How to Work with Young High Net Worth Donors

Hi Everyone, this post discusses high income donors who happen to be young. Gone are the days where the demographic for high income donors are of an older generation. We live in an age where there are millionaires who made their first million in their teens. We need to get creative when prospecting potential major donors because the economic climate calls for it. Please read the article below on this very subject. Enjoy!

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The demographic profile of high net worth (HNW) donors has changed rather dramatically in recent years. First, there are more of them, and second, they are younger.

Americans in general are quite generous with 80% of households donating each year. Seven-five percent of those receive no tax benefit from their donations. No other country even comes close to matching U.S. generosity.

Generosity increases as HNW increases. Ninety-five percent of families that are worth $1 million donate and when HNW increases to $5 million, 98% of families give regularly.

H. King McGlaughon, Jr, of Wachovia Wealth Management, made two important points in a recent webinar:

  1. The number of households that have $1 million has increased to 10% of households from a mere 3.5% in 1989. McGlaughon called these the “silent millionaires.” They don’t act rich or consume conspicuously, but they do believe in giving back to society.
  2. High Net Worth donors are younger than ever. Thirty-four percent of HNW donors are 65 plus years old. Sixty-two percent of HNW donors are between the ages of 37 and 64.

Nonprofits often assume that large donors will be older and overlook the many younger HNW individuals our economy has created in recent years. McGlaughon points to these characteristics of younger HNW donors:

  • Young HNW donors have wealth that is typically “new,” that is not inherited.
  • Young HNW donors are in their wealth and profession building years.
  • They are not as risk averse as their older counterparts.
  • They have a long horizon for planning
  • Their motivation is primarily mission driven, not tax-break driven. The mission here is the donor’s mission, not the nonprofit’s.
  • They are often concerned about the effects of wealth on their heirs.
  • They wish to protect their assets and preserve their capital.
  • But they want to create a “legacy,” and have a sense of moral obligation to do good in the world.
  • Younger donors are engaged and “control centric,” and are interested in targeted giving to address specific problems.
  • They enjoy connecting with their peers.
  • They often work with professionals outside the nonprofit ranks, such as financial firms and wealth management pros or even start their own foundations.

How can nonprofits work more effectively with these donors? Here are some tips from Mr. McGlaughon:

  • Learn to work with other professionals in the philanthropic field. Strive to be a team member with other trusted advisers of your donors. Think of yourself as a life partner with the donor.
  • Become donor centric. Focus on the donor’s mission rather than your own. These donors want to give their money where specific problems are addressed. They may not be as interested in broad, unspecified gifts to an alma mater or to help with a building fund. Think of how you can help the donor achieve “philanthropic actualization.”
  • Strive to be nimble and adaptable. Explore new ways of giving for the donor. They may no longer be interested in the ways donors have given in the past.
  • Provide opportunities for donors to interact with their peers. Consider donor circles, donor teams, and other collaborative tools.

With more than one million nonprofits in the field, the competition is fierce for donors. But, donations are also up. Between 2001 and 2005, giving in the US reached $1,270.83 billion despite a recession and the terror attacks of 9/11. That is approximately $270 billion dollars more than between 1996 and 2000.

We can see that there is no reason to despair but there are a lot of reasons to adapt.

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