Major philanthropy looks different in 2020.
There has never been a shortage of philanthropic need, but COVID-19 definitively underscored how wealthy individuals can and should play a role in effecting positive change through giving.
Luckily, they’ve stepped up to help tackle one of the defining challenges of our lifetime. Over 10 percent of billionaires donated toward COVID-19-related causes in the first five months of the year. Beyond that, they have helped provide PPE and other supplies.
But these philanthropists don’t necessarily come from the same background as most billionaire donors from the past five years. As a recent report from the wealth-rating agency Wealth-X found, they are younger, wealthier, and more likely to be self-made than traditional billionaire major philanthropists.
While the Wealth-X report focuses exclusively on giving to COVID-19-related causes, the shifts we’ve seen in philanthropic activity will have major implications for college and university advancement efforts for years to come.
The prevalence of younger donors highlights risks for advancement’s steady-state strategy of cultivating older donors
64 percent of billionaire COVID-19 donors are under the age of 70, with 15 percent being under the age of 50. This is a stark departure from the norm—in recent years, just 53 percent of billionaire philanthropists have been under the age of 70, and 10 percent have been younger than 50.
Age of billionaire philanthropists
The significant shifts in the percentage of younger billionaires seeking to impact the world through philanthropy signals that higher ed advancement leaders face some risk in the coming years if they fail to deviate from their current cultivation strategies.
With each passing year, development officers focus more of their visits on older and older donors. They increasingly neglect to build a pipeline of younger donors on deck to give major and principal gifts.
Share of gift officer visits by age range
Without changing course and paying more attention to donors in the rising part of the age-wealth distribution, advancement leaders will likely miss significant fundraising opportunities. Younger Boomers and Gen X billionaires are continuing to take up the mantle of transformative philanthropy—it is up to higher ed advancement leaders to act.
Billionaire philanthropists have gotten much wealthier, creating new opportunities for fundraisers who bring “big ideas” to the table
Billionaire philanthropists donating to COVID-19-related causes have an average of $3.4B more in wealth than their billionaire philanthropist counterparts from before the pandemic. Much of this growth is thanks to the stock market’s surprisingly resilience: billionaire COVID-19 donors tend to have more of their assets in the stock market than other billionaires, whose assets are more likely to be in private holdings.
While the reliance of pandemic-era billionaire philanthropists on market returns may seem problematic in a volatile economy, the S&P 500 index increased 11 percent from June 2019 to June 2020, countering most other major economic indicators’ fall during that period.
As the capacity of this new class of billionaire philanthropists has grown, so too has the opportunity for transformative impact—that is, if advancement leaders position giving opportunities the right way.
The most innovative development professionals today partner closely with the provost, deans, and faculty members at their institutions to launch “big ideas” initiatives. These initiatives are custom-designed to source principal gift proposals that will capture the attention of ultra-wealthy, impact-driven donors.
Yet many advancement leaders still complain of the challenges they face in getting their academic partners to think beyond their immediate needs. My colleagues and I have often heard of academic leaders, when asked for a funding opportunity for an ultra-wealthy prospect, saying they want to ask for “$5 million to fill my budget gap.”
They have yet to realize two important points:
- Growth at the top of the wealth distribution has raised the ceiling on principal giving amounts—meaning that $5 million ask is far too modes
- Billionaire philanthropists today are moved by impact, more than budgetary need or institutional loyalty.
Self-made, rather than inherited, wealth brings with it a “heavy involvement” mindset that few development teams are equipped to handle
The fight against COVID-19 has drawn considerably more philanthropic attention from self-made billionaires than those who inherited part or all of their wealth. Nearly three quarters of all COVID-19 philanthropists fall into this category.
Billionaire philanthropist source of wealth
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Self-made donors are significantly more likely to seek intimate involvement in the administration of their gifts—and their expectations for cultivation are much higher than their traditional principal-gift-prospect counterparts.
That’s because they’ve made their billions through active involvement in organizations. They are executives. They are leaders. And they want to roll up their sleeves to an extent that strains business-as-usual for most development and stewardship teams.
For some institutions, the only way to meet the heightened expectations of their wealthiest, increasingly self-made donors has been to invest in a principal gift strategy manager. This staff member handles internal logistics and coordination so as to free up the primary relationship manager—often the chief advancement officer—to focus on direct donor engagement.
Whatever the solution, advancement leaders must contend with the fact that transactional philanthropy is a non-starter for this new class of self-made billionaire donors.
Greater understanding of our philanthropic audience will allow us to target and engage them more effectively. Colleges and universities around the world will play an integral part in fighting COVID-19, along with future pandemics, through research and education of future generations. Now it’s time for higher ed to make its case to the budding philanthropists that may or may not have been on our radar