Going Beyond Giving Perspectives on the philanthropic practices of high and ultra-high net worth donors Individual and private philanthropy plays a significant and growing electronic survey of over 200 individuals, including 132 TPW members role in funding social causes. According to a recent U.S. Trust ® representing 30% of our network. Their responses raised provocative Study of High Net Worth Philanthropy, 91% of high net worth questions about the power of philanthropy to transform an individual’s individuals surveyed gave to charity in 2015. According to Giving investment decision about giving to tangible social change. We also USA, US$323B was given by US individuals and foundations in 2015. gained insight into what else individuals are looking for, to practice And a commissioned study by Wealth-X showed that ultra-high philanthropy more strategically. We understand strategic philanthropy net worth individuals—those with a net worth of US$30 million or as a practice of setting goals, charting a course to reach them, and more—will on average donate US$29.6 million over the course of adapting based on information, evidence, and experience. their lifetimes. The pages that follow share highlights from the study. We hope While high net worth donors have long been pursued by charities this report will spark more questions, discussions, and research in search of their support, the behaviors and practices of individual among philanthropists and those who support them, to advance donors are still only vaguely understood, and perhaps in ways that the field of giving. do not reflect reality. We know that charitable donations to support social goods matter. We know less about whether individual donors are strategic, how they make choices on structure and strategy, Tracy Mack Parker The Philanthropy Workshop Katherine Lorenz Cynthia and George Mitchell Foundation Board Chair, The Philanthropy Workshop and, importantly, who and what influences their giving practices. The Philanthropy Workshop, with funding from the Raikes Foundation CREATED WITH SUPPORT FROM and the Bill & Melinda Gates Foundation, commissioned research to understand the experiences, practices, and behaviors of high and ultra-high net worth philanthropists. The research included an 2 You’ve just come into money. You think you should give back. Now what? Imagine that you have just come into a substantial amount of money. You learn words like donor-advised fund. Private foundation. Your company went public. You’ve inherited wealth from your Limited liability trust. You are told there are tax implications and time parents or grandparents. Or, your spouse has. considerations to your choices. You may be asked about your legacy You’ve always wanted to make a difference. You’ve been involved in charitable efforts before—attended a few fundraising galas, given and estate plans; told of philanthropy or family wealth services. You’ve heard it said that engaging with philanthropy is a journey. money to your alma mater or religious organization, volunteered, What do you do first? And next? Are you prepared? How do you and written checks to causes you support. You think your money define success? How will you know your money is making a could be put to good use. difference? Who do you turn to for advice? Because of the wealth you’ve come into, you meet with legal, tax, and financial advisors, and lean on friends and family, some of whom may be on the same journey as you. What does it mean to be a philanthropist? 3 The Study: Our approach The Philanthropy Workshop (TPW) comissioned research in 2016-17 Notes to learn from philanthropists both within and beyond its membership • Our sample is only based on high net and ultra-high net worth network about their choices and practices. We started with a series individuals. It is also not geographically representative. As such, of questions: How do philanthropists learn about new opportunities? the results should not be construed as generalizable to all How do they choose where to invest, and which approaches to use? philanthropists. How do they manage their philanthropy portfolios and measure impact over time? To answer these questions, we administered an electronic Knowledge, Attitudes, and Practices survey to 219 respondents, with participation from around the world. Twenty respondents also participated in • Responses were self-reported. • Respondents did not always answer all questions, so the sample varies by question in the analysis. • Where numbers do not add up to 100%, the data is reported as the frequency of responses, not by the number of respondents. additional qualitative interviews. The first section of this report is a summary and analysis of the data. The second presents our interpretations of the findings, which we hope will fuel debate and foster dialogue that advances the field. 