Are the rich really "different from you and me"? Some thoughts on some new data on giving by High Net Worth Households

One of the most famous quotes from author F. Scott Fitzgerald comes from his 1926 short story “The Rich Boy.”   In it he wrote, “Let me tell you about the very rich. They are different from you and me…” That quote gave rise to a story, possibly apocryphal, about a conversation between Fitzgerald and Ernest Hemingway in which the latter retorted, “Yes, they have more money.”
 
In the sections that follow, we will look at some recent data and compare giving by the rich to giving by all donors to see if Fitzgerald or Hemingway was right.  To do that, we will use data about giving by High Net Worth households from 2014 US Trust Study of High Net Worth Philanthropy and data on giving by all donors from Giving USA 2014 . /1.
 
It is important to note, however, that the two studies are not strictly equivalent.  One includes only High Net Worth (HNW) households, defined as having $1 million of more in assets, excluding their primary home, or an annual household income of $200,000 or more.  The other study includes all types of donors: Corporations, Foundations and Individual Donors at all income levels.  Neither do all categories of recipient organizations used in the two studies entirely line up.  Still, the two studies do appear to provide a generally reasonable basis for comparing giving by HNW households to the broader pool of American donors.  To minimize difficulty, however, we will still limit our look to a few types of recipient organizations where the categories used in the two studies appear to be most equivalent. /2.

Arts – The broader donor group was marginally more supportive of the arts than were the HNW households. Giving USA reported that 5% of total US giving went to the arts while the US Trust study reports that HNW households devoted 4% of their total giving to the arts.  This near equivalence is interesting because it contrasts sharply with the longstanding notion of Arts as an elite cause. 

Education – High net worth donors, however, were substantially more generous to Education than was the broader group of donors.   The US Trust study reported that HNW households devoted 27% of their total giving to Education in comparison to the 16% devoted to Education by all donors as reported in Giving USA.  This finding comes as no surprise as education has long been considered to be a cause that is especially appealing to the affluent.

Environment and Animals – High net worth donors were also more supportive of these causes than was the broader group of donors.  The US Trust study reported that HNW households devoted 5% their total giving to the Environment and 1% to Animals (6% total) in comparison to the 4% devoted to Animals and Environment by the broader group of donors as reported in Giving USA.

Health – The broader group of donors, however, was more generous to health causes than were the HNW households. Giving USA reported that 10% of total US giving went to Health causes while the US Trust study reports that HNW households devoted 3% of their total giving to Health causes. This is perhaps not surprising given the amounts raised through broad-based efforts by the national charities focused on particular diseases.

International – International causes were also more appealing to the broader group of donors than to the HNW households. Giving USA reported that 3% of total US giving went to International causes while the US Trust study reports that HNW households devoted 1% of their total giving to International causes.  Given the large amount of funds raised by the mass-market international relief and development charities, this, too, comes as little surprise.

Religion – The broader group of donors was clearly more generous to religious causes than were the HNW households.  Giving USA reported that 31% of total US giving went to religious causes while the US Trust study reports that HNW households devoted only 12% of their total giving to religious causes. With corporations and foundations providing very little money to religious causes, this may actually give us a close to “apples to apples” look at how HNM households differ in their giving pattern from the broader population of individual donors.

So, who is right, Fitzgerald or Hemingway? 

In the six areas examined, the HNW households and the broader donor group demonstrated different preferences in the causes they supported.  In three areas; Education, Health and Religion, differences were large.  In the others, differences, though smaller, were still noticeable.  So, at least in terms of the causes to which they give, Fitzgerald appears to have been right; the rich really do seem to be different from the rest of us in ways that go beyond simply having more money. 

NOTES:  

1.    Formally, the first study is the “2014 US Trust Study of High Net Worth Philanthropy which is conducted in partnership with the Indiana University Lilly Family School of Philanthropy” while the second is “Giving USA 2014 which is researched and written by the Lilly Family School of Philanthropy.”

2.    Comparisons were not drawn in several other areas of giving because it was unclear as to how the US Trust and Giving USA categories lined up.  US Trust categories for which the data was not used include: Other, Combination, Youth Family, Basic Needs and Giving Vehicles.   Data for the following Giving USA categories was not used: Human Services, Public-society Benefit, Foundations, and Individuals.

