potential for positive impact on society, wealthy donors cited charitable giving (45%) and volunteering (31%) above political contributions, socially responsible investing and other means of effecting change. 

Fulfillment but challenges, too

The personal satisfaction they derive from charitable activities notwithstanding, engaging in philanthropy presents some significant challenges for wealthy Americans. Of those surveyed, 67% said that identifying the causes they care about and deciding where to donate are their biggest challenges.

“Creating a meaningful connection to your charitable activities by tying them to your core values and issues you’re most passionate about helps ensure that your giving is impactful and sustainable over the long haul,” says Claire Costello, national philanthropic practice executive at U.S. Trust. 

“While it may seem straightforward, identifying what matters most to you and how to act on those priorities can be quite challenging. This is especially the case if you’re giving as a family and your family members have different perspectives and sensibilities,” Costello says. 

After helping clients to develop their philanthropic mission predicated on their values and interests, Costello works with them to construct a philanthropic mission — whether to cure cancer, end human trafficking or establish community gardens — and a strategy to achieve it. The strategy might define the geographic focus, types of organizations favored by the donor — large or small, blue chip or fledgling, community based or nationally focused — as well as criteria for funding decisions. 

Measuring impact

One of the top motivations for wealthy donors is to make a positive impact on society, yet the vast majority of them do not monitor or evaluate the impact of their giving. Of those that do, only 44% believe their giving is having the intended impact.

“Given their strong desire to make a difference, there is a significant disconnect between their philanthropic motivations and their philanthropic practices,” Costello says. “It is important that donors evaluate the effectiveness of their giving to help ensure they meet their philanthropic objectives.”

Understanding yields satisfaction

The more experienced and engaged the high-net-worth donors are, the more likely they are to be personally fulfilled by their charitable activity. Indeed, donors who described themselves as knowledgeable about philanthropy said they are more personally fulfilled by their charitable activity than those who view themselves as philanthropic novices. 


 

Deeper knowledge of philanthropy also corresponds with a greater adoption of philanthropic best practices, which might explain why knowledgeable donors reported higher levels of confidence in the efficacy of their giving than less informed respondents. For example, 16.7% of “novice” households consulted with a philanthropic advisor, compared with 29.5% of “knowledgeable” households and 37.1% of “expert” households. Similarly, donors’ knowledge level corresponds with their use of charitable trusts, donor-advised funds and private foundations.

While every donor has different priorities, virtually all of them can increase the impact of their giving — and the satisfaction they derive from it — by taking the following actions: 

  • Establish goals and strategies that connect to their core values and areas of interest 
  • Conduct due diligence on potential gift recipients
  • Evaluate the effectiveness of both the charitable organizations and their broader philanthropic effort
  • Seek outside expertise if they have questions about the efficacy of their philanthropy.

“There is a difference between charity and philanthropy. Charity is more about the process of gifting to nonprofit organizations, while philanthropy involves a more strategic approach to effecting social  or environmental change,” Costello says. “While both may be born of goodwill and generosity, philanthropy done well is more likely to make the difference that motivates the donor to give in the first place.” 

For more information on charitable giving, contact your U.S. Trust advisor or visit ustrust.com/philanthropy.

IMPORTANT INFORMATION

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

OTHER IMPORTANT INFORMATION

The 2016 U.S. Trust® Study of High Net Worth Philanthropy is based on a nationally representative random sample of 1,435 wealthy donors, including, for the first time, deeper analysis based on age, gender,sexual orientation and race. The study is based on a survey of U.S. households with a net worth of $1 million or more (excluding the value of their primary home) and/or an annual household income of$200,000 or more. Average income and wealth levels of the participants in the study exceeded these threshold levels; the average income and wealth levels of study respondents was approximately $331,156 and $16.8 million, respectively.

“To give away money is an easy matter and in any man’s power. But to decide to whom to give it and how large and when and for what purpose and how is neither in every man’s power nor an easy matter.”—Aristotle  

Giving back to their communities remains a priority for the vast majority of wealthy families because they believe philanthropy is the best means of effecting positive social change, but many are uncertain their gifts are having the impact they seek.

These are some of the important findings from the 2016 U.S. Trust® Study of High Net Worth Philanthropy, a biennial study of the philanthropic behaviors, attitudes and priorities of wealthy donors. Conducted in partnership with the Indiana University Lilly Family School of Philanthropy, the survey found that 91% of American high-net-worth households donated to charity in 2015, on average giving ten times more than the typical American household.