4 am am?! pm: mu AGE Gender 36-51 31% Male Male 32% 32% 19-35 10% Female Female 71- 88 68% 68% 6% 52-70 53% LOCATION EXPERIENCE 5-10 years Have practiced philanthropy for > 10 years 64% 19% 22% UK 3-5 years 8% <3 yea rs 7% 61% Understanding our philanthropists 25% Canada South Asia Latin America Middle East each 1% Net Worth SCOPE OF ROLE Full Time 9% USA Hobby 24% Source of Wealth <$10M $10-25M 22% 22% $25-50M $100M+ 25% Part Time 51% Self Made 42% Inherited 17% $50-100M 16% 34% Spouse 24% 6 What and where do high wealth donors give to? What issues do you fund? In the aggregate, our respondents contribute to a wide variety of causes. Individually, donors tend to focus on just a few causes. 11% men 3% Env iron 6% * er* Oth Ar ts diseases to broader health systems strengthening. Contributions cu ce & Se 10% hts Rig tice n a us Hum cial J o &S Popula tions* to education ranged from early childhood to post-secondary. Our respondents primarily fund locally (45%) and / or internationally (48%), with 20% of the dataset reporting no geographic orientation. Ec Opp onom ortu ic nity 13% 8% For example, giving in health ranged from support for specific y rit a Pe Target And, the breadth of answers within a category was notable. t 12% lth $1M per year. n tio Educa % 17 a He Of those with no geographic orientation, 68% give away less than 20% * “Target Populations” include women and girls, youth, or gender-related funding. ** “Other” responses included religious giving, leadership, public policy, cultural exchange, and a few issues that did not fall into common groupings. 7 How much money do they give? How much did you give last year? There aren’t many clear guidelines on how much a philanthropist should give. We wanted to understand how much our respondents gave to social purposes in a year. Answering what percentage of net worth is allocated to charitable giving is surprisingly complex: assets can be owned by a family and not demarcated to individuals; invested assets can fluctuate with the market; and / or, philanthropists may have intentions for charitable donations that are not yet feasible. Net Worth $1M-5M $5M+ < $10M 62% 21% 8% 5% 6% $10-25M 22% 34% 16% 7% 6% $25-50M 11% 24% 26% 7% 0% $50-100M 3% 13% 24% 27% 6% $100M+ 3% 8% 24% 55% 81% Total % of sample 18% 36% 18% 21% 8% Our respondents are generous: 80% gave >$100,000 last year. Several respondents with lower net worth reported making larger < $100k $100-500k $500-1M donations. And, at higher levels of net worth, there are some who gave less than $500,000. Our analysis indicates that how much one gives in a year is also complex. 8 What else do high wealth donors contribute? In line with the adage that philanthropy is about giving wealth, work, Our philanthropists are also active networking and engaging in and wisdom, we asked what respondents give in addition to money. philanthropy education. In fact, when asked which specific networks High wealth donors can offer diverse skills and perspectives in they belong to, 101 discreet ones were listed. addition to their money. Because of their resources and networks, they are often invited to serve on boards. It was unsurprising, then, that 88% of our respondents volunteer, including board service. The high level of engagement was consistent across gender, net worth, source of wealth, and age. Our respondents also attend a variety of conferences relating to philanthropy (69%), with a smaller set attending issue or geographyrelated conferences (56%), and those which focus on impact investing (38%). 15% do not attend conferences. 69% attend PHILANTHROPY conferences 72% belong to philanthropy networks 84% engage in philanthropy education 9 What philanthropy structures and tools are used? For decades, philanthropy was associated with a private or family foundation structure. More recently, the term has been applied to What structures do you use in your philanthropy practice? a wide range of legal structures that channel money for societal 38% Private / Family Foundation 23% Checking Account 12% benefit. Our survey sought to understand how respondents made use of the structures and tools available to them. Our respondents channel their philanthropic giving through multiple Community Foundation DAF 9% Equity / Debt Investments 9% Private Bank DAF structures: 61% have two or more types and 39% one. This suggests 6% that philanthropists use different vehicles to meet their varying 1% Giving Circle Lobbying Organization needs. Likewise, they use a variety of financial tools to support causes they care about. Some respondents who selected “other” utilize direct tuition payment, loans and guarantees, and program related investments as tools they use. What tools do you use in your philanthropy practice? 89% Volunteer Time 80% Grants 46% Investments This diverse approach was consistent across net worth, years of experience, and levels of investment. Deeper exploration in the study’s qualitative interviews affirmed this finding. 