How America Michigan Gives 2014

NOTE: A version of this posting also appears on Linkedin

Every few years, The Chronicle of Philanthropy uses IRS data to look at giving by American individual donors in its How America Gives feature.  The most recent of these appeared in the October 9, 2014 edition.   As in the past, we’ll borrow some of their data to look at giving here in Michigan as a whole as well as in three Michigan Metropolitan Statistical Areas (MSA).

About the data

Like all studies, How American Gives, has its strengths and its weaknesses.  The major weaknesses are probably these: 1) It only covers individual givers -- gifts by corporate and foundation donors are not included, 2) It only includes giving by taxpayers who itemize, and 3) Lag time -- the new study is based on 2012 data.   The major advantage of this particular study, however, is that it disaggregates its data as a result of which it is possible to look at giving by locality (state, metropolitan area, county or ZIP code) as well as by income level. 

The key piece of information reported in How America Gives is the “Giving Ratio” which is the proportion of reported charitable gifts to total Adjusted Gross Income (AGI).  Using a ratio removes community size and income from the equation.  That allows us to more clearly focus our attention on a key aspect of the local giving culture -- the relative willingness of people to forgo some amount of personal consumption or savings accumulation to, instead, support charitable activity. 

In the sections below, giving ratios are listed from high to low with communities  to the left of Michigan having giving ratios above the state average and those to the right having giving ratios below the statewide average. 

Metro Area

Overall, the Grand Rapids-Wyoming MSA had the highest giving ratio, exceeding the state average by 1.06% and the giving ratios of the other communities by somewhat larger margins.  

Grand Rapids-Wyoming 4.07; Michigan 3.01%; Lansing-East Lansing 2.92%; Detroit-Livonia-Warren 2.70

We generally don’t think of 1.06% as a big difference.  When converted to dollars and cents, however, this difference of 1.06% means that Grand Rapids-area itemizers gave $4.07 to charity per $100 in AGI in comparison to a statewide average of $3.01 per $100 in AGI. 

Metro Area and Income Level

At five of the six income levels considered, the Grand-Rapids- Wyoming MSA also had the highest giving ratio exceeding the statewide ratio as well as those of the other communities.  The one exception was the $25,000 to $50,000 range where the Detroit-Warren-Livonia MSA had the highest giving ratio.

Following the national pattern, Michigan giving ratios generally declined as income levels increased.  Interestingly, the gap between the Grand Rapids-Wyoming MSA  giving ratio and those of the other communities was widest at the lowest ($25,000 and below) and highest ($200,000 and above) income levels.  At the high end, the Grand Rapids-Wyoming giving ratio also bounced back up to 4.51% after being lower at intermediate income levels.

AGI of $25,000 and Below

Grand Rapids-Wyoming 9.82; Michigan 8.57%;   Detroit-Livonia-Warren 8.35; Lansing-East Lansing 7.86%

AGI of $25,000 to $50,000

Detroit-Livonia-Warren   4.88; Michigan   4.71%; Grand Rapids-Wyoming   4.63; Lansing-East Lansing   4.23%

AGI of $50,000 to $75,000

Grand Rapids-Wyoming 4.02; Detroit-Livonia-Warren 3.56; Michigan 3.63%;   Lansing-East Lansing 3.35%

AGI of $75,000 to $100,000

Grand Rapids-Wyoming 3.57; Michigan 3.08%;   Lansing-East Lansing 2.96%; Detroit-Livonia-Warren 2.89

AGI of $100,000 to $200,000

Grand Rapids-Wyoming 3.30; Michigan 2.63%; Lansing-East Lansing 2.61%; Detroit-Livonia-Warren 2.41

AGI of more than $200,000

Grand Rapids-Wyoming 4.51; Michigan 2.72%;   Lansing-East Lansing 2.57%; Detroit-Livonia-Warren 2.28

Where can I learn about giving in my area?

This is obviously not any kind of a comprehensive look at How America Gives data for Michigan.  Readers can, however, easily take a look at the data for themselves.  To do that, an interactive tool is available on the Chronicle website.   http://philanthropy.com/article/Interactive-Explore-How/149107/#search

What makes up the three MSAs highlighted here?

