Patrick Rooney Motivations of High Net Worth Donors April 23, 2014 Indianapolis

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Patrick Rooney Associate Dean for Academic Affairs and Research Indiana University Lilly Family School of Philanthropy Professor of Economics and Philanthropic Studies Indiana University – Purdue University Indianapolis 2

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World The IU Lilly Family School of Philanthropy On April 9, 2013, IU President Michael McRobbie and other officials inaugurated the new School of Philanthropy and named it in honor of Lilly family. Believed to be the world’s first school dedicated to the study and teaching of philanthropy. Builds on existing strengths of the Center on Philanthropy. Academic Programs The Fund Raising School Lake Institute on Faith & Giving Women’s Philanthropy Institute International Programs Research 3

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Academic Programs Educate students and sector leaders through Academic Programs Degrees Offered: BA in Philanthropic Studies (since 2010, first in the world). MA in Philanthropic Studies (since 1993, first in the world). MPA in Nonprofit Management (with SPEA). PhD in Philanthropic Studies (since 2003, first in the world). Doctoral minors in several disciplines. Publications series. 4

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World The Fund Raising School Improve and enhance practice Home of the world-renowned The Fund Raising School (TFRS). Trained ~98,000 practitioners in the last 25 years. Currently, trains ~4,400 per year in ethical and effective fundraising to help build organizational capacity. Provide online courses and other resources about fundraising and about charitable giving. 5

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Institutes Lake Institute on Faith & Giving, fosters a greater understanding of the ways in which faith both inspires and informs giving. Women’s Philanthropy Institute examines the role gender plays in philanthropy through research, education, and training. International Programs collaborates with colleagues worldwide to increase understanding of philanthropy through education, research and training. 6

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Public Affairs Increase awareness of philanthropy in society through Public Affairs. 500 media interviews/year. Dozens of presentations to national, local groups. Provide info to policy makers. Annual symposia. Philanthropy Matters magazine and e-newsletter. 7

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Research Research informs practice and practice informs research Academic and applied research about giving, volunteering, and nonprofit management. Some key questions we study include: What does philanthropy look like today? How are the values, motivations, and expectations of donors changing? How will current trends shape the future? 8

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World The Study of High Net Worth Philanthropy Sponsored by Bank of America. Published in 2006, 2008, 2010, Leading resource on high net-worth households. Scientific random sample (in 2012, n= 701). Prior research based on client lists. Includes any household with an annual income of more than $200,000 and/or net worth of more than $1,000,000 (excluding the value of their home). All respondents had to have their primary residence in the U.S. 9

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World High Net Worth Donors Commitment to Nonprofits In 2011, 95% of HNW donors gave to a charity. In 2011, the average amount given by HNW households was $52,770 (a decrease of 7% from 2009). Focus on major gifts Disproportionately high share of all individual giving in the U.S. comes from HNW individuals Top 10% gave 63% of all itemized contribution deductions in Top 1% gave 37%. Top 0.1% gave 18%.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World High Net Worth Households Reporting Giving to Charity in 2005, 2007, 2009, and 2011 Notes: *2009 and 2011 results are statistically different. Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Average giving by education level of high net worth donors in 2007, 2009, and 2011 ($) Notes: ^°May not be statistically meaningful because, in some years, this group contains fewer than 50 respondents. Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Average giving by employment status of high net worth donors in 2007, 2009, and 2011 ($) Notes: ^Denotes that the categories have been changed from the previous survey. Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Notes: °May not be statistically meaningful because, in some years, this group contains fewer than 50 respondents. Source: The 2012 Study of High Net Worth Philanthropy. Average HNW giving by region of primary residence in 2005, 2007, 2009, and 2011 ($)

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Percentage of high net worth households that gave to each recipient category in 2011^ Notes: ^Combined organizations include UW, UJA, and CC. “Giving Vehicle” represents gifts to private foundations, charitable trusts, and donor-advised funds. *2009 and 2011 results are statistically different (2009 data not shown).