23% 21% I run my own NGO Contracts 10 Who influences philanthropy structure? For many of our respondents, the philanthropy journey Who most influenced the way you initially structured your philanthropy? began with legal decisions around corporate structures to benefit from tax advantages associated with charitable giving. For some who inherited money, it started by assuming % of Inherited % of Self-Made % of Spouse Wealth/Tax/Legal Advisor 25% 30% 38% Families / Friends 32% Philanthropy Advisor 22% Total 30% a role in an existing family foundation. For others, the journey 22% 17% Total 24% included a longer due diligence process to determine what structures were most preferable to achieve financial, as well 17% 16% Total 18% as personal, goals. Research 9% 19% 18% Total 15% Among the many groups with an opportunity to influence philanthropists at the start of their journey, it is clear that Other* 12% 12% 11% Total 12% wealth/tax/legal advisors and personal networks play a significant role. * Of respondents who selected “Other”, 44% related to their own experiences; for 15% a structure already existed; and others, gained insights from philanthropy networks, grantees, advisors, or other resources. 11 How do high wealth donors find OPPORTUNITIES to invest in? When asked how they identified opportunities for giving, our respondents said they depend heavily on their social and professional How do you identify opportunities for investment? What type of pre-investment due diligence do you conduct? (choose as many as apply) RELATIONAL RELATIONAL networks: 61% of total responses reflected relationship-based approaches. This is consistent with how they fund: nearly 60% report collaborating with other funders. Importantly, our respondents also tend to prioritize relationshiporiented approaches when conducting due diligence. For those 57% Professional network 56% 57% Families / Friends Professional network 36% TECHNICAL Research 56% Families / Friends who selected “other” as a response: 38% of related to formal and / 25% 36% Research Request for proposal (RFP) or informal reference checks; 25% related to working with the 8% 25% Staff recommendation Request for proposal (RFP) recipient organization; and 19% related to outsourcing due diligence to a third party. 1% 8% Responded to cold call Staff recommendation 1% Responded to cold call TECHNICAL 12 How do TheY think about risk? We sought to understand how donors think about risk and return funding proven ideas. Most respondents gravitate to the middle when funding organizations and individual projects. We found no ground: not too risky, and not too mature. 84% of those who provide clear patterns in risk appetite based on demographic variables, unrestricted funding invest in growing or mature organizations, suggesting that risk preference is personal. Overall, we observed a suggesting an even lower tolerance for organizational risk. We thought lack of risk appetite for new organizations, as well as lower interest in we would see more unrestricted funding going to new organizations. What kinds of projects do you prefer to fund? 24% unrestricted/ core funding 19% promising but unproven ideas 38% ideas with some success and some uncertainty 19% proven ideas with evidence of success LESS RISK MORE RISK 17% new organizations 58% growing organizations with scaling programs 25% mature organizations with clear operating models What kind of organization do you prefer to fund? 13 Are high wealth donors making an impact? How do they know? Our respondents have a very high level of confidence in the impact Compared to other research in philanthropy, which show that donors of their giving: 78% selected between 7 and 10 (with 10 being “very don’t tend to monitor their giving, this finding is not surprising. clear”) when asked if they have a clear understanding of how their However, this sample is highly confident about their impact, which philanthropy contributes to social change. Respondents with begs the question of where that confidence comes from. between 10-20 years of experience were our most confident. It is less clear how they actually know they are making an impact. While 70% of respondents use strategic plans to guide their philanthropy, 36% say they find investments via research, a potentially more objective approach to due diligence. The majority are more influenced by friends and family. And, 44% of respondents do not require grantees to submit any reports, while just 9% use third-party validation of results, which can be seen as a more objective measure. 55% require grantees to submit reports 9% 78% use third-party validation of results have a clear understanding of how their philanthropy contributes to social change 14 How do They learn to practice philanthropy? Some philanthropists have a clearly defined issue or geography How did you learn about practicing philanthropy? influencing their giving, even before their major wealth event. RELATIONAL Others carry their professional skills and experiences into their philanthropy practices. Others are brand new to philanthropy. 