High Net-Worth Philanthropy and the Arts

January 2nd, 2008 at 03:14pm Gary Steuer

A new study, Portraits of Donors, conducted by The Center on Philanthropy at Indiana University was recently released by Bank of America, looked at the philanthropic patterns of high net worth households. This report is based on data already gathered and issued in an initial report that examined giving by the wealthiest 3.1 percent of households. This new study explicitly looks at giving by the wealthiest Americans those that have a net worth of more than $1 million and annual income of more than $200,000. Eighty percent of the sample had a net worth of more than $2 million, and the group of responders was clustered into 12 archetypes:

• The Very Wealthy
• The Bequeather
• The Devout Donor and the Secular Donor
• The Entrepreneur
• The Dynast
• The Metropolitan
• The High Frequency Volunteer
• The Strategic Donor and the Transactional Donor
• The Altruistic Donor and the Financially Pragmatic Donor

While space won’t allow describing the characteristics of each of these donor groups, or their behavior, there are a number of very interesting results relevant to giving to the arts that I would like to highlight. Let’s focus first on the sweet spot those categories that seem most likely to support the arts (in bold above): Entrepreneurs, Dynasts, Metropolitans, and High Frequency Volunteer. To combine them all, the most likely arts donor would be a person of high net worth with substantial wealth coming from a business they own, who also gives a philanthropy allowance to their children, lives in a major metropolitan area, and volunteers more than 200 hours a year.

So let’s delve into the first of the jackpot categories. Entrepreneurs, those wealthy donors with 50% or more of their net assets in entrepreneurial assets, give 25% more on average than other wealthy donors. They also direct 15.6% of their philanthropy to the arts. Statistically, entrepreneurs cite the same motivations for giving as the average high net worth individual. Entrepreneurs are also less likely than other high net worth individuals to seek advice from others such as fundraisers or peers, and somewhat more likely to seek advice from foundation staff. Entrepreneurs are also much more likely to give through a business or a foundation.

Another interesting cluster are Dynasts, defined as households that give their children money to donate to charity. Statistically there is no difference between their wealth and income and those of other wealthy households, but their feel more secure. They give 70% more annually than the average wealthy household. Here is the big news: they give 24.3% to arts and culture far above the average wealthy household. They give more to arts and culture ($71,233 annual average) than they do to any other single cause, by far (next highest is education at $52,895, followed by funds and foundations, at $48,744). As one would expect, Dynast households are more motivated by setting an example for their kids” than others (80.8% compared to 62.1%). And in almost every category of external adviser, the Dynast was much more likely to seek advice. Dynasts are also much more likely than other wealthy households to use giving vehicles, like a foundation, stocks or will. Another important characteristic of this groups is that they are much likely to be heavy volunteers than other wealthy (41.8% volunteer 200+ hours/year compared to an average of 29%).

Metropolitans have their primary residence in a city with a population of more than 500,000. They also are significant contributors  to the arts, with 24.1% of their giving going to arts and culture. They give slightly more than the average wealthy household, so the higher percent of arts giving is not coming out of a smaller pie. As with Dynasts, the Metropolitans give more to the arts than any other individual cause $44,686. The next category was education with $40,901. But they gave the most $63,725 on average to foundations or funds. Also like Dynasts, Metropolitans were much more likely to seek advice from others than other wealthy households. They were slightly more likely to use giving vehicles than other wealthy donors.

High Frequency Volunteers those who volunteer more than 200 hours a year, also give more to the arts, at 22.1%, higher than any other category of giving for this group. Again, this group, much more likely to seek advice from others, and much more likely to use giving vehicles, like wills, stock, donor advised fund, etc.

Clearly this is valuable information, both for private sector advocacy organizations like Americans for the Arts, that are trying to make the case for the arts to donors at the macro level, as well as to individual arts organizations trying to cultivate wealthy individuals as donors.

It is also useful to look at some of the categories where the arts don’t rise so high. The Very Wealthy, defined as those with a net worth of over $50 million, also have statistically higher income levels (mean of $3.5 million), are slightly older than the average wealthy individual, and more likely to live in an urban area. Statistically they are much more generous—their median giving is seven times higher, for example, than the $5-50 million asset group. This group gives 10.7% of their philanthropy to the arts, which tracks very closely the national average for arts giving by foundations. In terms of causes, arts come in third with this group, behind Education at 14.8% and Health at 20.5%. But the largest slice of their philanthropy pie goes to Funds or Foundations (34.4%). It is interesting to see what motivates the Very Wealthy: Meet critical needs, a giving back to society, bring about a desired impact and set an example are the highest rated reasons for giving. Interestingly, the reason those with more should help those with less scored significantly LOWER with this group than among the other two classes of wealthy ($1-5 million, $5-50 million). The very wealthy were also somewhat more interested in determining the impact of gifts than the other wealth levels.

The very wealthy were also SIGNIFICANTLY more likely than other wealth classes to seek advice from the following professionals: accountant, attorney (47.5% compared to 11% or 18.2% for the other two groups), foundation staff, or financial adviser. They are also much more likely than other wealthy donors to give through a foundation or a business.

It would seem that successfully reaching the very wealthy as an arts organization requires making a better case for our impact and how we better society, and building stronger relationships with the philanthropic advisers on whom they heavily rely for guidance.

The Bequeather is a wealthy donor who has 25% or more of their assets left to charity in their will. Interestingly, they are much LESS likely to support the arts, with only 7.5% of their giving going to the arts. I suspect this can be explained by the likelihood that most arts groups are smaller and for someone thinking ahead decades in their giving there may be less of a sense of permanence in the arts than in other institutions like foundations, or health care, where they are more likely to direct their giving.

Not surprisingly the Devout donors those who attend religious services once a week or  more and donate to religious causes are the least  likely to be arts givers (at 4.7%). Secular giver defined as those who do not attend religious services or give to religious causes give 8.0% to the arts.  So interestingly, LACK of religious practice or giving is NOT a predictor of greater arts giving. It would seem arts givers fall between these two extremes”they have some level of spirituality or religious engagement, but not too much.

Strategic Donors are those who have created a foundation and do NOT give to every type of nonprofit. Transactional Donors have NOT created a foundation and DO give to every type of organization. For the most part he Strategic donor is giving less to the arts because the bulk of their giving is going into a foundation/fund. The Transactional Donor is spreading their money across every cause, and is giving MUCH more to disaster relief (18.7%) than other donors. By definition, strategic donors much more likely to use some sort of giving vehicle, and transactional donors, much less likely.

Lots of valuable information in this research that should help guide major gifts development folks (in the arts, as well as all other types of organizations) all across the country. We should be grateful to Bank of America for commissioning this research and making it available for free!

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