Consider High-Net-Worth Individuals for Your NFP Efforts

by | Apr 9, 2021 | COVID-19, Not-for-Profit, Tax and Accounting Desk

High-net-worth individuals donated $5.8 billion during the first six months of the COVID-19 pandemic — generous giving by most standards. This is according to a recent report, “Philanthropy and COVID-19 in the first half of 2020,” from the Center for Disaster Philanthropy and information service Candid. However, that $5.8 billion amount is deceptive, because nearly three-quarters of it came from one donor, Mackenzie Scott (the ex-wife of Amazon’s Jeff Bezos).

In fact, a 2020 study from the Milken Institute Center for Strategic Philanthropy found that only a relatively small percentage, 36%, of the ultra-wealthy are involved in charitable giving. This may sound like ominous news for not-for-profit organizations. But there are ways to tap this group’s ample resources.

Bad News, Good News
The Milken Institute report, “Stepping off the Sidelines: The Unrealized Potential of Strategic Ultra-High-Net-Worth Philanthropy,” studied individuals with more than $30 million in assets and found that only 9% had made charitable gifts of $1 million or more. The Institute summarizes the current issue this way: “the personal wealth of the world’s richest is accumulating faster than philanthropic capital is being deployed, and faster than global issues are being solved.”

However, the report identifies some cause for optimism. Although women currently make up one of every seven ultra-high-net-worth individuals, they’re growing in number. And wealthy women generally give more generously than their male peers. Their motivations also tend to be different. Men are more likely to give to create a legacy, and women are more likely to give to support a cause.

Strategic Targeting
So if your not-for-profit doesn’t already, you may want to focus more development efforts on both women who are already wealthy and younger female executives and business owners on the way up. Even if they aren’t in the position to make gifts right now, they may be in decades to come and will want to support charities they know and trust.

Also explore building relationships with the financial advisors of high-net-worth individuals. These include estate planners as well as advisors to donor-advised funds (DAFs), family offices and private foundations (which must spend at least 5% of their net investment assets annually). DAFs are the fastest growing charitable giving vehicles (over 100% in the past five years). And many are sitting on hefty cash cushions, thanks to a surging stock market and no minimum payout requirements. Currently, a charitable deduction is allowed for the individual at the time they contribute into the DAF, with no set rules on how soon the funds must be given to a charitable organization. But public pressure and potential legislation might force DAF owners to step up their charitable donations in the near future.

Help Rebuilding
If your not-for-profit is working to rebuild its emergency fund or an endowment it was forced to tap during the COVID-19 pandemic, consider focusing on high-net-worth individuals.

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