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Distribution of high net worth dollars given to each recipient category in 2011^ Notes: ^Combined organizations include United Way, or Catholic Charities. ‘Giving Vehicle’ represents gifts to private foundations, charitable trusts, and donor-advised funds. | Source: The 2012 Study of High Net Worth Philanthropy. Percentage (%)

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Average amounts given by HNW households in 2009 and 2011, by charitable category^ Notes: ^Values adjusted to 2011 dollars for the year This table does not show outlier data. *2009 and 2011 results are statistically different. Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Charitable giving forecast for the next three to five years among high net worth households Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World 19 WHAT ARE HIGH NET WORTH DONORS’ MOTIVATIONS FOR GIVING?

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World High net worth donors reporting giving based on motivation type in 2011^ Note: ^Respondents were asked to rank answers from 1 “strongly disagree” to 5 “strongly agree.” Responses shown here represent those in the agree categories. *2009 and 2011 results are statistically significant (2009 data not included here). Percentage (%)

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Make a difference The largest proportion (74.0 percent) of high net worth donors reported giving to charity in 2011 because they were moved at how their gift could make a difference. Hyperagency: world building, history-making, and self-construction in accumulation and allocation (Schervish, 2000) Hyperagency refers to the enhanced capacity of wealthy individuals to establish or substantially control the conditions under which they and others will live 21 Source: The 2012 Study of High Net Worth Philanthropy. Schervish, Paul The New Physics of Philanthropy: The Supply- Side Vectors of Charitable Giving

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Give back to the community A 2000 Internet survey of 1,000 high net worth individuals finds that 50 percent of respondents felt an obligation to give back The most recent BAML Study of High Net Worth Philanthropy (2011) finds nearly 62 percent report giving back to one‘s community as an important motivator 22 Source: The Center on Philanthropy at Indiana University Review of Literature on Giving and High Net Worth Individuals

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Give back to the community Greatest portion of giving and volunteering takes place in one’s own community and helps support activities from which donors is directly associated The question for generating generosity is how to expand those very familiar sentiments of identification to include human beings that relationally, spatially, and temporally to a wider circle of human beings in wider fields of space and time To extend the sentiments of family-feelings to the realms of fellow-feelings 23 Source: Schervish, Paul The New Physics of Philanthropy: The Supply- Side Vectors of Charitable Giving

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Religion Over 70 percent of donors reporting contributions to religious causes in 2009 However, only about 40 percent reporting that religious beliefs are an important motivating factor in their giving Other research suggests that religious donors may show more consistency in their philanthropy Among donors at all income levels, nonreligious donors giving to secular causes were more sensitive to tax rates and income compared to religious donors (Helms and Thornton, 2008) 24 Source: The Center on Philanthropy at Indiana University Review of Literature on Giving and High Net Worth Individuals.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Personal fulfillment through charitable activity Donors often report being personally fulfilled through their philanthropic engagement. Fulfillment relates to the feelings that a donor’s own charitable activity engenders. In this study, almost 80 percent of all reporting high net worth donors indicated that their charitable activity is personally fulfilling, while only 3 percent reported that their personal charitable activity is not fulfilling. 25 Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Levels of fulfillment through charitable activity among high net worth donors^(%) 26 Note: Respondents were asked to rank answers from 1 to 5, with 1 being “strongly disagree” and 5 being “strongly agree.” Responses are collapsed into three categories. Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Personal Satisfaction Through Charitable Activity Personal satisfaction from their charitable activity relates to the perception that donors have about the outcomes and effects of their charitable activity. Three-quarters of all high net worth donors reported being satisfied with their charitable activity, while about 22 percent reported feeling neutral. Four percent reported not being satisfied with their charitable activity. 27 Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Levels of satisfaction through charitable activity among high net worth donors^(%) 28 Note: Respondents were asked to rank answers from 1 to 5, with 1 being “strongly disagree” and 5 being “strongly agree.” Responses are collapsed into three categories. Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Benefits derived from charitable activity The greatest proportion (76.4 percent) of high net worth donors reported feeling a sense of accomplishment when the organization benefiting from their gift creates results or impact. The second-highest proportion (38.2 percent) of high net worth donors reported that they were able to learn about organizations and causes through their giving. Nevertheless, a slightly lower percentage (34.5 percent) reported the opposite. This suggests that donors derive benefits from engagement opportunities provided by nonprofit organizations 29 Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World High net worth donors reporting benefits derived from charitable activity^(%) 30 Note: Respondents were asked to rank answers from 1 to 5, with 1 being “strongly disagree” and 5 being “strongly agree.” Responses are collapsed into three categories. Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Family traditions and high net worth giving 31 Note: Responses do not include households that do not have children or grandchildren (whether living at home or not) Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Children and the transmission of philanthropic values 32 Note: Responses include households that may or may not have children. Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Children and the transmission of philanthropic values (continued) In 2009, most high net worth households depended on their own family’s efforts to educate younger relatives about charitable giving (85.4 percent). By 2011, only 51 percent of high net worth households relied on their family or family’s network of friends and peers to educate their children, grandchildren, or other younger relatives about giving. 33 Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Children and the transmission of philanthropic values (continued) Similarly, in 2009, about 45 percent of high net worth households indicated that they rely on their church, synagogue, mosque, or other place of worship to transmit charitable values to their children. By 2011, that percentage dropped to 34 percent. High net worth donors were least likely to report the use of an independent advisor, bank or trust company staff, or independent philanthropic advisor in 2009 and 2011 to transmit philanthropic values to children or younger relatives, with response rates at 3 percent and below. Source: The Center on Philanthropy at Indiana University Review of Literature on Giving and High Net Worth Individuals