Grand Rapids-Wyoming MSA includes Barry, Kent, Montcalm and Ottawa counties.

Detroit-Warren-Livonia MSA includes Lapeer, Livingston, Macomb, Oakland, St. Clair and Wayne counties.

Lansing-East Lansing MSA includes Clinton, Eaton and Ingham counties.

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Michael J. Montgomery is a fundraising consultant with his own firm, Montgomery Consulting of Huntington Woods, MI.  He is also an adjunct faculty member teaching nonprofit management in the MPA program at Oakland University in Rochester, MI.   More information on him/his firm is available at: www.montgomeryconsultinginc.com

Thinking About the "Ice Bucket Challenge"

Once the mopping up is complete, I think it will be clear that the Ice Bucket Challenge (ICB) will have been the most successful stunt-based fundraising effort ever. 

Like many, if not most, American fundraisers I followed the Challenge closely and have thought about it quite a bit.  My first thought about the Ice Bucket Challenge was a fervent and sincere wish that I had invented it.  My second, was that the Challenge is a huge win for a cause -- ALS -- that had begun to fade from the public consciousness.

The Ice Bucket Challenge put ALS back in front of the public.  ALS, or Amyotrophic Lateral Sclerosis, originally entered the public consciousness as “Lou Gehrig Disease” but, aside for baseball and old movie fans (“Pride of the Yankees” w/Gary Cooper), relatively few people today know much about Gehrig or, for that matter, ALS.

The Challenge produced enormous growth in unrestricted giving.  The Ice Bucket Challenge has the ALS Association fast closing in on twenty-fold growth in annual giving raising upwards of $110 million from 2.4 million donors for a cause that in recent years had not raised more than $6 million in general contributions.

The Ice Bucket Challenge produced very significant growth in the renewable base for ALS Association.  The Challenge is, admittedly, a transactional form of fundraising.  As a result, it will probably add proportionally fewer donors to the ALS Association’s renewable base than might some other type of fundraising (if comparably successful).  On the other hand, the ICB is so vast – 2.4 million donors and rising – that it really only requires retaining a small percentage to double or triple the ALS Association’s renewable base.

What made the ICB work so well? 

I think four things came together to make this a uniquely powerful fundraising tool.

1. Peer-to-Peer Contact -- Remember, ICB began as individuals challenging specific friends, family, associates, their peers, to support the cause or take a bucket of water over the head and post the video.

2. Good Plain Fun -- No matter how smart or sophisticated we think that we have become, low comedy is still funny. 

3. Social Media Use -- Since we’re all kind of tired of cat videos and this summer’s actual news has tragically painful to watch, ICB videos were an immediate “hit” on YouTube© and that popularity very quickly and efficiently gave this fundraising initiative enormous reach.

4. Successful Celebrity Involvement -- When the butt of the joke is someone prominent or powerful, low comedy becomes just that much funnier.  As a result, once high profile people started participating in the ICB, the videos were MUCH more broadly accessed and the challenge took off like a rocket (my personal favorite of the celeb videos is probably former First Lady Laura Bush dosing ex-President George W. Bush)

So, what will be the “next Ice Bucket Challenge”? 

I don’t know.  But, I certainly hope to be the person who invents it!

The 2014 Michigan Fundraising Climate Survey

Respondents to the 2014 Survey offered a generally positive view of Michigan’s recent fundraising climate with significant, though not universal, optimism about the present and near term future. 

Background:

Beginning in 2012, our firm has annually invited a sample of Michigan nonprofit organization leaders to take a brief online survey in order to help us all to better understand the fundraising performance of, and fundraising climate facing, our state’s organizations. 

I recently posted a piece that compared national ratios for contributions by source from the new edition of Giving USA to those from the 2014 annual Michigan Fundraising Climate Survey.  Since then, some people have expressed interest in what else we might have found through our survey.

Some Selected Findings:

A majority said their groups’ 2013 fundraising results had improved in comparison to 2012.  On the 2014 survey, 55.8% of respondents reported that their organizations’ 2013 fundraising results were “Much Better” or “Somewhat Better” than their organization’s 2012 results.  This is a modest increase over last year’s survey when 51.8% of respondents characterized their organizations’ 2012 fundraising results that way in comparison to 2011. 

