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Financial Planning > Charitable Giving

BofA Merrill Lynch Issues High-Net-Worth Philanthropy Study

By Michael S. Fischer

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Wealthy households continued to support charitable organizations at levels consistent with those seen in 2005 and 2007, according to the 2010 Bank of America Merrill Lynch Study of High Net Worth Philanthropy released Tuesday. Ninety-eight percent of affluent households donated to charitable causes in 2009, the study said.

The 2010 study, which was conducted by the Center on Philanthropy at Indiana University for Bank of America Merrill Lynch, followed studies published through the partnership in 2006 and 2008. It is the result of random mailings to 20,000 U.S. households in high-net-worth neighborhoods across the country about their giving in 2009.

More than 800 households with income greater than $200,000 and/or net worth of at least $1 million, responded. The average wealth of respondents was $10.7 million; half of those who responded had a net worth between $3 million and $20 million.

In a telephone interview, Claire Costello, national foundation executive for philanthropic management at Bank of America Merrill Lynch, noted some particularly interesting findings in the study. For one, donors continue to show loyalty and support for the nonprofit sector in that they did not stop giving to any more organizations than they had stopped giving to in 2007. “Even if they were giving at lower dollar amounts, they continued to see their nonprofits through,” Costello said.

In addition, nonprofits experienced a significant uptick in volunteerism, which also speaks to support of the sector, she said. The researchers have several hypotheses to explain this finding:

  • People are feeling constrained in terms of dollars, and can make up for that in other ways.  
  • Baby boomers with still a lot to offer are retiring at increasing rates.
  • There are more unemployed or underemployed, people with many skills who are seeing fit to participate in the nonprofit sector in the absence of a private sector job.

Costello said the Bureau of Labor recently increased the worth of a volunteer hour by 50 cents, to $20.85, meaning that billions of dollars go into the nonprofit sector.

For the first time, researchers asked respondents where they put their greatest confidence as between business, state and local government, themselves and the nonprofit sector. They voted fairly strongly for placing their confidence in the nonprofit sector and themselves in solving local and global issues, Costello said. “That’s a huge endorsement, and speaks to the level of responsibility that high-net-worth donors perceive of themselves and the confidence they place in the expertise and good works of the nonprofit sector.”

Another first-time question related to investment risk with respect to donors’ philanthropic versus personal assets. The results showed that donors are more risk averse in their philanthropic investments than they are with their personal investments. Costello said this evidences sophistication on the part of donors that they are aware of the ethical responsibilities that giving brings.

She said that further evidence of donors’ sophistication, and consistent over the past study, was that they continued to give primarily to general operating support of nonprofits. “They see the need to keep the lights on and the doors open, but also it’s a nod to the expertise of the nonprofits in that they’re not micromanaging those dollars. They trust the nonprofits to do what they do best, which is apply their expertise toward the mission and purpose of the organization.”

At the same time, donors are becoming more structured in their giving. Whereas in the past, they tended to consult primarily with the staff of nonprofits and less with traditional advisors, the current study shows they are seeking advice from attorneys and accountants. “This says to us that philanthropy is an increasingly important part of the high-net-worth wealth structuring process,” Costello said. “It’s not about what you do with what’s left over. Today, it’s at the front end of the wealth structuring process, so the need for and reliance on accountants and advisors is much greater.”

Donors’ top motivations for giving in 2009 were where their money could make a difference, feeling financially secure and efficient use of their dollars. “In aggregate,” Costello said, “folks are making sure in times of high need and constrained resources that their contributions are being put to effective and efficient use. There’s strong demand to run a tight ship in the furtherance of the nonprofits’ mission.”

In 2009, households stopped giving to at least one organization. Some 60% of respondents said they had stopped giving to a particular charity because they were too frequently solicited or asked for an inappropriate amount. Significantly fewer said they had decided to support other causes or that their household circumstances had changed.

Costello said that nonprofits either did overly solicit in terms of frequency or asked for inappropriate amounts based on their heightened need, or donors may have been more sensitive to the requests given on their own financial constraints.

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