60% Family / Friend Regardless of starting point, the vast majority of our respondents 19% Financial or wealth advisor showed they want to understand how to practice philanthropy, and 19% Philanthropy advisor pursued relationship-based as well as more technical approaches to learning. 62% of respondents selected three ways of learning. Our qualitative interviews provided a more nuanced view. Most TECHNICAL a philanthropy 72% Attended workshop or training respondents expressed a clear need to be perceived as offering 57% Went to conferences more than their money, particularly for the causes they care about 45% Research most. Almost every donor interviewed shared stories of failure as an important part of their learning journey. 16% Other Note: percentages do not add up to 100%, as respondents were allowed to select multiple responses. 15 Do these donors ever pause their practice? The study provided an opportunity to explore a common question in philanthropy research: do philanthropists ever take a break from 11% giving? Why? What motivates them to start practicing again? My financial position positively / negatively changed We found that most of our respondents did not pause their practice. 36% Perhaps these donors interpreted our question as only related I wanted to reassess or define my approach to philanthropy to pausing after getting started (we heard language in qualitative interviews about pausing before starting), but regardless of interpretation, we were surprised by the result. 82% reported not pausing, while 6% selected N/A. Of the 12% who have paused, some did so for personal reasons (notably including 12% paused their philanthropy practice 22% There were other more important demands on my time 13% I didn’t think my philanthropy was making a difference 7% a few who had bad experiences with non-profits), others wanted to Practicing philanthropy is too complex and I needed to learn more reassess their philanthropy. The reasons for starting up again were 11% Other (all family issues) primarily personal, with only a few respondents noting that philanthropy education or strategic planning jumpstarted their giving. 16 Do high wealth donors hire support? Strategic grant making takes time to do well, and we thought it would be useful to understand the types and levels of support donors hire. We were especially curious given that only 25% of the dataset reports practicing philanthropy full time. We were surprised 29% that 60% report having no staff. 29% report having fewer than five fewer than five staff staff members and of those, almost half have fewer than or equal to one staff member. Interestingly, just 9% of respondents reported they had engaged with a philanthropy advisor in the last three years. Among the minority of the respondents who do utilize staff support, the propensity to retain staff increases as net worth, years of 60% report having no staff 9% engaged with philanthropy advisor in last 3 years experience practicing philanthropy, and volume of giving increase. 17 What do Donors believe will help them do better? We were curious about what our respondents could use to help them get better at philanthropy, and asked an open-ended question: “What would help you improve your philanthropy practice”? Through a pattern analysis of responses, our respondents express More peer learning networks More education a clear interest in more peer learning networks (20%) and education More time (17%). By comparison, 6% of responses asked for better investment opportunities, while 3% of responses related to more issue knowledge and cultural competency. Interestingly, 13% of respondents said they wanted more time, and 8% wanted more money, to do better work. These responses are striking: our respondents already depend on their social and professional networks in all aspects of the philanthropic journey, and the extent to which they already engage Better investment opportunities More money A clearer focus or approach Not sure in educational and learning activities with their limited time. 18 The philanthropy journey is bespoke Our study found that philanthropy practices don’t differ dramatically practice full time, 55% say it is a part time profession and 13% a hobby across demographics, years of experience, volumes of giving, source (6% selected “other”). The converse was also not universally true: of wealth, net worth, or whether practicing philanthropy is or is not a 22% of those with <$10M in net worth report practicing philanthropy full-time activity. We expected patterns to emerge. They didn’t. full time and 34% part time. We thought we’d see a difference in how philanthropists approach Our qualitative interviews offered a possible explanation that is giving depending on net worth. While the $50M-100M+ set was more personal: one’s relationship with wealth seems to have a more likely to have higher annual giving, more likely to give greater influence on how one structures and practices philanthropy. multi-year funding, and slightly more