What Really Drives Giving? (It’s Not Tax Breaks)

The survey found a strong connection between wealth, the size of a gift and the approach to giving. Giving becomes more strategic with the level of wealth and the size of donations.

The report said that as wealth increases, more entrepreneurial strategies replace impulse giving. But size is not the only consideration. Women at all wealth levels tend to be philanthropic, yet they typically insist their giving is less impulsive than men’s.

The research showed that tax considerations do not drive the decision-making process. Just 25% of respondents considered tax benefits a major influence on their decision to allocate. Nearly twice as many said tax benefits had no influence on their charitable giving.

However, wealthy individuals do not totally discount the tax benefits of giving, the study found. Some may like the write-off advantages, while many others would forgo these benefits or directly transfer them to the causes they support. Whatever their position, the tax code’s complexity is an obstacle to increased giving for some and completely off-putting for others.

What does drive giving, then? The research suggests wealthy individuals have to think about their own financial circumstances when deciding how much to give away. They have to maintain their wealth in order to continue their charitable giving in the long term.

Beyond this priority, the survey found that a small change in their fortunes can prompt a complete change in their giving behavior. “When an individual feels comfortable with their personal finances, they will likely increase their giving by as much as 60% on average,” the report says. The wealthy are motivated to make gifts where they believe they can make a difference. Some of the more committed respondents said their causes were often part of a long-term family legacy; for many, a focal-point issue was religion or ethnicity.

When considering which causes to support, the survey found that donors would favor the following areas over the next 12 months:

• Homelessness
• Education
• Society
• Health
• Human rights

The report said wealth advisors could be of service to philanthropists in several ways. They can help quantify how much to give for impact without jeopardizing the donor’s personal situation.

An advisor can also help the donor apply the same risk-based assessments used in his or her investment portfolio to the philanthropy portfolio.

Wealth advisors can also provide innovative thinking about philanthropy, and expose the client to other significant donors, the broader giving community and other funding opportunities.