Giving Compass' Take:

• In this Financial Planning post, The Bridgespan Group discusses common barriers to impact giving, and the paths that high-net-worth clients can take to deliver on such goals.

• The main takeaway here is that, equipped with more knowledge, resources and a willingness to take risks, high-net-worth (HNW) individuals can multiply the effect of their gifts many times over.

• Looking for ways to analyze and track impact? Try our free personal donations manager, Giving Planner.

Many ultra-wealthy individuals and families — those who hold $500 million or more in assets — say they want to achieve more with their philanthropy. But current giving levels fall far short of these donors’ potential.

In the United States alone, more than 140 billionaires have signed the Buffett-Gates Giving Pledge, committing to give half of their wealth to philanthropy during their lifetimes or upon their death.

Despite such aspirations, our analysis shows that ultra-wealthy American families donated just 1.2% of their assets to charity in 2017. That falls considerably short of average, long-term investment returns on assets. Compare 1.2% to the S&P 500’s 20-year, average annual returns of 9%, for example. The clear-eyed math shows that if an ultra-wealthy family wanted to spend down half its wealth in a 20-year time frame, the family would need to donate more than 11% of its assets per year — a tenfold increase over average current levels of giving.

The Bridgespan Group’s research team, with support from the Bill & Melinda Gates Foundation, set out to spotlight barriers that impede giving to social-change efforts — think ending homelessness or eradicating polio. The team then identified pathways that could make meaningful progress towards doubling annual ultra-wealthy giving from $45 billion to $90 billion in the coming years. The team interviewed more than 60 ultra-wealthy families, their advisors and staff, and experts in the field, and paired insights gleaned from those interviews with lessons from behavioral science and the experiences of community leaders and fundraisers.

Some of the barriers that impede the wealthiest from giving to social-change efforts include the following:

  • Finding the right funding opportunities can be challenging
  • Giving to social change efforts often requires a change in mindset
  • The marketplace for matching funding with opportunities is broken

Having identified these barriers, we set about envisioning a compelling future state for ultra-wealthy giving. Our assessment identified four significant pathways to greater giving.

  • Path 1: Aggregated funds become a common asset class for ultra-wealthy donors
  • Path 2: A high-impact way for philanthropists to bet big on improving economic mobility
  • Path 3: Philanthropists have access to high-quality services that support their giving
  • Path 4: Philanthropists have consistent access to those qualified grantees that are prepared to put their big bets to effective use

We are at the beginning of a $30-trillion wealth transfer from baby boomers to their heirs, which will play out over the next two to three decades. If the wealthiest families surmount the challenges to giving more, they will seize a once-in-a-generation opportunity to help put society on a path to enduring progress.

Read the full article about the paths to impact philanthropy by Susan Wolf Ditkoff and Alison Powell at Financial Planning.