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Findings from other research In an analysis of philanthropy among wealthy donors in New York City, Ostrower (1995) notes that some donors use philanthropy as either an entrée to or a demonstration of high social standing. For this reason, high net worth individuals are more likely than average donors to contribute to educational and cultural institutions, which are perceived as being more elite. 35 Source: The Center on Philanthropy at Indiana University Review of Literature on Giving and High Net Worth Individuals

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Findings from other research Sargeant et al. (2005) also found that a prospective donor‘s trust in an organization and its ability to impact the selected cause can be a strong motivating factor for giving trust appears to be significantly affected by the performance of the charity and its communication trust is created when a nonprofit is perceived to have had an impact on the cause and by maintaining appropriate communications with the donor The development of a personal connection to an organization or cause, coupled with trust in the organization‘s ability to make an impact, can have an enormous effect on giving. 36 Source: The Center on Philanthropy at Indiana University Review of Literature on Giving and High Net Worth Individuals

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Findings from other research Taxes Perhaps the strongest material incentive for channeling this burgeoning major wealth to major gifts revolves around making positive use of the current estate tax laws Rooney et al.’s research shows that estate tax rate has a significant impact on bequest giving 37 Source: Schervish, Paul The New Physics of Philanthropy: The Supply-Side Vectors of Charitable Giving

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Findings from other research Gratitude Theologian Robert Ochs has remarked that there are three ways to take a gift: it may be taken for granted, taken with guilt, or taken with gratitude For wealth holders, taking their fortune with gratitude is the single most crucial aspect of their consciousness They recognize that their wealth and abilities are unearned gifts—the recognition of a life graced by unearned opportunities, unachieved benefits, and ultimate contingency is at the core of the inherent transformative capacity of wealth to induce charitable giving 38 Source: Schervish, Paul The New Physics of Philanthropy: The Supply-Side Vectors of Charitable Giving

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Findings from other research Karlan and List (2007) examine the effect of donor matching and find that revenue per solicitation increases 19 percent and the probability that an individual donates increases by 22 percent when match money is available. These findings support the notion that potential donors are more likely to contribute if they perceive an additional incentive 39 Source: The Center on Philanthropy at Indiana University Review of Literature on Giving and High Net Worth Individuals