A significant proportion of those surveyed, however, did not meet their 2013 fundraising goals.  Nearly 40% of respondents said that their organizations did not meet their 2013 fundraising goals.  This is a slight deterioration over last year when 37.3% of respondents said their organization did not meet its 2012 fundraising goal.

Those surveyed were generally upbeat about early 2014 fundraising conditions in their area.  On the this year’s survey, 5% of respondents described current fundraising conditions in their area as “Excellent” while 68.33% characterized their local fundraising climate as “Good.” While not a ringing endorsement of current fundraising conditions, this is nonetheless the third year in a row that the proportion of respondents giving positive ratings to their local fundraising climate increased.

A significant proportion of respondents -- but still less than a majority -- were optimistic about overall Michigan fundraising conditions.  This included 11.48% responding that they expected the Michigan fundraising climate to be “Much Better“ and 38.07% expecting conditions to be “Somewhat Better.”  This is a modest increase over last year when 10.8% expected 2013 fundraising conditions to be “Much Better” and 32.5% “Somewhat Better” than in 2012.  In both years, however, a significant number expected fundraising conditions to remain “About the Same” with 37.0% giving that response in 2014 and 48.2% in 2013.   

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Michael J. Montgomery is a philanthropy consultant with his own firm, Montgomery Consulting of Huntington Woods, MI.  He is also an adjunct faculty member teaching nonprofit management classes at Oakland University and, previously, at Lawrence Technological University.

THINKING ABOUT INDIVIDUAL DONORS

A new edition of Giving USA is out covering giving during 2013.  It reports that living Individual Donors made 72% of all US contributions with another 8% of total US giving taking the form of Bequests.  Do the math and you find that Individual Donors, living and dead have yet again made 80% of all US contributions.  No big surprise there.  When bequests are added to individual giving, the resulting figure has hovered within a percent or two of 80% for a long time. 

Repetition, however, can give a notion greater impact.  As a result, the new edition of Giving USA may even more firmly fix the “80% of all giving come from individuals” truism in some minds and that would not be a good thing.   While I’m not concerned when fundraisers say that, I do become concerned when fundraising managers propose to allocate their organizations’ limited fundraising resources based on that truism.

Let me be clear; we have no reason to believe that the Giving USA figures are inaccurate at the national level or when all types of nonprofits are included in the analysis.  Our own work suggests, however, that the actual giving ratio is likely to be very different at the generally secular groups where readers of this posting are most likely to work.

Since 2013, our Michigan Fundraising Climate Survey has included a question on giving by donor type. Because we wanted to give the members of Michigan’s professional fundraising community benchmark figures with which to inform their efforts, we narrowed our data gathering to the types of organizations that are most likely to employ professional fundraising staff.  To do that, we excluded religious congregations, K-8 parochial schools, public schools w/out district-level foundations, and very small organizations.

With the more focused dataset described above, we observed a substantially different pattern of giving.  Our data showed individual giving to be significantly less, and corporate giving to be a good deal more, important than implied by the Giving USA figures.  In the section below, figures are contrasted to the Giving USA figures for the same year below.

2014 (giving during 2013):

Individual Donors – 57% of all giving in our data vs. 72% in Giving USA data

Bequests – 7% of all giving in our data vs. 8% in Giving USA data.

Corporations – 21% of all giving in our data vs. 5% in Giving USA data.

Foundations – 15% of all giving in our data vs. 15% in Giving USA

2013 (giving during 2012)

Individual Donors – 58% of all giving in our data vs. 73% in Giving USA data

Bequests – 6% of all giving in our data vs. 7% in Giving USA data.

Corporations – 21% of all giving in our data vs. 6% in Giving USA data.

Foundations – 15% of all giving in our data vs. 14% in Giving USA

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*Michigan Fundraising Climate Survey 2014 & 2013, Montgomery Consulting.  These are corrected figures.  Responses of “other” were examined and – based on their specific content – reallocated to the other categories.

**Giving USA: The Annual Report on Philanthropy for the Year 2012 & *Giving USA: The Annual Report on Philanthropy for the Year 2013, both © Giving USA Foundation and researched and written at The Center on Philanthropy at Indiana University.