Philanthropy’s Missing Middle Characteristics of MidLevel Donors (part 5)
29 Sep 2020

Philanthropy’s Missing Middle Characteristics of MidLevel Donors (part 5)

In this fifth and final analysis of the Boston College survey of 1,260 Mid-Level donors (who gave between $2,000 and $20,000 to charity last year), we continue looking at our respondents’ giving habits.  In the preceding article, we sadly concluded that “contented apathy” is the best descriptive of our donors’ attitude: they care about their effectiveness of their giving but are not requiring the organizations they support to demonstrate impact.  In addition to measuring our respondents’ discernment, we tested their knowledge of key philanthropic concepts in two ways. First, we listed a series of well-known pathways to change and asked respondents to identify all those that they had given to in the past five years. Overall, respondents reported giving to:

Type of issue or cause Percent who gave in past 5 years
Specific programs such as providing direct services 70%
Advocacy campaigns to change policy on an issue 23%
Communications to influence public opinion 21%
Capacity building to fund the management needs of a charitable organization such as strategic planning, technology or fundraising consultants 24%
Capital campaigns such as for buildings, endowments or expansion to a new location 34%
Research 42%
General operating costs or an annual fund 41%

These numbers are not surprising given how little our respondents seem to know about how their donations are used, although the high score for “giving to research” is explained by the popularity of health charities.

Second, we tested our respondents’ familiarity with giving vehicles whose popularity has increased in recent years: community foundations, donor advised funds, and giving circles.  While most were familiar with (76%) or gave through (6%) community foundations, far fewer were familiar with (55%) or gave through (4%) donor advised funds (“DAFs”). Even fewer were familiar with (49%) or gave through (3%) giving circles.

As could be expected, familiarity with giving circles and DAFs increased at the higher income and giving levels. 69 percent of donors who gave at the top level (between $15,000 and $20,000) knew of or gave through giving circles, as did the same percent of respondents who earned over $350,000 annually.  At this highest giving level, 7% of respondents claimed to use DAFs as a giving vehicle (as opposed to 4% overall).

We ended the survey by exploring three possible ways to encourage donors towards more research and thoughtfulness: volunteering, financial advisors, and educational resources.

We expected that volunteering, and especially board service, would encourage donors to invest more time in their philanthropic due diligence.  Indeed, 84 percent of respondents volunteer at least once per year – almost half at least once a month and almost a quarter at least once a week. Further, nearly a quarter of all respondents serve on boards.  We found that volunteering is closely correlated with increased giving: 90 percent give to the organization for which they volunteer and half of those respondents make the organization the focus of their charitable dollars. Furthermore, more than twice as many of the “high-ticket” donors who give over $10,000 annually (39%) were board members as those who gave less than that amount.  67 percent of the high-ticket donors volunteer at least once a month (compared to 42 percent of those who give between $2,000 and $9,999 a year) and only 11 percent of high-ticket donors do not volunteer at all.   Donors who volunteer are also more responsive to appeals (letters, emails, calls, social media): Of donors who make “all” their gifts in response to fundraising appeals, two-thirds serve on boards and over half volunteer at least once a week.

However, volunteering and even board service do not seem to correlate with more thoughtful and effective giving (defined for the purposes of this survey as linking donor satisfaction with knowing that a charitable organization is making a difference, whether it is well run, or understanding the solutions to an issue).   Donors who volunteer are more likely to say that having a personal contact with a charitable organization is very important to their sense of satisfaction about their giving, and question whether the charity is legitimate less than donors who do not volunteer, but volunteering does not seem to impact their “philanthropic literacy.”

The second pathway to improving Mid-Level donor thoughtfulness could be through their trusted advisors.  In recent years, the wealth advisory community has been sensitized to the beneficial effects of discussing philanthropy with clients although its focus has been primarily on high/ultra-high net worth individuals and families.  Certainly, 80 percent of our 1,260 respondents have a financial or legal advisor (despite the great majority – 81 percent – owning less than $1 million in assets).  Of the 1,004 respondents who seek professional financial or legal advice, 68% discuss philanthropy with their advisor – 20 percent regularly and 48 percent sometimes.   It’s once again at the $100,000 annual income mark that more than half of donors (56 percent) begin discussing philanthropy at least sometimes with an advisor – a portion that rises to 75 percent at the $350,000 annual income level.  We were also surprised – and gratified – to learn that 55 percent of our respondents intend or are thinking of leaving charitable bequests despite the fact that 40% earn less than $100,000 annually.

Thus the pump is primed for advisors to provide the educational resources that will empower Mid-Level donors to be smarter about their charitable giving.  When asked, two-thirds of respondents would “be willing to invest time in learning how to select the most effective nonprofits” (and almost 1/3rd “very interested”).  Of those who responded “Not at all interested,” the most common responses were “I already know how to do this” and  “I already have so many charitable obligations that I have no money left over for new charities.”  But the majority who report being “very interested” in donor education indicated preferring an online course or webinar series (81 percent) or a workshop offered by their financial or legal advisor (51%).

While there exist a number of self-education resources for individuals interested in becoming more effective in their charitable giving, almost all target high and ultra-high net worth donors.  Yet almost half (48 percent according to the Chronicle of Philanthropy, 2019) of US philanthropic dollars from individuals come from donors who earn less than $200,000 annually.  As demonstrated by this survey, MidLevel donors care deeply about their giving and want to have impact but are unwilling to invest much time or resources to select high preforming charities.  They need to feel empowered with clear and simple tools to make effective decisions.  And those best placed to distribute these tools are their trusted advisors.

To this end, I developed for advisors a number of donor education products specifically targeted at the MidLevel donor demographic (which can also be used by more affluent donors!) that are enlightening, engaging, and free of jargon.  My virtual, modular curriculum, “Smart Donors… Make A Difference,” can be used as a three-hour, self-directed online course for clients to view in their own time, or as the basis for webinars and workshops.  Please look at www.sd-mad.com for a sample of the modules and more information on obtaining access to this unique donor education tool.

 

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