Augmenting their financial support with their time and talents, half of wealthy individuals also volunteered at one or more charitable organizations, a rate twice that of the general population. 

In fact, more wealthy donors (63%) report significant personal fulfillment from volunteering than from giving (42%).

Not surprising given their commitment to philanthropy, high-net-worth donors put a premium on charitable giving as a means of strengthening their communities. When asked what they believe has the greatest potential for positive impact on society, wealthy donors cited charitable giving (45%) and volunteering (31%) above political contributions, socially responsible investing and other means of effecting change. 

Fulfillment but challenges, too

The personal satisfaction they derive from charitable activities notwithstanding, engaging in philanthropy presents some significant challenges for wealthy Americans. Of those surveyed, 67% said that identifying the causes they care about and deciding where to donate are their biggest challenges.

“Creating a meaningful connection to your charitable activities by tying them to your core values and issues you’re most passionate about helps ensure that your giving is impactful and sustainable over the long haul,” says Claire Costello, national philanthropic practice executive at U.S. Trust. 

“While it may seem straightforward, identifying what matters most to you and how to act on those priorities can be quite challenging. This is especially the case if you’re giving as a family and your family members have different perspectives and sensibilities,” Costello says. 

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After helping clients to develop their philanthropic mission predicated on their values and interests, Costello works with them to construct a philanthropic mission — whether to cure cancer, end human trafficking or establish community gardens — and a strategy to achieve it. The strategy might define the geographic focus, types of organizations favored by the donor — large or small, blue chip or fledgling, community based or nationally focused — as well as criteria for funding decisions. 

Measuring impact

One of the top motivations for wealthy donors is to make a positive impact on society, yet the vast majority of them do not monitor or evaluate the impact of their giving. Of those that do, only 44% believe their giving is having the intended impact.

“Given their strong desire to make a difference, there is a significant disconnect between their philanthropic motivations and their philanthropic practices,” Costello says. “It is important that donors evaluate the effectiveness of their giving to help ensure they meet their philanthropic objectives.”

Understanding yields satisfaction

The more experienced and engaged the high-net-worth donors are, the more likely they are to be personally fulfilled by their charitable activity. Indeed, donors who described themselves as knowledgeable about philanthropy said they are more personally fulfilled by their charitable activity than those who view themselves as philanthropic novices. 


 

Deeper knowledge of philanthropy also corresponds with a greater adoption of philanthropic best practices, which might explain why knowledgeable donors reported higher levels of confidence in the efficacy of their giving than less informed respondents. For example, 16.7% of “novice” households consulted with a philanthropic advisor, compared with 29.5% of “knowledgeable” households and 37.1% of “expert” households. Similarly, donors’ knowledge level corresponds with their use of charitable trusts, donor-advised funds and private foundations.

While every donor has different priorities, virtually all of them can increase the impact of their giving — and the satisfaction they derive from it — by taking the following actions: 

  • Establish goals and strategies that connect to their core values and areas of interest 
  • Conduct due diligence on potential gift recipients
  • Evaluate the effectiveness of both the charitable organizations and their broader philanthropic effort
  • Seek outside expertise if they have questions about the efficacy of their philanthropy.

“There is a difference between charity and philanthropy. Charity is more about the process of gifting to nonprofit organizations, while philanthropy involves a more strategic approach to effecting social  or environmental change,” Costello says. “While both may be born of goodwill and generosity, philanthropy done well is more likely to make the difference that motivates the donor to give in the first place.” 

For more information on charitable giving, contact your U.S. Trust advisor or visit ustrust.com/philanthropy.

IMPORTANT INFORMATION

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

OTHER IMPORTANT INFORMATION

The 2016 U.S. Trust® Study of High Net Worth Philanthropy is based on a nationally representative random sample of 1,435 wealthy donors, including, for the first time, deeper analysis based on age, gender,sexual orientation and race. The study is based on a survey of U.S. households with a net worth of $1 million or more (excluding the value of their primary home) and/or an annual household income of$200,000 or more. Average income and wealth levels of the participants in the study exceeded these threshold levels; the average income and wealth levels of study respondents was approximately $331,156 and $16.8 million, respectively.