More money for charity comes from the ultra-rich

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While charitable giving is rising, the donor pool is shrinking as philanthropy becomes overly concentrated amongst a small group of ultra-wealthy mega-donors, a brand new study finds.

A brand new report from Altrata shows that ultra-high-net-worth individuals (value $30 million or more) now account for 38% of all individual giving globally. In other words, 400,000 people represent over a 3rd of the world’s charitable giving.

The situation is much more extreme once we take a look at billionaires. The world’s 3,200 billionaires (or 0.00004% of the world’s population) represent 8% of individual philanthropy.

Giving from those at the top is clearly positive. Although it’s value debating whether the wealthy give enough (see last annual letter from Gates Foundation CEO Mark Suzman on how the wealthy should step it up), giving overall continues to grow.

According to Altrat, the overall level of giving from ultra-high-net-worth individuals in 2022 was 25% higher than in 2018, regardless that it was a yr of declines in financial markets. North Americans remain the most philanthropic people in the world, accounting for almost half of world donations from this upper class.

The challenge for wealth advisors and nonprofits is adapting to the latest, high-pressure landscape of philanthropy. Nonprofits which have relied on a broad pool of donors for years must now depend on a smaller group of super donors who’re already inundated with requests. Charitable giving will wax and wane based on the interests and goals of a small group of mega-funders. Overall, giving will develop into more volatile as the benevolence of billionaires and the ultra-rich is essentially driven by stock prices.

Amir Pasic, dean of the Lilly Family School of Philanthropy at Indiana University, says the so-called “dollars up, donors down” phenomenon has led nonprofits to rethink their fundraising methods and methods.

“A lot of nonprofits are trying to focus more on major gifts and trying to figure out how to reach wealthy donors and foundations,” he said.

At the same time, he said, some nonprofits try to reverse the tide of wealth and use technology and more creative programs to achieve a bigger community of smaller, younger donors.

“It’s a catch-22,” he said. “Everyone is rushing to the top of the pyramid, but the situation becomes so concentrated that they may neglect the importance of reaching future donors.”

According to Altrata, today’s ultra-wealthy megadonors are mostly men, most over the age of 70, and with a greater share of liquid wealth (i.e. money) than the broader ultra-wealthy population. However, women are a growing force. The study shows that girls make up 11% of the ultra-wealthy population, but make up 22% of larger donors.

Today’s ultra-wealthy donors also prefer to present through private foundations and donor-advised funds—which provides them more control—fairly than simply writing a check to the Red Cross or United Way. Assets held in private foundations have greater than doubled since 2005, to greater than $1.2 trillion, based on Federal Reserve data.

According to Altrata, nearly 1 in 5 ultra-high-net-worth individuals have a personal foundation, and 30% of individuals with assets exceeding $100 million have such a foundation, based on Altrata.

The giving priorities of the wealthy also differ from those of broader society, which may result in more money flowing to causes which might be exclusively for the wealthy and even for a small group of individuals. According to Altrata, the commonest charitable purpose for ultra-wealthy donors was education (54%). This was followed by arts and culture (32%), healthcare and medical research (28%), social services (23%) and environment/conservation/animals (14%).

While religion is by far the most vital charitable cause for Americans, Altrata found that religion is just not amongst the top seven causes supported by the ultra-wealthy, although Altrata noted that because religious giving is commonly “anonymous and diverse in nature,” the actual number may very well be higher.

“There is some evidence that the ultra-high-net-worth population is different from the broader population,” Pasic said. “And that can also be skewed by a small number of very large donations to a single cause.”

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