What is the Funders Collaborative Hub and why do philanthropists need to know about it?
How many potential philanthropists are there in the UK?
Growing the UK donor pool – Quantity, quantum and quality.
Beacon co-founder Cath Dovey tackles the task of quantifying the high-net-worth philanthropy market in the UK. With only a finite number of individuals in this demographic, she underscores the importance of strong organisation/donor relationships for growing wealthy philanthropy.
I have been spending a lot of time looking at numbers recently – too much, my colleagues would say. I have been trying to find sources to answer the question: how many potential philanthropists are there in the UK?
On one level, the answer is like the proverbial piece of string. Everyone with the willingness to build a committed relationship with the organisations they support, including time, talent and treasure, could be counted as a potential philanthropist.
But for the purposes of strategic planning, organisations need to know who is willing and able to make gifts of four and more figures.
Before digging into the data, it is important to flag a crucial insight from recent research on barriers to giving: Even among wealthy people, one of the biggest barriers to giving is financial insecurity.
“Even among wealthy people, one of the biggest barriers to giving is financial insecurity.”
While this may sound perverse, let’s remember making money is a risky business. Taking on financial risk in business means many wealthy people guard their personal wealth to protect against future shocks. They are often stretched and worry deeply about having enough for the future.
So, when figuring out how many people have the capacity to give, we can’t just consider how many wealthy people there are, we also need to think about the point at which financial security kicks in.
Exactly how many wealthy individuals are there?
…and how many might be willing to give regularly?
On the quantity question, CapGemini’s World Wealth Report 2021 estimates there are around 573,000 dollar millionaires in the UK. That is people who have $1 million once you exclude their property and any non-liquid assets. It’s a lot of money, but a million dollars (£750,000) in ready cash isn’t what it used to be.
We know from our own research that the giving patterns of millionaires are not that different from the wider population. It is only when we get to the next level of wealth that we start to see generous behaviours emerge.
CapGemini’s research identifies a segment of mid-tier millionaires, those with wealth above $5 million (£3.75 million). With more money, we can expect higher levels of financial security. Globally, 10% of dollar millionaires fit this category, or just over 50,000 wealthy individuals in the UK.
“We know from our own research that the giving patterns of millionaires are not that different from the wider population.”
ONS data, meanwhile, identifies the top 1% of income tax payers to be a group of around 300,000. This group has income greater than £162,000 per year. Again, it is a lot of money, but is it enough for these individuals to feel they have financial security?
Probably not – and here is my reasoning…
HMRC data on giving shows that it is only individuals in the income bracket above £250,000 who have increased their giving in recent years. In this category, total giving has gone up from £1.22 billion in 2015 to £1.98 billion in 2020 – an increase of 62% over five years. But for all other high-income groups, the level of giving has flatlined.
If it takes an income of £250,000 to feel financially secure enough to make regular major gifts, we need to question how many people fit into this bracket. According to the ONS, it is approximately 150,000 people (0.5% of income tax payers).
Taking these findings together suggests that among the UK’s high-net-worth population of around 500,000 we can expect 50,000 – 150,000 to be able and willing to give regularly in large amounts.
“We can expect 50,000 – 150,000 [HNW individuals] to be able and willing to give regularly in large amounts.”
So, where does this leave us?
It is a sobering thought that this number means there are fewer potential regular major donors than there are registered charities in the UK.
Yet it also highlights the critical importance for charities to engage well with their major givers. Wealthy donors typically give to six or seven charities, and it won’t take those individuals long to feel stretched or to switch funding to new charities if the relationship with an organisation isn’t a meaningful one.
“There is, of course, potential for all high-net-worth individuals to give more…”
Non-profit organisations also need to think about how to grow the major donor pool, recognising that just because someone is rich, that does not necessarily make them financially secure enough to make a major gift initially.
There is, of course, potential for all high-net-worth individuals to give more, but given their trepidation, giving may be sporadic until their circumstances change. Maybe they sell their business, or retire, or inherit.
Financial security happens by many means and it is only by getting to know your donors personally, that a fundraiser can anticipate when these magic moment might emerge. When they are ready, a good donor journey can see an individual’s giving increase tenfold.
“When they are ready, a good donor journey can see an individual’s giving increase tenfold.”
Lastly, it is a reminder that philanthropy is a precious resource. Major donors can unlock the capacity for organisations to innovate, to advocate and to grow, but there will always be more opportunities than donors, so thinking about how to present opportunities to them is vital. A case for support is only as good as the relationship behind it.
Knowing how many people have the capacity for major donor giving is one thing, unlocking that potential is more complex and patient work. We need to think as much about the quality of relationships, as we do about quantity or quantum of giving.