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Third of Ultra-Wealthy Families Prefer Time-Limited Approach to Philanthropy: Survey

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A new study of ultra-wealthy families around the world finds that a growing number of those engaged in philanthropy are considering whether it is more effective to set an end date for their initiatives or to continue in perpetuity.

A third of families in the study just published by Rockefeller Philanthropy Advisors and Campden Wealth reported that they had adopted a time-limited approach to philanthropy, concentrating their donations over shorter time periods. This approach has grown by nearly two-thirds since the early 2000s, according to the study.

Thirty percent of those who have adopted the approach said they wanted to see their giving’s impact during their lifetime, 23% wanted to narrow their philanthropic focus and 17% wanted to transfer more of the founding donor’s wealth to favored causes sooner than later.

The majority of the families in the study used the more traditional in-perpetuity model for their charitable giving. Seventy-one percent said they wanted to provide sustained and long-term support to address persistent problems, 56% to support the family’s purpose and values, and 41% to have greater impact on beneficiaries over multiple generations.

“As the global economy grows, so does the number of wealthy individuals making philanthropy a key part of their lives,” Rockefeller Philanthropy Advisors CEO Melissa Berman said in a statement. “This global survey affirms trends that we’ve identified in our work: the desire for deeper personal engagement, more focused giving and a commitment to impact that can be seen and assessed.”

Berman noted that families around the world were actively involved in donor collaboratives, impact investing, media campaigns and public-private partnerships.

“And as donors become more sophisticated in giving and investing, they’re thinking seriously about the time horizon that makes the most sense for the goals, motivations and visions of their own philanthropy,” she said.

The study was based on a survey conducted during the first half of 2019 among 201 private/family philanthropists from 28 countries — 50% from the U.S., 25% from Europe, 20% from Asia/Pacific and 5% from six other countries across the world. In addition, 29 semistructured interviews were conducted with ultra-high-net-worth philanthropists or their senior staff across the globe.

The average net wealth of the families and private philanthropists surveyed stood at $1.2 billion, while the average assets under management of the associated philanthropic organizations was $155 million. Over the last 12 months, the philanthropists gave an average of $12 million each to various causes.

Next-Gen Involvement

Three-quarters of survey participants said they engaged in philanthropy in order to give back to society, 55% were interested in creating social change, 50% wanted to put values into action and 47% sought to address social inequality.

Eighty-one percent of respondents across all regions reported that the next generation of wealth holders was engaged in their family’s philanthropy in some way.

Regardless of time horizon approaches, 65% said instilling philanthropic values and a sense of moral responsibility was their top strategy to engage the next generation. This was followed by more concrete actions: For example, 55% involved the next generation in philanthropic work, and 38% created meaningful roles for them in philanthropic entities.

Some regional differences emerged from the study. Asia/Pacific respondents tended to rely more heavily on instilling philanthropic values and a sense of moral responsibility and on active philanthropic engagement, while those in the U.S. relied more heavily on creating meaningful roles and opportunities to transfer knowledge and experience.

Among families that engaged in in-perpetuity giving, 54% of members of the next generation served on boards and 34% made site visits, while in families that adopted a time-limited strategy, 28% of the next generation was involved in grantmaking.

“As the world’s wealthiest are playing an increasingly important role in tackling today’s social and environmental problems, the entrance of this new generation is likely to impact critical global initiatives,” Rebecca Gooch, Campden Wealth’s director of research, said in the statement.

The study showed that family foundations were the most popular vehicles for giving, used by 64% of survey participants. Forty-five percent said they made direct donations to nonprofits, 16% used donor-advised funds and 15% gave through corporate/business foundations.

According to the study, education was the No. 1 area families said they gave to globally, constituting 29% of the average philanthropic portfolio, followed by 14% for health and 10% for art, culture and sports. The environment received only 8% of the giving portfolios in the survey.

European donors surveyed were twice as likely to give outside their region as their counterparts in North America and Asia/Pacific.

The study found that strategic decision-making power tended to lie with the family. Founders or family heads were noted as the key decision-makers in 60% of cases, followed by other family members in 48% of cases.

Europe aligned with this global average, while in the U.S., other family members tended to hold the most decision-making authority, followed by founding donors and trustees. In Asia/Pacific, family heads or founders and trustees dominated strategic decision-making, with other family members a distant third.

— Check out Why Clients Decide to Donate Publicly or Anonymously on ThinkAdvisor.