Next-Gen Philanthropists Are Revolutionizing Giving but Need Help

Today’s wealthy young donors aren’t satisfied with just spreading cash around; they want to make a measurable impact.

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Today’s young philanthropists are a new breed — more focused on making an impact, and willing to roll up their sleeves and get involved. They’re also “high maintenance” for the organizations they give to. And they’re going to give like never before.

“The next generation of these big donors are at a stage in their life where they are developing their identity, and they’re going to be the biggest donors we’ve ever seen over the course of the next 20-30 years, given the amount of wealth transfer that’s happening,” said Michael Moody, professor of philanthropic studies at the Indiana University Lilly Family School of Philanthropy.

Moody, the author of “Generation Impact: How Next Gen Donors Are Revolutionizing Giving” with Sharna Goldseker, says academics generally shy away from dramatic words like “revolutionary.”

“But it really does fit here, because this generation of big donors are willing to change whatever is necessary about the existing practices and norms of giving in order to move the needle on issues which their parents and grandparents or other major donors of the past have been trying to fix for a long time,” said Moody at Next-Gen Giving: How Younger Donors Approach Philanthropy a webinar hosted by DAFgiving360 (formerly Schwab Charitable) and the Stanford Social Innovation Review.

Moody added that while these young philanthropists strive to help others, they need help themselves.

“They are very much amenable to engaging with advisors to help them understand the best way to achieve that impact — the how, the where, the when, the what — everything associated with embracing that legacy of philanthropy and charitable giving,” he said.

While the wealthiest young donors are changing the way giving is done at the highest levels, young Americans of more modest means are also evolving, according to another webinar panelist, Jon Bergdoll, associate director of data partnerships at the Lilly School.

‘Donors Down, Dollars Up’

The most notable trend among young donors — and all Americans — is “donors down, dollars up,” Bergdoll said. Fewer people are giving to nonprofit organizations, but the total amount of donations has increased. “About 2008, the Great Recession, we start to see a long-term decline begin across all generations’ giving, and it’s about 10 percentage points in every generation,” he said.

One theory is that as older people leave the potential donor pool, fewer younger people are giving, so that net population replacement is slowly dragging that overall incidence rate down, Bergdoll said.

Another theory is that as the general population trends less religious, religious-themed giving also should decline. But Bergdoll said that’s not exactly what has happened among younger donors.

Young Religious Donors Giving More

“While younger households in general are less religious, those who are religious are likelier to give,” he said. “And so, the pool of young donors is actually going to look a lot more religious than a pool of young people more generally.” In a trend Bergdoll called “a little troubling,” younger religious donors are becoming less likely to give to secular organizations. “You see with millennials and then with the early data on Gen Z, it’s very strong. We see it very starkly,” he said.

Bergdoll said in most cases, religious giving means donating to one’s own congregation. However, many people who donate to social causes do so through religious organizations, so their donations are counted as religious. “In Indianapolis, for example, there’s not a single nonprofit homeless shelter that’s not somehow tied to a Christian organization or church,” he said.

Among secular donations, giving to human services like shelters and food banks has been popular with older generations and also has strong support from younger donors, with over 10% of next-gen households donating to these organizations, Bergdoll said.

Debt Drags Down Education Donation

However, charitable giving for education has been declining among younger generations and now accounts for 5% of next-gen donors, he said. One possible cause is increasing student debt, Bergdoll said.

“Alumni are a lot less likely to give to their alma mater if they are still paying for college,” he said. “And this obviously would be an issue sort of concentrated among younger households.”

In addition, younger donors tend to be “issue-driven” and are less likely to maintain loyalty to a few charitable organizations, Bergdoll said. “What are you addressing?” he said a younger donor might ask. “I want to fix a thing. Let me find who I need to be able to fix that thing.”

But he added that the biggest nonprofits are thriving. “The largest organization have outpaced the growth of everyone else, so that even a larger share now of the dollars is at the very top 5-ish percent of organizations in the nonprofit world,” he said. This may be due to the larger organizations’ ability to pivot quickly and address the concerns of the giving public, he said.

Bergdoll said his research is representative of the general population and skews away from wealthy households. That’s because it’s based on the Philanthropy Panel Study, or PPS, a project led by the Lilly Family School of Philanthropy that’s been surveying a fixed group of respondents for over 20 years. The study is designed to be most accurate at the lower end of income and wealth “so, it’s not necessarily the best tool to ask questions about high-net-worth households or aggregate amounts of giving, but it’s great for general population,” he said.

