PARTNERS ADVISORY SERIES
August 2002

Older donors give more
A special supplement in the July/August issue of American Demographics reported the results of the 2000 Consumer Expenditure Survey. Nearly 110 million households in 2000 spent $4 trillion or approximately $38,000 each. Confirming what we already know, charitable contributions increase with age as spending priorities change. Spending in most other categories peak at about age 50.

The chart shows spending power by age group and the index for cash contributions. The average for all households in the nation is 100. So, senior households give 2.23 times as much as average households. Note that their spending power is a little more than half of those in peak earning years.

The report also has useful data to use in planning special events like auctions. For example, if your constituency is primarily older baby boomers and empty nesters, they spend more on vacations than other groups. Gen Xers and younger baby boomers spend more on personal services.

The rich are just like us
The third annual Phoenix Wealth Management survey of high net worth households by Harris Interactive was reported in June. It can be downloaded at www.phoenixwm.phl.com High net worth is defined as net assets of $1 million or more excluding debt and personal residences. Interestingly, while 90% believe that the economy is on the road to recovery, only 40% feel secure about their own long-term finances. (See Philanthropic Giving Index below.)

The good news is that 71% report that their charitable giving is being maintained at last year’s level and 20% intend to give more. Also, a majority feels an obligation to make significant contributions to their communities.

They are worried about retirement like the rest of us. A quarter are delaying retirement plans and a quarter feel that they need to make up for lost time in saving for retirement. This statistic has a direct bearing on our work: 34% are very concerned about outliving their assets. No matter how much we have, we worry that it won’t be enough.

Also significant for us is that 53% consult financial advisors before making major financial decisions – such as major gifts to our institutions. Twenty-one percent wish to minimize their income and capital gains taxes while 11% want to protect their estates from taxes. Just 5% plan to begin transferring wealth to their families and only 4% say that their goal is to leave an estate for heirs. A miniscule 1% want to create a foundation as their legacy. We have the tools to help them reach these goals, but it’s obvious we have to educate and gain the confidence of financial advisors to be successful.

Wealthy and Wise
An April 21 opinion piece in the New York Times Magazine gave left-handed praise to billionaire Mayor Michael Bloomberg for personally giving $10 million to the City’s cultural institutions to help mitigate the effects of cuts in City subsidies. The writer referred to the NewTithing Group that can be found at www.newtithing.org. It is a philanthropic research organization founded by Claude Rosenberg, a wealthy investment manager who wrote Wealthy and Wise.

Rosenberg believes that the wealthy can give considerably more to charity without affecting their financial security and greatly increase their personal satisfaction. The site includes a charitable giving calculator illustrating that the average tax filer in 2000 with an adjusted gross income in the range of $200,000 to $499,999 could increase actual contributions from $7,588 to $21,000. This information may help us and our volunteers overcome a reluctance to ask for big gifts. However, as you and I know from experience, capacity has little relationship to propensity.

Stinking rich
In a delightful article in the June 9 New York Times Magazine, David Brooks reports that if you have a family income of $75,000, you make more than 95% of the people in the world! There are about 7 million households with a net worth of more than $1 million. And this boggles my mind: there are nearly as many cars as there are people in this country. While we have 6% of the world’s population, we are responsible for over 30% of total economic production. We actually exceeded Europe’s standard of living in 1740!

Brooks believes that our riches haven’t corrupted us (as opposed to the Roman Empire) because we have transformed the nature of money into an environment of abundance. With an attitude of abundance, we tend to be promiscuous with our money. Philosopher George Santayana wrote, "The American talks about money because that is the symbol and measure he has at hand for success, intelligence and power; but as to money itself he makes, loses, spends and gives it away with a very light heart." That is perhaps one reason why we give away far more money than people do in other countries.

Brooks writes, "The environment of abundance accounts for the energy, creativity and dynamism that marks national life. The lure of plenty, pervading the landscape, encourages risk and adventure. The more opportunity there is lying around, the more you’ll risk to go for it and the less cost there is in going for it and failing….When money comes and goes with such alacrity, it doesn’t hurt to give it away."

Such sentiments can help us maintain an attitude of optimism when the stock market gropes for its bottom, corporate executives’ greed is exposed and accounting fraud shakes our collective confidence. Optimism is crucial to our ability to convince donors to give away what they might be tempted to hoard in uncertain times.

Philanthropic Giving Index
The Center on Philanthropy at the University of Indiana conducts a semi-annual survey of development professionals to gauge the giving climate. The results of the April survey can be downloaded at www.philanthropy.iupui.edu. It shows that we are considerably more optimistic about the fundraising climate in general than we were six months earlier but significantly less positive about our own organizations especially among those of us working for organizations with revenues of less than $1 million. We have a strong belief that it will continue to improve over the next six months. With events of the past few months including the continuing stock market jitters, I suspect the survey would show all of us to be less optimistic if it were repeated today.

Major gift solicitation continues to be the most effective method of raising funds as reported by larger nonprofits. Typically, small nonprofits are more reliant on mail appeals, telephone solicitations and special events. It appears that these methods are more susceptible to economic downturns. It’s additional evidence that even small nonprofits should be investing resources in major and planned gift programs. Otherwise they will continue to be whipsawed by events beyond their control.

AFP Think Tank
Presentations ranged from venture philanthropy to President Bush’s faith-based initiative to fundraising among diverse ethnic cultures to personal giving styles. Some of the conclusions included:

• Venture philanthropists apply business approaches to giving sometimes with unrealistic expectations.
  
  
• If passed into law, the President’s faith-based initiative will likely have little effect on most nonprofits.
  
  
• While immigrants’ charity tends to focus on gifts to family members, a study by the Center on Philanthropy found no difference in giving by ethnicity when controlling for recency of immigration, income and education using multiple regression analysis.
  
  
• Individuals are becoming more directive in their giving and more concerned with the uses of their gifts.
  
  
• Professional fund raisers must become more aware of cultural nuances and generally more attuned to donors’ personalities in order to be successful for their institutions.
  

The bottom line is that fund raising is based on personal relationships founded on integrity, honesty and trust. That means dealing with donors one-to-one, face-to-face. Those factors are likely to remain true in the foreseeable future.

Thank you again to all those who provided input. Your reflections made for more insightful discussion.

Michael R. Maude, ACFRE, FAHP
President
Partners In Philanthropy

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