likely to have staff, they Philanthropists are often advised to support issues and approaches don’t do different diligence or go to different types of conferences that resonate with their personal values and passions. In many or use different vehicles. respects this advice leads to an artisanal philanthropy journey. Wealth was also not a factor in how respondents characterized their practice. Considering that many start practicing philanthropy when they have liquidity and time, we wondered whether the higher net worth respondents would be more likely to practice philanthropy full time. But although 26% of ultra-high net worth philanthropists “As a kid, I was taught everyone is equal. It’s about love of people, not putting your name above something. We are responsible for one another. That’s what it’s about for me.” 20 Philanthropy is a confusing and loaded term Our dataset is a wealthy one, representing high net and ultra-high And what about the transaction itself? The term “philanthropy” is used net worth individuals donating hundreds of thousands, if not millions, as a catch-all to describe the investment, the journey, the market, and of dollars annually for social benefit. And still, more often than not, the profession. It strikes us that the big, inclusive tent of the word our qualitative respondents caveated a discussion around their may be confusing and confounding rather than advancing the practice giving with “I’m not really a philanthropist. I’m not Mark Zuckerberg of strategic philanthropy. or Bill Gates”. If high and ultra-high net worth donors are uncomfortable describing themselves as philanthropists, then who should be? Who should define philanthropy, and with what criteria? Is a hobby philanthropist who gives sporadically in response to requests “Philanthropy is a grand word for very modest activities.” “Philanthropy is not necessarily about a lot of money, it’s about a way of being.” from friends and family the same as a full-time philanthropist who invests according to a strategic plan, has a staff and consistently reviews their impact? Are they both “philanthropists”? “I’m not sure I identify as a philanthropist. Only recently have I felt OK saying that I am one. I don’t want my kids to think of me that way.” 21 Is being active in philanthropy the same as being strategic? Our respondents are very active in their giving practices. They say with DEN. Yet, there are inconsistencies: while 70% report having they spend time building relationships with other philanthropists. a strategic plan (a strategic practice), 44% report they do not They conduct many kinds of due diligence for new grant making. require grantee reports (evaluation also being a strategic practice). They serve on boards, and they volunteer. They go to conferences If practice makes permanent, and practicing philanthropy offers and events relating to their practice, and they research. Yet, they opportunities to become more strategic, this study provokes report doing these things in small amounts and with very limited questions about whether the skills and tools available are illuminating amounts of time. Only 25% of participants report that philanthropy a clear path for philanthropists to follow, or that there is indeed is their full-time profession, and the majority have no staff. And, an evolution to be had. they want more time and support to give better, but few seem to engage professional help. We designed this study using a set of principles and practices developed by the Donor Effectiveness Network (DEN), a group convened by the Hewlett Foundation. It was our best proxy for “Don’t over professionalize me. A lot of what is beautiful in life are not the things that are over professionalized.” identifying good practice in the pursuit of strategic philanthropy. Many of our respondents report practices that are consistent 22 Learning and Improving isn’t so straight forward Our respondents want to learn. They want to network. This is partly It may be that in a field where funding recipients are incentivized to why they are so busy. Building relationships and developing networks share only good news, and where funders are advised to make giving is a significant time investment. If the goal is not about building personal, opportunities for learning are limited. Perhaps our pool of networks, though, but about how to allocate resources to achieve respondents are conflating the input of resources and effort with societal impact, is this time well spent? Or best spent? having an effect. It’s hard to square the confidence with the doubt. The 219 respondents noted belonging to 101 philanthropy networks. 84% report engaging in some form of philanthropy education. 60% report collaborating with other funders. Relationships with friends and family and / or wealth advisors are the first or second most-cited influencers of a wide variety of practices. They believe their efforts have impact, and want more networks and education to improve. By contrast, our qualitative interviews found uncertainty around their practices. “I want to be the one deciding how to spend this money… But I am so busy. I am worried I might be so overwhelmed I won’t get down and do it. But I’m also very driven to do it. There’s so much to learn.” 