Wealthy millennials, Gen Z are redefining philanthropy

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

Wealthy millennials and Gen Zers are redefining the world of charitable giving, seeing themselves more as activists than donors, according to a new study.

Wealthy donors under the age of 43 are more likely to volunteer, fundraise and act as mentors for charitable causes rather than just give money, according to a new survey from Bank of America Private Bank. The survey of more than 1,000 respondents with more than $3 million in investible assets also found that young philanthropists want more public attention for their giving compared to Gen Xers and baby boomers.

The shift in the way the next generations give, as well as the causes they favor, is likely to remake the charitable landscape. Rather than simply writing checks to causes they care about, the next generation of givers wants to be deeply involved in trying to fix the biggest social and environmental problems.

“They view themselves as holistic social change agents,” said Dianne Chipps Bailey, managing director and national philanthropic strategy executive for philanthropic solutions at Bank of America Private Bank. “I think they have a better sense of agency in this world. They’re really looking to move their capital in a much more comprehensive robust way to achieve their social impact goals.”

Both younger and older multi-millionaires are highly charitable. According to the study, 91% of the respondents had given to charity in the past year. More than two-thirds of both older and younger respondents said they are motivated by “making a lasting impact.”

Yet their reasons for giving and their methods vary widely by age. Donors under the age of 43 are slightly more likely to volunteer and are twice as likely to help raise charitable donations from friends or peers rather than just giving directly. They’re  more than four times as likely to act as mentors. And they’re more interested in serving on nonprofit boards rather than limiting their contributions to capital.

Older donors give from of a sense of responsibility. Those over the age of 44 were more than twice as likely to give due to “obligation” than younger donors. Those under 43 were more likely to cite self-education and the influence of their social circle as drivers of their philanthropy.

Some of the differences between generations may be rooted in life cycles and wealth. The younger wealthy are still building their fortunes and inheriting their wealth, so they’re more likely to give their time and help fundraise. Still, Bailey said the focus on peer networks and activism will likely endure even as they get older and wealthier.

“You can think of philanthropy as the five T’s – time, talent, treasure, testimony and ties,” she said. “The older generation is focused on the treasure (giving funds). The younger generations are leaning into the other four.”

The young wealthy also support different causes. They’re twice as likely to support efforts related to homelessness, social justice, climate change and the advancement of women and girls. Philanthropists over 44 were far more likely to support religious organizations, the arts and military charities.

“When you think about what [the younger generation] has been through in recent years, 2020, where they saw it all exposed, they’re leaning into the response,” Bailey said. “And it’s sustained. So many people move their giving with the headlines, but they’ve really dug in deeply. It’s not a moment but a movement.”

The implications of the generational shift in giving will be profound for wealth advisors and nonprofits, advisors say. Since many younger donors inherited their wealth, they’re far more likely to use giving vehicles created by their family. They were more than four times more likely to use charitable trusts, family foundations and donor advised funds.

Bailey said the next generation wants to talk about philanthropy as part of an initial discussion with a wealth advisor — even before talking about their investment plan.

“They have a hunger to know more, to learn more about philanthropy,” Bailey said. “They’ve already got these complex [giving] vehicles at the ready, so the education piece is critical both for nonprofits and for the advisors.”

With charity increasingly dominated by wealthy donors, and with the next generations expected to inherited over $80 trillion in the coming decades, courting the young rich will be critical.

“You need their perspective and you’re going to need their money,” Bailey said.

Advisors to the young rich also need to be generous with their praise. Younger donors are more than three times more likely to gauge the success of their philanthropic efforts by public recognition, according to the survey. Nearly half say they are likely to associate their names with their philanthropic efforts, while more than two-thirds of older donors give anonymously.

“Praise them, celebrate them, give them visibility,” she said.

Just don’t call them “philanthropists.” A report from Foundation Source found that 80% of young donors want to be seen as “givers,” while 63% also like the terms “advocate” or “changemaker.” Only 27% accepted the label of “philanthropist.”