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What motivates wealthy donors to give?

Theresa Lloyd and Beth Breeze share findings from their recent research into the attitudes of wealthy donors

 

What motivates the wealthy to give? In our research for the recently published Richer Lives: why rich people give, we set out to create an in-depth study based on a survey of over 80 wealthy UK donors, a dozen philanthropy advisers and 16 fundraisers and other experts.

One thing that we discovered is that the traditional ‘armchair philanthropist’ is a dying breed; today, almost all those who give substantial amounts of money also give substantial amounts of time. Although the level of engagement varies, donors want to be involved with the causes they support.

Increasingly, philanthropists’ approach to giving involves long-term support for an organisation that is not just financial, but that uses the expertise of the donor or their networks to build the capacity of the recipient organisation. This is especially the case for ‘emerging’ donors (younger donors who are relatively new to philanthropy, as opposed to ‘established’ donors), who are often directly involved in the organisation’s management, perhaps through taking a seat on the board and/or setting out clear performance indicators to judge the investment. Many would describe this approach as ‘strategic’ or ‘venture’ philanthropy.

   

Spending strategy

Over the past decade, wealthy donors consider themselves to have become more strategic in their giving. Indeed, philanthropy advisers report that over 40 per cent of their clients want training in strategic philanthropy.

The most obvious manifestation of large-scale, planned, strategic giving is setting up a charitable foundation. Three-quarters of our respondents have established a foundation, compared with only half in 2002.

However, not all foundations are set up with the intention of existing in perpetuity. Rather than make grants out of the interest earned on capital, some philanthropists choose to spend out all of their capital over a specified period of time while overseeing the strategy – to have the fun of ‘giving while living’. We found that significantly more emerging donors have already made the decision to spend out, or are actively considering this option.

Along with this, it is worth highlighting the 2009 research by Angela Eikenberry in Giving circles: Philanthropy, voluntary association and democracy, which found that American donors who give collaboratively – for example, in a giving circle – donate larger sums than donors who give alone.

While little is known currently about giving collaboratively in the UK, we were surprised to learn that over 40 per cent of our respondents are part of a regular or occasional group of donors. Giving collaboratively may be one of the best kept secrets of the rich donor community; indeed, we found that a third of emerging donors who have not yet given as part of a group are open to doing so in future, and advisers report that two-thirds of their clients want introductions to other donors who share their interests.

   

Shifting sands

This move towards giving strategically and collaboratively, and spending out, is just one element of a trend that has seen the blurring of the distinction between philanthropy and investment. While with venture philanthropy, the return on an investment is a social rather than a financial one, other forms of investment where donors seek some degree of financial return have come increasingly into vogue.

Charities, too, are increasingly looking to social investment as an element of their funding. Scope’s £20m bond scheme to expand its fundraising programme (launched in 2011) and the over-subscribed Mencap/Triodos bank bond (launched in 2013) are prime examples of this.

Donors are also defining new roles for private donations and investment within public services. These include exploring new ways of supporting people who do not currently receive government support, and topping up levels of care provided by the state. These can be put together in a mechanism such as a Social Investment Bond (SIB).

An example is the first such SIB in the UK, which addresses prisoner rehabilitation and re-offending. A partnership between the Ministry of Justice, Social Finance and the St Giles Trust, a charity working with ex-offenders, the pilot scheme was launched in March 2010 at Peterborough Prison, Cambridgeshire. Investors collectively fund a £5m intensive programme for short-term prisoners leaving the prison. Three thousand offenders will be supported over six years, and if reoffending rates fall by 7.5 per cent or more, investors will make a profit. The more government saves on not having to prosecute and jail recidivists, the higher the profits.

   

Social work

While potentially very significant, the development of social investment is still at an early stage. The launch of the Social Stock Exchange (SSE) in June 2013 is a positive development, since it should provide a single reference point for investors and standardised, transparent and comparable data on the impact of such investments.

Currently, data on giving does not include this investment strand. However, it seems likely to grow and become one of the most fertile markets for the non-profit sector to investigate and develop.

   

Richer Lives: why rich people give was published on 30 September for more information and to order a copy visit www.richerlives.org

Beth Breeze is the director of the Centre for Philanthropy at the University of Kent and researches and writes the annual Coutts Million Pound Donor Report.

Theresa Lloyd advises organisations on strategy and fundraising, and is the author of Why Rich People Give (2004) and Cultural Giving (2006).


This article first appeared in The Fundraiser magazine, Issue 35, November 2013

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