23 Where do we go from here? Like any substantive research project, this study left us wanting to ask journey isn’t so bespoke. It might need more precise definitions more questions and to do a more in-depth analysis. for different types of giving. And it could benefit from greater Having spent much of our careers in philanthropy, the idea that individual donors approach giving in a variety of ways—something connectivity between, and understanding the impact of the many donor networks and collaborations that already exist. our research confirms—seems in line with our expectations. We were We believe there is an opportunity to widen the philanthropy discussion surprised, however, by how active these donors are, how much they so that the language and practice of strategy reaches more individual depend on their networks, and their tendency to operate without donors earlier in their journeys. Donors need effective, professional professional support. We also were surprised by how dominant services they will use. More information is needed on donor demo- relationships and networks were to all aspects of giving, from setting graphics and behaviors that are personal, like one’s relationship with up structures to sourcing investments to learning. We expected our wealth and its effect on identity. respondents, particularly those whose behavior seemed more strategic, to work with more technical criteria and practices. This research has generated new perspectives, as we all seek clarity on philanthropy’s most meaningful questions: Are your efforts The philanthropy field, including The Philanthropy Workshop, is transforming your investment decisions into meaningful and interested in understanding how to motivate and help donors to become tangible social change? Is your money making the difference you more strategic. It might require better market segmenting so the want it to make? 24 About The philanthropy Workshop The Philanthropy Workshop is a leader in strategic philanthropy CAN PHILANTHROPISTS LEARN TO GIVE BETTER? education and networking—inspiring individuals and families to give All TPW members surveyed completed a year-long experiential better. Our members invest their time, talent, treasure, and networks workshop to learn how to be more strategic in their giving. When as a means of effecting purpose-driven, sustainable change. asked specifically whether and how the program affected their Founded in 1995, TPW leverages the strengths of forward-thinking philanthropists, advisors, and our founding organizations, including the Rockefeller and Hewlett Foundations and the Institute for Philanthropy, philanthropy behavior, 58% reported behavior changes towards more strategic giving. • 75% of member respondents say they frequently or always to bring educational programming, a diverse network, and a united use the skills they learned from TPW; 22% say they use the skills position as the foremost influencers of strategic and innovative learned some of the time philanthropy in the global community. With offices in San Francisco, New York, and London, the TPW member network of nearly 450 philanthropists is the largest of its kind and • 89% of respondents report that their approach to giving has changed because of TPW • 63% say they increased their total investments because of TPW unique to the field of philanthropy. Our members hail from the United States and the United Kingdom with significant numbers from Canada and countries throughout Europe, Latin America, the Middle East, and Asia. 25 About the Authors Kimberly Dasher Tripp is an author and advisor on philanthropy Rachel Cardone founded RedThread Advisors, LLC to advise and social enterprise. She is the founder and principal of Strategy funders and funding recipients on strategy development, program for Scale, advising both doers and donors on strategy, planning design, and the creation of meaningful management systems to and achieving impact. She has spent twelve years in philanthropy, advance social impact. She brings specific expertise on policy and previously having worked as a principal at the Skoll Foundation and finance to address global water security. Previously, she worked at a program officer at the Henry J. Kaiser Family Foundation. She lives the Bill & Melinda Gates Foundation as a program officer and co- and works in San Francisco. She holds an MBA from the University developer of the Water, Sanitation & Hygiene Program. She lives in of California, Berkeley and graduated magna cum laude from Port Townsend, WA. She holds an MPA from the Columbia University Princeton University. and graduated cum laude from the University of Michigan. www.strategyforscale.com www.redthreadadvisors.com 26