Budgeting plays a part in charitable giving, according to a Vanguard Charitable study released in November. While only 44% of Americans donated to charity in the past 12 months, those who included charity in their annual budget gave nearly seven times more dollars than those who did not budget at all, says the online study that included 2,075 adults. Nearly four in 10 Americans who include charitable donations in their annual budget increased giving in the past 12 months, while for those who gave who did not have a budget, only 19% said giving increased in the past 12 months. Younger Americans and those approaching retirement age are more likely to have a charitable donation budget.
The affluent represented in the Bank of America study especially showed their desire to do more. The vast majority of affluent Americans, nearly 90%, gave to charity in 2020. And nearly half donated to charitable organizations or financially supported individuals or businesses in direct response to the pandemic, the Bank of America study says. Several distinct giving trends related to the pandemic were revealed in the study. There was an increase in support for local community needs, an increase in unrestricted gifts to a variety of nonprofit organizations and an increase in virtual interactions between nonprofits and donors.
In particular, “the affluent are increasingly using their resources in multiple ways. At the same time that they are supporting charities, they also are saying corporations must do more than just make money,” says Dianne Bailey, national philanthropy strategy executive at Bank of America Private Bank.
“Currently, there is a better understanding that there is a need for flexible, unrestricted giving,” says Una Osili, associate dean for research and international programs at the Lilly Family School of Philanthropy. “Gift sizes have gone up even in a time of economic hardship. We have seen a shift to social and racial justice issues: That is part of what we have been seeing for a while now, but people are also giving to causes rather than organizations.
“Advisors can help clients identify what their priorities are and align their legacy bequests with their goals. They can be helpful in connecting clients to their missions,” she adds. Philanthropists are more fulfilled when they are engaged with more than just donations of money” and advisors can help make those connections. Volunteering did not fall as much as might be anticipated during Covid.
“It is too early to know for sure if these are long-term trends,” Osili says. However, “innovative forms of giving are being embraced by a diverse donor population whose influence, expectations and priorities are expanding traditional notions of philanthropy. Financially empowered and technology-enabled, these affluent donors are looking to deepen their impact, using a range of tools and vehicles available to them to advance the issues they are passionate about.”
Technology and cryptocurrency also are fueling philanthropy, according to Fidelity Charitable. Investing in cryptocurrency and giving to charity go hand in hand, according to a study by Fidelity Charitable, “Cryptocurrency and Philanthropy,” released in October. Forty-five percent of cryptocurrency investors donated $1,000 or more to charity in 2020, compared with 33% of all investors. Fidelity Charitable said the reasons may be that millennials, who are more comfortable investing in cryptocurrencies, are also more inclined to give money to charity than other generations.
Another trend that is growing in popularity is direct digital giving, according to the Bank of America study. More than half of contributors in the study gave through a nonprofit’s website in 2020 and one in five used digital tools such as GoFundMe and other crowdfunding platforms and 17% used payment processing apps such as Zelle and Venmo.
Philanthropic planning is also a key to success for advisors, according to Fidelity Charitable. Financial advisors who include charitable giving in their practices are more successful than those who do not. Planning for charitable giving helps advisors grow their practices, brings in more revenue and makes clients more likely to refer them to others, Fidelity Charitable says in a study, “On the Leading Edge: Accelerating Firm Growth with Charitable Planning.”
“It is critical that financial advisors not only be part of the decision-making (for charitable giving), but they should initiate the conversation with their clients. Charitable planning opens the door for advisors to reinforce the breadth of their wealth management expertise and build stronger client relationships and more holistic financial plans,” Fidelity Charitable says. “In many cases, charitable planning is a key strategy used to deliver on a firm’s objective of providing holistic wealth management.”
Philanthropists are committing to giving more in appreciated assets, rather than cash, as they realize the tax advantages to themselves and the fact that they then have more value to give to their favorite causes, says G. David Phelps Hamar, managing director and head of wealth advisory services and family office services at Chilton Trust, an independent, privately owned, wealth management company providing wealth management services to high-net-worth individuals, families, foundations, endowments and institutions, based in New York City.
While the world was uncertain at the beginning of the pandemic, giving slowed. “But as soon as the Federal Reserve Board acted and the presidential administration acted, we saw giving speed up and increase. People were looking for new ways to give. For high-net-worth individuals and families, there is a little more strategic thinking and more forward thinking, than for the mass affluent. The wealthy want to create a legacy,” Hamar says. “As soon as people saw the market was not going into a major meltdown,” they stepped up their giving, he says.