The landscape of philanthropy is rapidly changing, with donations to charity on the rise but the pool of donors shrinking. A recent study by Altrata revealed that ultra-high-net-worth individuals, those worth $30 million or more, now contribute 38% of all individual giving worldwide. This means that a mere 400,000 people are responsible for over a third of the world’s charitable donations.
Challenges for Nonprofits
As the focus of philanthropy becomes more concentrated among the ultra-wealthy, nonprofits and wealth advisors are faced with the challenge of adapting to this new reality. Fundraising strategies need to shift to cater to a smaller group of super-donors who are already inundated with donation requests. Causes that receive funding will be influenced by the personal interests and goals of these mega-donors, leading to a more volatile landscape for overall giving.
While the study showed that the majority of ultra-wealthy mega-donors are male and over the age of 70, there is a rising force of female donors in this demographic. Women, who make up 11% of the ultra-high-net-worth population, account for 22% of larger givers. This shift highlights the changing dynamics within philanthropy and the need for targeted outreach to female donors.
Shift Towards Foundations and Donor-Advised Funds
Ultra-wealthy donors are increasingly opting to give through private foundations and donor-advised funds, which offer them more control over their contributions. This trend has led to a substantial increase in the assets held in private foundations, surpassing $1.2 trillion. Nearly one in five ultra-high-net-worth individuals now have a private foundation, with 30% of those worth $100 million or more having established one.
Giving Priorities of the Wealthy
The study also revealed that the charitable priorities of ultra-wealthy donors differ from those of the broader public. Education emerged as the top cause, with 54% of mega-donors choosing to support educational initiatives. This was followed by investments in arts and culture (32%), health care and medical research (28%), social services (23%), and environmental conservation (14%). Interestingly, religion, a top cause for Americans in general, did not rank in the top preferences of the ultra-wealthy.
As the landscape of philanthropy continues to evolve, it is crucial for nonprofits to strike a balance between catering to the needs of existing mega-donors and cultivating relationships with a broader base of smaller, younger donors. Technology and creative outreach programs can help bridge this gap and ensure sustained support for charitable causes. Dean Amir Pasic of the Indiana University Lilly Family School of Philanthropy emphasized the importance of engaging tomorrow’s donors while navigating the increasingly top-heavy nature of philanthropy.
The rise of ultra-wealthy mega-donors has reshaped the dynamics of philanthropy, posing both challenges and opportunities for the charitable sector. By understanding the giving priorities and preferences of these donors, nonprofits can adapt their strategies to secure funding for a wide range of causes and engage a diverse donor base for a more sustainable future in philanthropy.
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