If the wealthiest young donors were added to the PPS data, some of the results would be different, because they give the largest amounts, Bergdoll said. “The biggest donors among young people are the very well off, especially those who have inherited their wealth,” he said. “We typically found that while wealthier households do still give strongly to religion, it’s at a much lower share of their giving overall than what we do see in a general population.”

Transformation From the Top

While Bergdoll’s data is weak when it comes to the wealthiest young donors, Moody has made them his specialty. And the changes they are making are transformative. “Those who are in the next generation are promising to be the major donors in the scheme of ‘dollars up, donors down,’” Moody said.

The theme that runs through the giving of so many young wealthy donors is “impact,” Moody said. “They don’t always agree on what that impact is. For some of them, it’s numbers on the spreadsheet. For some of them, it’s the faces of the kids in the classroom. The key is that they want to see the impact. They want to see the difference and the results that they’re having.”

At their core, young philanthropists have inherited their values. “When we asked them, who influences their giving, parents and grandparents were very clearly at the top,” Moody said. “But when we said, what did you learn from parents and grandparents? It wasn’t strategies or technique, it was values.”

Wealthy younger donors tend to be more focused on single issues than their parents, who often gave to many causes, Moody said. “One of our interviewees said their parents just liked to ‘spread peanut butter around the community,’ so everybody gets a little bit of the money.”

And the old ways of giving often fall short for next-gen philanthropists. “They still may want to give to basic needs, but they want to do that to new kinds of organizations in new ways that are more innovative, and that they think are going to lead them to have greater impact,” Moody said.

In many cases, these wealthy young donors have inherited their money and are more willing to take risks than previous generations. “This idea that you change things and take risks has always been somewhat challenging, particularly in the multi-generational giving families. But the next generation wants to push those envelopes. They’re coming into their roles as major donors,” he said. “And if they’re if they fail, they want to fail forward in ways that they can learn and do and build and develop their strategy in greater ways.”

However, these young donors still want to be part of their family’s philanthropic efforts, Moody said. “They don’t want to leave the next generation in the dust. They want to be on the team, on the field at the same time. They want to be seen as a rookie that has amazing skills and energy and new ideas but can also benefit from mentoring by the veterans on the field.”

Hands-on Donors

Another way wealthy young donors are looking to make an impact is through direct involvement with the organization they fund, using all their “assets,” including their knowledge and skills. This can lead to friction, Moody warned. “There’s a lot of consequences for fundraisers and for nonprofit professionals.

“These are much more high-maintenance,” he said. “But they could end up being the greatest, biggest donors of all time, if we’re able to engage them in that right way.”

Some young philanthropists take a do-it-yourself approach, Moody said, citing the example of tech investor Hadi Partovi. Instead of simply donating to established nonprofit organizations, Partovi channeled his tech expertise to pursue his passion — teaching coding to children from disadvantaged communities. Partovi created his own organization Code.org, is its top donor, runs it as the executive director, and focuses all his work on its mission, Moody said.

Investing to Make an Impact

Moody said there is a misconception that young philanthropists are more transactional when they’re giving. “They really want to align all of their assets with their values,” he said, noting that one way is through impact investing.

In an innovative twist, two members of the Rockefeller family, Justin Rockefeller and his sister, Valerie, turned impact investing on its head while chairing the Rockefeller Brothers Fund family foundation. The family fortune was made in petroleum, but siblings pushed the foundation to divest from fossil fuel stocks, Moody said. “According to Justin, using that tool of changing the investment into impact investments actually can do as much, if not more good in the world for their mission of environmental sustainability and other things as their grant making,” Moody said.

Help Wanted: Financial Advisors

Although many wealthy young donors are going down new paths, financial advisors have a big role to play, Moody noted. “They really are more and more amenable to, and in fact, dependent upon engaging with professionals who can really help them to achieve their maximum impact by establishing and implementing a really strategic and thoughtful plan on how to give where and when,” he said.

Ed Prince is a writer for Rethinking65. In a four-decade career in journalism, he has served as an editor with many of New Jersey’s leading newspapers, including the Star-Ledger, Asbury Park Press and Home News Tribune. Read more of his articles here.

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