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Understanding Wealthy Donors – 3 Truths Every Gift Officer Needs to Know
There’s a chasm in major gifts fundraising. It lies between the wealthy donors who often make up over 80% of your giving base (sometimes over 90%), and the gift officers and fundraising teams who reach out to them and interact with them.
While the wealthy donors may have seven, eight, or even nine figures in net worth, the people from your organization who are trying to build relationships with them tend to have far less. This makes it hard to relate to each other. And it’s even harder if the fundraisers make incorrect assumptions about their wealthy prospects and donors.
Why Understanding Your Wealthy Donors Matters
Relationships are built on trust. And wealthy people have a hard time trusting people who are not wealthy whenever the subject of the conversation turns to money. They may not think everyone is out to rob them, but they face different problems than other people, and they see the world and money through a different lens.
Plus, how they obtained their wealth plays a big role in how they think about it and about themselves.
If you enter into these relationships with incorrect or judgmental beliefs and assumptions about wealthy people who want to participate in philanthropy, you’ll be placing additional hurdles between your organization and the biggest gifts these people want to give.
So, let’s look at three truths about wealthy potential donors.
Truth 1: Many Wealthy People Do NOT Feel Financially Secure
A Bank of America study found that only 20% of people with over $50 million in net worth feel financially secure. And 10% feel financially insecure.
Say whaaaat?
How can this be? It’s easy to hear that and think these people must be crazy, paranoid, and out of touch with reality. But, if we take some time to listen and understand why wealthy people might feel this way, it begins to make sense.
Here are a few reasons why even very wealthy people may not feel financially secure:
History of Financial Insecurity
Imagine an entrepreneur who has tried to launch ten businesses. The first nine either failed, succeeded enough to earn a living but nothing extravagant, or only generated enough income to qualify as a side business. But then, their tenth business blew up and became a huge success, and now they’re a multi-millionaire.
For a person who has gone through that experience, they know how it feels to struggle, to fail, to gain, and then lose. They’ve lived it. So, now that they have achieved financial and business success, they’re still going to view their finances through their prior experiences. Success is not guaranteed to continue. I could lose this if I don’t keep working at it.
Financial insecurity can also result from their childhood. Maybe they grew up very poor and know how it feels to struggle and not have enough. Even though they’ve now come out of that, they remember it, and they don’t want to return to it.
The movie Erin Brockovich, starring Julia Roberts and based on a true story, is a great example of this.
The real-life Erin struggled with fairly extreme poverty for many years. It was a challenge just to get food on the table. But, after getting a low-level job at a law firm, she ended up playing a big role in winning a huge lawsuit for the firm, and (spoiler alert) she receives a seven-figure bonus.
Did Erin Brockovich suddenly feel wealthy and secure after that? Of course not. She has lived under the stress of financial insecurity for most of her life. If anything, she’ll be afraid to overspend and lose her new wealth.
So, every wealthy person has a different story. And for many of them, they have lived without wealth for much of their lives.
Smart Observation
Wealthy people have observed and heard stories of others who have lost everything. Celebrities are often presumed to be very rich, and many are. But the gossip magazines are filled with stories of formerly wealthy famous people who have lost everything. From Johnny Depp to Michael Jackson to numerous star athletes, it’s not actually that hard to lose millions, even hundreds of millions of dollars. For example, they can:
- Overspend on themselves – houses, cars, clothes, jewelry, security, entourages
- Spend on gambling or unsavory vices
- Invest in unwise business ventures
- Get scammed or misled by unscrupulous people who have access to them
- Give too much to family and friends who think they deserve a piece of that
Mike Tyson lost hundreds of millions. Michael Jackson earned over a billion dollars, and when he died, he was over $400 million in debt. Do a web search on celebrities who have gone bankrupt. It’s not a short list.
And it’s not just celebrities. Ted Turner lost over 90% of his wealth – $100 billion dollars – when a big merger between AOL and Time-Warner imploded. That’s not a misprint either – it’s billion, not million.
Can you imagine losing billions of dollars all in one year? Neither can most people.
But wealthy people know these stories. Their financial advisors know these stories. And when they hear this stuff, the wise ones take it as a sober reminder that no amount of money guarantees that you’ll be set for life.
It’s Already Happened to Them
For other wealthy people, they may have already experienced the rise, fall, and rise again in their net worth. They had it, lost it, and have now gained it back again. Anyone who’s been through that will probably never feel fully financially secure.
For example, maybe they had a business, but got into legal trouble and lost everything. Maybe they got crushed in a recession and their business failed or their investments lost tons of value. Maybe they were in too much debt and their debtors called them for it at the worst time. Maybe they had a major health problem that upended their entire life for a couple years.
Nothing is guaranteed. And a fair number of wealthy people have already been through that as a reality.
Truth 2 – Wealthy People Don’t Like Being Judged
And judged, they are – probably more than anyone else in the world.
Name the last movie or TV show you saw featuring wealthy people who were NOT portrayed as scheming, conniving, greedy, heartless, selfish, spoiled, entitled, or other descriptions like these. It’s not easy to come up with one.
