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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future releases straight to your inbox.
Wealthy millennials and Gen Zers are redefining the world of charitable giving, seeing themselves more as activists than donors, according to a new study.
Wealthy donors under the age of 43 are more likely to volunteer, fundraise and act as mentors to charities rather than just giving money, according to a new survey by Bank of America Private Bank. The survey of more than 1,000 respondents with more than $3 million in investable assets also found that young philanthropists want more public attention for their giving compared to Gen Xers and baby boomers.
The change in the way the next generations give, and the causes they favor, are likely to reshape the philanthropic landscape. Rather than simply writing checks for causes they care about, the next generation of donors want to be deeply involved in solving the biggest social and environmental problems.
“They see themselves as agents of holistic social change,” said Dianne Chipps Bailey, managing director and national philanthropic strategist for philanthropic solutions at Bank of America Private Bank. “I think they have a better sense of agency in that world. They really want to move their capital in a much more integrated and powerful way to achieve their social impact goals.”
Both younger and older multi-millionaires are highly philanthropic. According to the study, 91% of respondents had given to charity in the past year. Over two-thirds of both older and younger respondents said they are motivated by “making a lasting impact.”
However, their reasons for giving and their methods vary greatly by age. Donors under the age of 43 are slightly more likely to volunteer and are twice as likely to help raise charitable donations from friends or peers rather than just giving directly. They are more than four times more likely to act as mentors. And they are more interested in serving on nonprofit boards rather than limiting their capital contributions.
Older donors give out of a sense of responsibility. Those over 44 were more than twice as likely to give out of “obligation” as younger donors. Those under 43 were more likely to cite self-education and the influence of their social circle as drivers of their philanthropy.
Some of the differences between generations may be rooted in life cycles and wealth. The younger rich are still building their fortunes and inheriting their wealth, so they are more likely to volunteer their time and help raise money. But Bailey said the focus on peer networks and activism will likely last even as they grow older and wealthier.
“You can think of philanthropy as the five Ts – time, talent, treasure, testimony and ties,” he said. “The older generation focuses on the treasure (giving funds). The younger generations lean toward the other four.”
The nouveau riche also support different causes. They are twice as likely to support efforts related to homelessness, social justice, climate change, and the advancement of women and girls. Philanthropists over 44 were much more likely to support religious organizations, the arts and military charities.
“When you think what [the younger generation] it’s been over the last few years, 2020, where they’ve seen it all exposed, they’re leaning into the response,” Bailey said. “And it was preserved. So many people hype their offering with headlines, but they really dig deep. It’s not a moment but a movement.”
The implications of the generational shift in supply will be profound for wealth advisers and nonprofits, advisers say. Since many younger donors inherited their wealth, they are much more likely to use vehicles created by their family. They were more than four times more likely to use charities, family foundations and donor-advised funds.
Bailey said the next generation wants to talk about philanthropy as part of an initial conversation with a wealth advisor — even before talking about their investment plan.
“They have a hunger to learn more, to learn more about philanthropy,” Bailey said. “They already have these complexes [giving] vehicles on hand, so the education part is critical for both nonprofits and consultants.”
With philanthropy increasingly dominated by wealthy donors and the next generation expected to inherit more than $80 trillion in the coming decades, courting the new rich will be critical.
“You need their perspective and you’re going to need their money,” Bailey said.
Advisors to the nouveau riche should also be generous with their praise. Younger donors are more than three times more likely to measure the success of their charitable efforts by public recognition, the survey found. Nearly half say they are likely to associate their names with their charitable efforts, while more than two-thirds of top donors give anonymously.
“Praise them, celebrate them, give them visibility,” he said.
Just don’t call them “philanthropists”. A report from Foundation Source found that 80% of young donors want to be considered a “donor”, while 63% also like the terms “supporter” or “changemaker”. Only 27% accepted the “philanthropist” label.