The next generation of wealthy families will be the philanthropic leaders of the future in what’s predicted to be a “golden age of philanthropy.” Yet, we know little about how these next generation philanthropists (those who fit into “Gen X” (born 1964 to 1980) or “Gen Y/Millennials” (born 1981 to 2000) generational cohorts) think. We don’t know how they think about philanthropy, how they prefer to allocate their resources, financial and otherwise, what they see as the priorities for giving and from where they get information about and inspiration for their philanthropic approach, among other questions.
Answering these questions is particularly important given the expanding scope and size of philanthropy, especially among the wealthy. Even with the recent economic downturn, scholars still calculate that the United States is currently undergoing a massive wealth transfer process, as our unprecedented levels of accumulated assets–mostly held within high-net-worth families–are passed from one generation to another.
Arelatively small group of the 122 million Gen Xers and Gen Yers stand to inherit over $40 trillion from 1998-2052. Additionally, the assets being passed on to descendants through bequests and the amount of new wealth being created by individuals of these generations leads some to predict we’re entering a new golden age of philanthropy because of the amount of wealth available for charitable purposes. (Schervish and Havens, 1999 http://www.bc.edu/content/bc/research/cwp/features/goldenage.html) Given this possibility, it’s crucial to learn moreabout these next generation major donors for whom advisors are planning.
With the magnitude of global issues facing us today, like the need for clean water and better education for our children, many experts expect the next generation to do nothing. Kristin Keffler, an advisor to wealthy Gen X and Yers based in Denver, calls this phenomenon “paralysis by predecessor, prosperity and possibility,” when next gen inheritors are stymied by one of these three paradoxes in their lives. She means that when these inheritors are afforded the opportunity to use their resources to affect change, they’re often overwhelmed by the success of their predecessors, their lack of motivation to earn wealth or the number of ways to live their lives.
Getting Some Answers
Although many factors come into play when it comes to understanding donor psychology, we disagreed with the cynics and wanted to delve deeper. Given the apparently intractable problems of the day that demand thought leaders and resources behind them, how could we better understand the next generation of major donors with the goals of helping thembecome better, more thoughtful philanthropists; encouraging and informing conversations among multiple generations involved in philanthropy; and helping those who seek to engage and assist the next generations to become better donors, stewards, grantmakers and agents of social change?
As advisors, some of us, like Keffler, are compelled by the opportunity to help such individuals during a critical time of identity formation to find the fourth “p,” or “purpose,” in their lives. Other advisors are compelled by a 2011 Merrill Lynch study, citing that after one parent passes away, only 45 percent of descendants remain with their parents’ advisors. After the second parent passes, only 2 percent remain with their parents’ advisors. This suggests advisors need to begin to build relationships with the next generation of their clients if they want those Generation X and Y family members to be their clients one day.
Whatever the motivation, advisors today are starting to ask not if they should, but how they should approach next generation clients or family members of current baby boomer and traditionalist clients.
To help next generation major donors and the family members and advisors who want to engage them, we fielded a survey which garnered 310 responses from next generation major donors between the ages of 21 and 40, and we conducted in-depth interviews with 30 additional individuals. In the study, 52 percent of next generation respondents are from families giving more than $250,000 annually and 30 percent from families giving more than $1 million annually. Fifty-two percent were from families with more than $5 million in endowed assets, and 10 percent were from families with $100 million or more in endowed charitable assets. Here are some of the findings:
Driven by values, not valuables. We discovered, quite the opposite from the paralysis that Keffler describes above, that these next generation major donors are driven by values, not valuables–values they often say they learned from parents and grandparents. They are eminently mindful of the privilege they have inherited–or that comes with the wealth they’re creating. They seek a balance between honoring family legacy and assessing the needs and tools of the day.
Impact-first. The word “strategic” is used–probably over-used–in many different ways in the field of philanthropy these days. But next generation major donors highlight the importance of strategy for the future of the field. They see philanthropic “strategy” as the major distinguishing factor between themselves and previous generations, who were more motivated by a desire for recognition or social requirements (unlike themselves, who are focused on impact, first and foremost).
Time, talent, treasure and ties. Once engaged, these next generation major donors want to go “all in.” Giving without significant, hands-on engagement feels to them like a hollow investment with little assurance of impact. They want to develop a close relationship with any organization or causes they get involved with; they want to listen and to offer their own professional or personal talents, all to solve problems with those whom they support. They want to give the full range of their assets to the causes and organizations they believe in, including their time, talent, treasure and ties.
Crafting their philanthropic identity.Many next generation major donors are still in their 20s, experiencing a move from adolescence to emerging adulthood and developing their sense of self. All are from high capacity families, in which wealth isn’t always easily transferred to the next generation and where many come of age feeling like children waiting to inherit autonomy that’s not only financial. Rather than waiting until the sunset of their lives to decide who they are as philanthropists and how they want to leave their legacy, these next generation major donors are actively crafting their identities now, actively thinking about their own legacy.
The research offers a window into the way next generation major donors think, how they may share common values and giving priorities with their families and yet be hungry for new strategies and impact first. Advisors can appeal to next generation family members by understanding their perspectives and goals and offering advice in accordance with the same. Hopefully this research will provide insight along that journey. For more information visit www.NextGenDonors.org.