A key component of many wealth planning strategies involves charitable giving. This is clear from statistics regarding the cumulative total of all donations that flow to charities every year. In 2014, according to the National Center for Charitable Statistics, more than $358 billion was donated to charities in the U.S., with 72 percent of that number coming directly from individuals.
“The wealthiest donors are concerned that their money isn’t going to good use.”
Clearly, donations from individuals are a major part of all the charitable giving that happens throughout the year. However, a new study from SEI Private Wealth Management found that most of the wealthiest individual donors were concerned that their contributions were not going to the right place, or otherwise being misused. The survey specifically noted that these donors are actually losing sleep over these worries.
In a questionnaire that focused on high net worth individuals, SEI found that 52 percent of those with assets totaling at least $10 million were kept awake at night with the thought that their charitable contributions were not making a difference, or that it was simply going to waste. The respondents in this wealth bracket reported giving away 21 percent of their personal wealth every year on average. The study found that less wealthy contributors, female donors and those over 60 years old did not suffer as much anxiety about their charity.
When controlling for total assets, the survey did find some interesting facts about the propensity to trust a financial professional. Out of all respondents, whose average reported assets totaled $18 million, 44 percent said they would trust an advisor with a difficult financial decision like philanthropy. Twenty-one percent relied on family, while 20 percent were their own advisors. However, trust of financial professionals declined as total individual assets went below $3 million. The survey found 71 percent of these respondents made their own financial decisions, without consulting a professional in most cases. Among those younger than 40 years old, this was even higher, at 90 percent. More women tended to trust a financial professional with philanthropic decisions, with 37 percent reporting as such, compared to 26 percent of men.
Apparently, the usual model of charity isn’t doing any favors for the conscience of donors. That may be why new methods and tools for finding, researching and ultimately contributing to charitable causes are becoming widespread, according to ThinkAdvisor. They cited a poll from Campbell Rinker, which found that donations from mobile platforms had gone up by about 80 percent since 2013. More donors are also using their mobile phones to visit the websites for charities and complete their donations this way, according to the survey.
This trend has implications for charities, but also for financial professionals as well. To better serve current or potential clients, advisors need to adapt to changing methods and fears regarding charitable giving. By meeting clients in the middle, financial professionals are more likely to help them make a positive impact on the world without worry.