Newly wealthy individuals face numerous psychological and practical hurdles when starting or increasing their philanthropy, according to a new report focusing on Bay-Area donors with at least $10 million in assets.
The study, published by the consulting firm Open Impact, found that many self-made millionaires are already juggling great demands on their time, which might include running companies and raising children.
Wealth advisers might suggest establishing foundations or donor-advised funds for tax purposes, but they aren’t always knowledgeable about how to identify high-performing nonprofits that deserve support. And many would-be donors worry about making costly, embarrassing mistakes in their giving.
“They are anxious and insecure about their philanthropy, in some ways,” says Heather McLeod Grant, co-author of the report.
Still, the report found that there are things that nonprofit leaders, as well as the broader philanthropic community, can do to help new-money donors embrace and increase their giving. Grant describes it as helping this category of givers “become more effective more quickly.” Besides summarizing the findings of the report, The Chronicle interviewed some Bay-Area philanthropists included in the new report to get their advice. Here are some key takeaways:
Develop Helpful Materials for Donors
A major windfall can introduce complex dynamics into families, Grant says, including worries about raising down-to-earth children. Introspection about one’s values, and how a would-be donor might want to live out those values via philanthropy, is an important early stage in many philanthropists’ journey to big-dollar giving.
The report suggests that nonprofits can help such families by creating decision-making tools for couples “to make joint decisions about their money and their philanthropy, including examples of the choices that other couples have made around giving.”
Grant and her colleagues at Open Impact say such tools can be as simple as lists of questions that help families reflect on their values and the causes they care about, or a deck of cards with different values printed on each, designed to help donors identify their motivations for giving. Grant and her colleagues also pointed to tools created by the German firm Active Philanthropy, including an illustrated philanthropy map that lays out the many choices that donors will encounter in their philanthropy.
Firms and organizations that offer donor-advised funds, such as Fidelity Charitable, also have useful tools.
Develop Training and Tools for Wealth Managers
The role of wealth advisers and investment firms can be important when newly wealthy individuals take up charitable giving, the report found. While wealth advisers typically focus on protecting and growing clients’ money, they don’t necessarily have the knowledge to serve as a bridge to the nonprofit world, Grant says.
That creates an opening for nonprofits: Develop training and tools for wealth managers that will help them have the right conversations with their clients about giving.
“Because of their privileged relationship with their ultrawealthy clients, wealth advisers — if connected with the right information and resources — could be very helpful partners to these clients in figuring out their philanthropic journey,” the report says.
The Bay-Area philanthropist Kathy Kwan says a well-informed wealth adviser would have been helpful when her family established its foundation in the mid-2000s, after Google’s initial public offering. Instead, hers gave her very basic advice and a 20-page handout from the IRS.
“It basically kept me out of jail,” she says. “It wasn’t necessarily helpful in terms of how do I pick an organization, how do I engage in a constructive conversation and dialogue with a not-for-profit or grantee.”
Support Donor Networking
Many self-made wealthy people find it valuable to learn from peers, as well as nonprofit professionals, about charitable giving. So, supporting and plugging into donor networks, formal and informal, is another way nonprofits can help.
Such networks have played a key role in her philanthropy, says the Bay Area philanthropist Lucy Caldwell. With $5,000, she joined a donor fund called the Silicon Valley Social Venture Fund, commonly known as SV2. That relationship, she says, taught her how to spot a good nonprofit, recognize good leadership practices, and make grants.
Her involvement in such donor networks has broadened tremendously since she got started, Caldwell says. Now, she regularly attends conferences and other events for donors. In addition to SV2, a donor program she has particularly enjoyed is the Battery in San Francisco, which convenes members and experts around specific social problems.
Nonprofits should help donors find or create what the report calls their “giving tribes.”
“Peer networks help donors develop a giving culture and encourage them to give more strategically, while connection can unleash new levels of giving,” the report says. “On the flip side, loneliness, isolation, and fear can trigger a big pause in giving.”
Start With a Small Request
For most donors, relationships with nonprofits begin with volunteering and small gifts. In fact, the study found that no matter how rich individuals are, they rarely give more than $5,000 to $10,000 to an individual group at the start.
That means that when asking the ultrawealthy for money, nonprofits should start small.
“Making small and active bets gives donors a chance to learn, which then allows them to begin ramping up. Even very wealthy donors will start with a small gift and build trust before giving more,” the report says.
Pay More Attention to Women
Nonprofits should not overlook women or spouses when conducting fundraising. In the cases in which couples were interviewed, the majority involved women making most of the decisions about charity donations.
Charities also should invest in research into women’s charitable giving habits, the report concludes.
Plan Something the Kids Can Do, Too
Among the things that SV2 does well in its work with wealthy donors, says Caldwell, is creating opportunities for donors’ children to get involved. Examples have included wrapping Christmas presents for disadvantaged families and bundling shoes with handwritten notes and donation checks for families at the beginning of a new school year.
Caldwell found that activities like those offered important lessons in teaching her children about the needs of others.
“My kids just didn’t even have a comprehension at that point that there were kids who couldn’t afford new shoes,” and that “just five miles away from our house, there are people who are struggling to put food on the table,” Caldwell says. Raising their awareness, she added, “allowed me to have those kinds of conversations to shape their understanding of the world.”