Entertainment almost universally presents wealthy people in a negative light, and this rubs off on the people who watch it. Furthermore, politicians and pundits routinely accuse wealthy people of hoarding wealth, avoiding taxes, and generally not caring about how anyone else is doing financially.
Is this ever true? Certainly it is.
But is it generally true of the majority of wealthy people?
Very likely not.
Even more, how do you define wealthy? Compared to much of the world, most Americans are wealthy. Here’s a calculator you can use to compare your income to the rest of the world. A household of four – with two adults and two children making $100,000 per year – makes 13.1 times the global median income and is in the richest 3.1% of the global population.
So, you may be wealthy too, and you didn’t even know it. Do you feel greedy and conniving now?
Joking aside, the point is that people with wealth are, for the most part, just people. Most wealthy people earned their wealth. They did not inherit it. And they resent being accused of or judged for things they didn’t do, attitudes they don’t share, and beliefs that don’t apply to them.
Any honest look at the tax code reveals the obvious truth – wealthy people pay by far the greatest share of taxes in the US. It’s not even close. So for wealthy people paying high taxes, it irks them quite a lot to be told by other people that they are probably tax cheats, and that they AREN’T paying their “fair share.”
To be clear, we’re not saying any of this to make a political statement or pick sides or start arguments. The data is there for all to see.
The reason this matters is because – how do YOU perceive the wealthy donors and supporters you’re trying to engage with relationally?
If you harbor envy, and secretly believe they are dodging taxes, ripping people off, deliberately underpaying their workers, and all the rest – how are you going to forge a healthy, sincere relationship with them based on mutual respect and the desire to solve some of the world’s problems through giving?
Truth 3: Wealthy People Stink at Philanthropy
This doesn’t mean what it may seem at first glance.
It’s not that wealthy people don’t want to give money away to causes they care about. It’s that they don’t know how to do it very well. There are a couple reasons for this.
First, contrary to popular opinion, most wealthy people earned the majority of their wealth themselves. Only a small percentage inherited it, and the values of first generation wealthy families are very different from what most people think of when they think of wealthy people.
Because they earned it themselves, this means they spent most of their time building wealth, but very little time learning how to give it away. Families with inherited wealth have spent more time thinking about this and learning how to do it well. But newly wealthy families are less familiar with the nuances of donating large sums of money.
The second reason is because much of their wealth isn’t just sitting in bank accounts. It may be in retirement accounts, collectibles, businesses, and other non-cash assets. Giving away this type of wealth is much harder than just writing a check, and there are tax consequences depending on how you do it.
What This Means for Gift Officers
So, if your goal is to build authentic and rewarding relationships with wealthy people who are good candidates for major gifts, you need to acknowledge these three truths.
The first two are about attitude.
Don’t assume your wealthy prospects feel financially secure. About 80% of them don’t, according to the data referenced earlier. And don’t go into any conversation with a wealthy prospect if you harbor resentment, envy, or other negative feelings about wealthy people. That attitude will bleed into your communications, and you won’t be able to prevent it. They will feel it.
Lastly, understand that many of these people really do need help figuring out how to give their money away. And this is how you can become a very valuable person to them. They want to give major gifts, and they will appreciate you showing them the details of how this works so that it benefits them as well as the causes they want to help.
Approach with a sincere desire to know, understand, and relate to them. And think of yourself as a guide, the expert leading them down the good path they want to go on.
Do that, and you will have far more success in establishing beneficial relationships with your wealthy prospects and donors.
Related Resources:
- The Truth about Wealthy People and Philanthropy Should Affect Your Fundraising… But Does It?
- 4 Ways Your Assumptions about Major Donors Are Hurting Your Fundraising
- 3 Ways You Can Alter Your Perspective and Approach Toward Wealthy Donors So You Raise More Money
- 10 Questions You Should Ask Your Wealthy Supporters to Motivate them to Give
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Others may have different experiences; however, in my more than thirty years in fundraising, I struggle to identify even one gift officer who represents the statement “And don’t go into any conversation with a wealthy prospect if you harbor resentment, envy, or other negative feelings about wealthy people. “
Rhetorical question: How does one do this work when that’s how you feel?
Thanks for this, Karen. Me too. However, I have been seeing more and more content from ‘fundraising advisors’ that seem to resent or envy donors. Here’s a quote from one of their blogs:
https://nonprofitaf.com/2024/04/fundraising-experts-enough-with-the-donor-sycophancy/#more-8723
“If you are focused on the egos and feelings of donors and whether they are thanked enough or given enough attention when everything is on fire and those fires disproportionately affect the most marginalized by race and gender and disability, then you are protected by multiple layers of privilege. And your privilege needs to be examined and mitigated for, because your teachings and ponderings are not innocuous. When the entire village is on fire, it is already difficult enough to try to put it out without people bitching about whether they got thanked enough or treated special enough for contributing a bucket of water.”