Solstock | E+ | Getty Images
A version of this article first appeared in CNBC's Inside Wealth newsletter with Robert Frank, a weekly guide for the affluent investor and consumer. Register to receive future editions straight to your inbox.
Wealthy millennials and Gen Zers are redefining the world of charitable giving and seeing themselves more as activists than donors, a new study shows.
Wealthy donors under the age of 43 are more likely to volunteer, raise money and mentor charities rather than just give money, according to a new study from Bank of America Private Bank. The survey of more than 1,000 respondents with more than $3 million in investable assets also found that young philanthropists want more public attention for their donations compared to Gen Xers and baby boomers.
The shift in the way the next generations give, and in the causes they benefit, is likely to change the charity landscape again. Rather than simply writing checks to charities they care about, the next generation of givers wants to be intimately involved in solving the biggest social and environmental problems.
“They view themselves as holistic agents of social change,” said Dianne Chipps Bailey, managing director and national philanthropic strategy manager for philanthropic solutions at Bank of America Private Bank. “I think they have a better sense of agency in this world. They really want to move their capital in a much more comprehensive, robust way to achieve their social impact goals.”
Both younger and older multimillionaires are very charitable. According to the survey, 91% of respondents gave to charity in the past year. More than two-thirds of both older and younger respondents say they are motivated by 'making a lasting impact'.
Yet their reasons for giving and their methods vary widely by age. Donors under the age of 43 are slightly more likely to volunteer and are twice as likely to collect charitable donations from friends or colleagues rather than just donate directly. They are more than four times more likely to act as a mentor. And they are more interested in serving on nonprofit boards than in limiting their contributions to endowment.
Older donors give from a sense of responsibility. Those over 44 were more than twice as likely to donate out of 'obligation' than younger donors. Those under 43 were more likely to cite self-education and the influence of their social circle as driving forces behind their philanthropy.
Some differences between generations may have their roots in life cycles and wealth. The younger wealthy are still building their fortunes and inheriting their wealth, so they are more likely to spend their time fundraising. Still, Bailey said the focus on peer networking and activism will likely continue even as they grow older and wealthier.
“You can think of philanthropy as the five Ts: time, talent, treasure, testimonials and ties,” she said. “The older generation is focused on the treasure (giving money). The younger generations lean on the other four.”
The young rich also support various causes. They are twice as likely to support efforts related to homelessness, social justice, climate change and the advancement of women and girls. Philanthropists over 44 were much more likely to support religious organizations, the arts and military charities.
'If you think about what [the younger generation] The last few years, 2020, have been through, seeing it all come to light, they're leaning into the reaction,” Bailey said. 'And it holds up. So many people move their donations along with the headlines, but they're really dug in deep. It is not a moment, but a movement.”
The implications of the generational change in giving will be profound for wealth advisors and nonprofits, advisors say. Because many younger donors have inherited their wealth, they are much more likely to use donation vehicles created by their families. They were more than four times more likely to use charitable trusts, family foundations and donor-advised funds.
Bailey said the next generation wants to talk about philanthropy as part of an initial conversation with a wealth advisor – even before they talk about their investment plan.
“They're eager to know more, to learn more about philanthropy,” Bailey said. 'They already have this complex [giving] vehicles ready, so the educational piece is critical, both for the nonprofits and for the consultants.”
With philanthropy increasingly dominated by wealthy donors, and with the next generations expected to inherit more than $80 trillion in the coming decades, courting the young rich will be crucial.
“You're going to need their perspective and you're going to need their money,” Bailey said.
Advisors to the young rich should also be generous with their praise. The research shows that younger donors are more than three times as likely to measure the success of their philanthropic efforts by public recognition. Nearly half say they are likely to associate their name with their philanthropic efforts, while more than two-thirds of older donors give anonymously.
“Praise them, celebrate them, give them visibility,” she said.
Just don't call them 'philanthropists'. A report from Foundation Source shows that 80% of young donors want to be seen as 'givers', while 63% also like the terms 'advocate' or 'changemaker'. Only 27% accepted the label 'philanthropist'.