The vast majority of high net worth individuals (HNWIs), currently, are first generation, and have collectively paved the way to venture philanthropy, which uses venture capital techniques to support philanthropic activities. Ouliana Smith, head of content for WealthInsight, investigates
According to a new study from WealthInsight, 24.5% of the global high net worth individuals (HNWI) population preferred to engage in health-related causes, while 19.2% contributed to academic causes, and 18.5% contributed to culture. There was also an affinity for humanitarian, political and, to a lesser extent, environmental causes.
While almost 10.5% of HNWIs contributed to humanitarian causes, 9.6% and 3.1% identified with political and environmental causes respectively. HNWI preferences were found to vary significantly according to age group, gender, location and wealth band.
HNWIs aged under 45 were found to be most likely to donate to health-related causes with 32.0% of HNWIs, compared to 25.1% of those aged 45–64, and 23.3% of those aged over 65. HNWIs aged under 45 also showed strong affinity towards humanitarian causes with 23.8% of HNWIs. At 12.5% and 10.7%, younger HNWIs were less likely to have an affinity for cultural and academic causes than older HNWIs.
The vast majority of HNWIs today are newly created or first-generation, and have collectively paved the way for what
is known as venture philanthropy, which uses venture capital techniques to support philanthropic activities.
According to WealthInsight, 47.3% of HNWIs earned their wealth and 42.5% are entrepreneurs; this compares to just 10.2% who inherited their wealth or run a family business. Consequently, an increasing number of HNWIs are focusing on applying business acumen to their chosen cause.
The reach of venture philanthropy is further broadened by the growing population of younger HNWIs and their interest in delivering change. An increased desire for giving is noticeable among younger HNWIs who wish to contribute to causes that are close to them personally. Many young HNWIs are willing to become actively involved in their cause by volunteering. Once they have acquired their wealth, HNWIs will need help to structure their result-driven approach to
New HNWIs do not simply want to engage in philanthropic activities for reasons of goodwill or tax breaks; being involved and making an impact are vital to their motivations for giving. A key strategy for organisations to target HNW philanthropists is to form a partnership with them to encourage HNWIs to gradually donate funds.
Trust remains an important factor for HNWIs when looking for an advisor, so advisors need to adapt to cater to result-driven outcomes rather than simply seek donations. Advisors should show what they can deliver by giving examples of cases achieved. In this way, HNWI clients will be more likely to donate more once they are informed of the impact their funds are generating. With a greater capability to measure investment returns and deliver tax-efficient investment
solutions, wealth managers are equipped to manage the impact of philanthropy.
Partnerships can be formed to help philanthropists in selecting the right business for investments, and managing micro-enterprises in developing a profit and growth. As a result, this modern approach to philanthropy will transform it into a more organized and impact-oriented sector, enabling advisors to strengthen client relationships.