Philanthropy & the World's High Net Worth Individuals
Monday, 30th July 2007 at 4:13 pm
The wealthiest individuals in the world gave more than $285-billion to charity in 2006, according to the 2007 World Wealth Report, an annual look at the financial practices of high-net worth individuals (HNWIs).
The report says HNWIs are increasing the financial resources, time and thought that they donate to philanthropic causes. Philanthropy is increasingly being used to provide these individuals with a social return on their investments, rather than to just leave a legacy for future generations.
The way in which HNWIs give also is evolving due to an increasingly global perspective combined with an increase in the availability of investment approaches that enable support of a broader range of causes.
Among the key findings:
– Eleven percent of the wealthy say they gave at least 7% of their assets to charity last year.
– Among the richest people surveyed — those whose assets exceed $30-million and are described as ultra-HNWIs— 17% say they gave 10%of their wealth to charity in 2006.
– Americans and Canadians together gave 7.6% of their assets to charity in 2006, 20% more than in 2005. High-net worth individuals in the Asia Pacific regions gave 11.8% and those in the Middle East gave 7.7%.
– Wealthy Europeans gave 4.6% of their assets, while rich Latin Americans gave only about 3%of their financial holdings to charity. Latin Americans gave the least, according to the study, because philanthropy is not as well developed there as it is in North America and Europe
The 2007 World Wealth Report is available on Merrill Lynch’s (www.ml.com)
By comparison, the report says less affluent individuals donate less than 1.5% of their earnings each year.
The report says the new generation of HNWIs is increasingly seeking to strategically manage the wealth and personal resources they allocate to philanthropy
in order to maximize its impact.
To this end, HNW philanthropists are leveraging tactics that are quite similar to those utilized and proven successful in their business ventures and personal investing. This is resulting in a growing trend toward strategic "investment-like" giving aimed at maximising societal return on investment.
HNWIs are also investing significant personal time and energy toward attaining their specific philanthropic goals.
One manifestation of this trend is the substantial growth in popularity of donor-advised funds during 2005 and 2006.
"Donor consulting" firms are also playing an increasingly important role in advising wealthy clients on philanthropic investments that maximise social return on investment, with leading firms increasing their market penetration by more than 45% per year from 2002 to 200679.
While the United States accounts for the majority of growth in donor-advised funds and donor consulting, globally, private banks are expanding beyond their traditional range of services to advise HNW philanthropists.
The report concludes that while the causes that attract HNWI interest vary greatly, wealthy donors have one attribute in common: a desire to maximise the impact that their personal contributions have on achieving a preferred societal outcome.
As the number of HNWIs increases and their interests continue to broaden, the report says they likely will continue to expect higher returns on their investments.
Although HNW philanthropists continue to donate financial resources for tax benefits and legacy building, they also expect substantial positive social impact.
The report says successful giving, more than ever, will be defined by the results generated by a given investment. From financial advisers to Not for Profit organisations, entities that can meet these expectations will be rewarded handsomely.
The 2007 World Wealth Report is produced by Merrill Lynch and Capgemini, This is their 11th annual in-depth look at changes in the high net worth marketplace.
Philanthropy is just one section of this major report.
The report is available for download on Merrill Lynch’s website at www.ml.com/media/79882.pdf