Financial advisors hoping to serve tomorrow’s wealthy clients need to not only engage more with them today, but also cater to their distinct interests in philanthropy, a new study suggests.
A new report on how some of the richest households in America give, published Tuesday by Bank of America Private Bank, found that wealthy women and younger investors — whose ranks are expected to grow through the great wealth transfer — have different causes they prefer to support compared to older clients, and a different attitude toward philanthropy as an activity. Advisors may need to update the charitable giving advice they provide to those clients, compared to how they advised older or male clients on philanthropy. The report was a collaboration between the bank and the Lilly Family School of Philanthropy at Indiana University–Purdue University Indianapolis, according to a press release Tuesday.
READ MORE: The link between charitable giving and snagging next-gen clients
“This year’s study shows … the strong influence of women and Next Gen philanthropists who are using their wealth to promote positive change in the world,” Katy Knox, the president of Bank of America Private Bank, said of the study results in the press release.
Overwhelmingly, women are behind most charitable activity in the U.S. — 85% of household philanthropic giving was either made or influenced by a woman in 2022, the study found. In addition, most affluent women in the survey, 85%, said they “sometimes or always” consciously align their purchasing decisions with their values, compared to only 75% of the study’s affluent men. Women often prefer to support organizations that promote women and girls’ causes, and are much more likely than men to support racial justice.
Women need help getting on nonprofit boards, where they are still heavily underrepresented compared to men, the study found — only 16% of affluent women in the study held board seats, around half the rate at which affluent men, at 30%, held them. This underrepresentation can create an opportunity for advisors to guide women clients on how to deepen their philanthropic engagement while pursuing leadership opportunities on boards.
The report also found that those under the age of 42 (millennials and Gen Z), who along with women are largely expected to receive much of the trillions in wealth passing down over the next two decades from other family members, also have distinct charitable preferences and needs.
Younger people are much more interested in addressing climate change — they were 2.5 times more likely than older givers in the study to cite climate change among their top three most important causes to support. Younger donors were also hungry to learn more about philanthropic giving. While only 27% had a giving strategy, overall the group was about twice as likely as older donors to desire more knowledge about how to integrate values and philanthropy into their wealth management plans. This means furthering the philanthropic interests for the younger generation of a family will look different than for their parents.
READ MORE: How rich American families engage in philanthropy: report
Tomorrow’s givers, especially women, also want more accountability from their gift recipients on how the money is being spent, and more involvement with their causes of choice. Philanthropist Liz Elting, founder and CEO of the Elizabeth Elting Foundation, spoke about her own charitable work at a media luncheon previewing the study results on Sept. 28. Elting said she hears from other philanthropists that “‘I don’t want to only write a check. I want to give my expertise. I worked hard for this money. I’ve learned so much.’… I certainly feel that way.”
This presents another opportunity for advisors to stand out when advising wealthy clients: helping the clients track and evaluate where their donated money is going. “By helping affluent households monitor and evaluate their giving, advisors can help ensure that donors’ intended positive impacts are achieved,” the report authors said.
The study was conducted online in early 2023 using a “nationally representative random sample” of 1,626 individuals who each either had a net worth of at least $1 million, excluding primary residence, or an annual household income of at least $200,000. Respondents’ median income was $350,000 and median net worth was $2 million.
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