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World The 12 Portraits of Donors Source: Rooney, Patrick, and Heidi Frederick Bank of America Study of High Net- Worth Philanthropy: Portrait of Donors. Center on Philanthropy at Indiana University.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Total Giving, 2005 (donor household only) Source: Rooney, Patrick, and Heidi Frederick Bank of America Study of High Net- Worth Philanthropy: Portrait of Donors. Center on Philanthropy at Indiana University. MeanMedian High Net Worth$120,651$16,500 The Very Wealthy $50 million +$1,163,190$271,625 $5-$50 million$117,185$38,600 $1-$5 million$25,264$8,100 Bequeather$525,418$74,500 The Devout$103,427$23,500 The Secular$250,679$10,000 Entrepreneur$232,206$41,000 The Dynast$205,467$37,000 The Metropolitan$136,144$29,000 The High Frequency Volunteer$140,920$31,250 Strategic$303,436$47,450 Transactional$188,293$44,000 Financial$48,611$9,187 Altruistic$198,007$23,400

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World WHAT ARE HIGH NET WORTH DONORS’ STRATEGIES FOR GIVING?

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World High net worth donors reporting strategic approaches to giving in 2011 Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World HNW donors’ awareness of philanthropic tools to advance social or charitable goals Source: The 2012 Study of High Net Worth Philanthropy.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World HNW donors who currently have or plan to establish a giving vehicle in the next 3 years Source: The 2012 Study of High Net Worth Philanthropy. Percentage (%)

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World HNW donors who consulted with others before making a charitable giving decision Notes: The percentage of high net worth donors reporting consultation with an outside advisor by category includes only those who consulted at all. For the 2008 and 2010, the “Other” was not given as an option in the surveys. | Source: ibid. Percentage (%)

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World How high net worth donors gave in and how they intend to give in Source: The 2012 Study of High Net Worth Philanthropy. Percentage (%)

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World How decisions about charitable giving were made by high net worth household in 2011 Source: The 2012 Study of High Net Worth Philanthropy. Percentage (%)

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Factors ranked as important to high net worth households when making a charitable gift^ Note: ^Respondents were asked to rank answers from 1 “strongly disagree” to 5 “strongly agree.” Responses shown here represent those in the agree categories. *2009 and 2011 results are statistically significant (2009 data not included here). Percentage (%)

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Number of organizations HNWH stopped supporting in 2011 which they previously supported^ Notes: ^Responses here include only those HNWH who stopped giving to at least one organization. The percentage of HNWH who stopped supporting at least one organization in 2011 in which they had previously supported (30%) is not shown in here.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Reasons why HNW donors stopped supporting previously supported organization, in 2011^ Notes: ^Responses include only those high net worth households that stopped giving to at least one organization. *2009 and 2011 results are statistically different. Source: The 2012 Study of High Net Worth Philanthropy. Percentage (%)

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Conclusions High net worth households are committed to giving. The vast majority of high net worth households donate to charity each year. This high rate of giving continues in the latest study, with 95% giving to at least one charity last year. A quarter (24%) of high net worth households anticipates increasing their overall giving in the next 3 to 5 years. More than half (52%) of wealthy households plan to continue giving at the same rate in the next 3 to 5 years.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Conclusions Motivations for giving. Feeling moved about how a gift can make a difference remained a top motivation for high net worth donors in 2011 Annually supporting the same causes and giving to an efficient organization held steady as motivations for high net worth donors between 2009 and 2011 Positive personal engagement with a cause is linked with increased volunteering and charitable giving. 53

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Conclusions Wealthy households are strategic. The majority of wealthy donors give strategically and have a plan for giving – 71% had a specific strategy in place to guide their charitable giving in The use of giving vehicles is on the rise, with 19% of wealthy households giving to them in 2011, compared to 16% in % of wealthy donors consulted with at least one type of outside advisor about their charitable giving in 2011.

INDIANA UNIVERSITY LILLY FAMILY SCHOOL OF PHILANTHROPY Improving Philanthropy to Improve the World Resources School of Philanthropy The 2012 Bank of America Study of High Net Worth Philanthropy study-of-high-net-worth-philanthropy Million dollar list Other research including