What prevents rich people from giving?

Why is it that everyone who is a significant donor talks about how rewarding it is, yet so many people who, on the face of it, could afford to be generous donors give little or nothing? The paradox of philanthropy is that you don’t ‘get it’ until you do it. One reason that many rich people don’t give, and don’t believe that giving will be enriching, is because this only makes sense to those who have actually done it.

One of the most important ways to encourage philanthropy is for those seeking funding to go about it the right way, by introducing their cause effectively and looking after donors appropriately. Donors are far less likely to give if asked by people with whom they have no previous relationship. Over two-thirds of those we interviewed in our research into why rich people give will at least consider a request if it comes from someone they know and respect, who is themselves a giver. Fundraising organisations must engage their trustees and existing significant donors in introducing potential supporters. Time must be taken to foster an interest and the early experience of giving must be as fulfilling as possible. There must be a personalised programme of engagement that responds to people’s interests and values.

One of the most important ways to encourage philanthropy is for those seeking funding to go about it the right way, by introducing their cause effectively and looking after donors appropriately.

Sir Peter Bazalgette, who quoted our findings in his speech at the UK Community Foundations conference on 20 September, observed that: “In the mind of the wider public, the arts are not necessarily a charitable cause”. We applaud the aim of widening the donor base for the arts, but this will take time. Meanwhile the arts and culture sector is supported by nearly 60% of those we interviewed, with an average annual level of giving second only to that going to higher education. Much of the support is going to diversify access, to support young professionals and to encourage riskier programming. As Sir Peter said: “The public isn’t aware of… how vital the arts are to every aspect of communities…” That case needs to be made, including to the wealthy who are not giving. Yet opportunities to learn about the activities, meet those responsible for delivering the work (trustees, senior and creative staff) and others who share their passions are integral to the mission. It should be relatively easy to introduce and nurture potential supporters. Too often this is not happening.

Apart from not realising “what fun it is”, why are so many wealthy people not giving? The top reason we uncovered is that however irrationally, many feel that they cannot afford it; they feel financially insecure. There are other reasons: some live in a ‘bubble’ and seem to lack empathy for potential beneficiaries; some feel that it is not their responsibility to help beyond paying their taxes; some were not raised with the philanthropic values that were so clearly manifest among our interviewees.

The situation is not helped by fears (not all ill-judged) that once they stick their head above the parapet they may be inundated with requests, and they may be pilloried by a press that despises wealth creation and questions their motives. And some (including those who do give) express concern that charities, including some arts organisations, are not as effective as they should be and do not account well for the monies that they have received.

Various solutions have been proposed, particularly to the question of feeling financially insecure. The simplest is to take a rational approach by sitting down and calculating what one might need over the course of the rest of one’s life, allow very generously for heirs and dependents, contingencies and disasters, and allocate some of the surplus to good causes. This approach, called “newtithing”, was first advocated nearly 20 years ago by an American, Claude Rosenberg, and has been adopted by some of those we surveyed. We suggest that encouraging and helping people to follow this approach is a key role for the growing number of philanthropy advisers. Such people also have a role in explaining about tax incentives.

Tax incentives are used by donors, but are not well understood by the wider world. This is not helped by media misrepresentations that suggest giving is primarily motivated by tax breaks. It’s an innumerate accusation, as the donor is always ‘down’ on the deal, but widespread nonetheless. However, beneficiary organisations should be much more effective at explaining fiscal incentives for giving. Tax incentives do matter, but ‘challenge’ or ‘matched’ funding is also important. With government supported schemes to encourage donations to higher education, and now, with the Catalyst schemes, to the arts and heritage sectors, there has been some experience of the incentive of a funding match. Our interviewees responded very positively to the idea of a deal: that the value of their donation will be multiplied by a factor. Such matched funding can come from an existing donor or group of donors, as well as bodies such as Arts Council England and the Heritage Lottery Fund.

Government should contribute to encouraging the wealthy to give more by having a consistent strategy on tax incentives and challenge funding, recognising all types of philanthropy through the honours system and investing in the education of the next generation, as could the media by celebrating role models and raising awareness of opportunities for giving time, expertise and money.

But in the end it is down to those seeking funding to engender that sense of personal fulfilment, because that is what reinforces the practice of giving and becomes a primary incentive for recurring commitment and involvement.

Theresa Lloyd and Beth Breeze are the authors of ‘Richer Lives: why rich people give’, published on the 30 September 2013.

Theresa Lloyd advises cultural organisations on strategy and fundraising, and is the author of Why Rich People Give (2004) and Cultural Giving (2006).

Beth Breeze is the Director of the Centre for Philanthropy at the University of Kent and researches and writes the Coutts Million Pound Donor reports.