In the past 60 years, wealth in the top 10% of U.S. households grew more than six-fold, while the wealth of the top 1% grew more than seven-fold, much faster than other groups. According to the Pew Research Center, between 1970 and 2018, the share of national income for upper-income households grew from 29% to 48%, while the middle-income households share dropped from 62% to 43%.
Why this is happening is a big, complex question; many socio-economic forces are contributing to this shifting wealth landscape. But such issues are out of our control.
In the advancement profession, we must adapt to the evolving landscape by harnessing the power of wealth concentration to support the mission at hand. Below are a few key observations about how wealth dynamics may impact the strategy and logistics of fundraising.
1. Wealth vs. Income and a Greater Role for Boards
Both income and wealth are more concentrated now, but wealth is likely the more relevant measure. High-earning households often make gifts—even large five- and six-figure gifts—out of their income. Such donors can likely be qualified, solicited, and stewarded using traditional methods.
Top households measured in wealth, especially those in the top 1% or top 0.1%, are often not giving out of income, but out of accumulated wealth, especially through more complex planned gifts that involve family foundations, 403b funds, and increasingly, Donor Advised Funds (DAFs). Even more important, reaching this top tier of wealthy families cannot likely be done by traditional methods. One doesn’t have to “qualify” such donors in the traditional sense, i.e., with wealth screenings, because they are often public or socially visible leaders, especially in the philanthropic community.
This is where Boards are becoming increasingly important. If the organization is prioritizing such donors and their potential for large, high-impact gifts, Board members may be the most effective way to find connection points either with those families or those managing a donor’s wealth and charitable interests. Does your Board have the right composition of people who are operating in those circles? Are Board members willing to facilitate introductions to get those doors opened and guide the relationship-building going forward?
In a world where the giving pyramid is no longer 80/20 or 90/10, or even 95/5, it may be, as one of our roundtable panelists quipped, “more like 98/2.” In that world, it may no longer be sufficient to choose Board members based on who can pay their annual dues and buy tables at fundraising events. Providing entrée and being willing to help co-pilot outreach to that top tier of donors may now be mandatory.
2. Stewardship May Look Very Different
Given the size of their gifts, social status, and business prowess, the expectations of mega-donors are much higher today. They often feel that they require a larger influence in the organizations they fund, e.g., not just naming rights, but maybe a seat on the Board or even a role in strategic hiring decisions. They also often desire a level of bespoke, white-glove service that many nonprofits are neither used to nor properly staffed for.
There is also the possibility, given such high expectations, that “donor revolts” are possible, when a donor does not like something the organization does. Examples of these scenarios have peppered the press in recent years. Nonprofits must be cognizant of such risks when targeting the mega-donor class. It’s incumbent on the fundraising team to engage with donor expectations as early as possible and set boundaries in a transparent way that’s satisfactory to the donor as well as the organization’s mission and independence.
In that same vein, some development pros find it ironic that even though the middle-tier of major donors has been shrinking, they too have higher expectations even for their annual gifts, not to mention a stretch gift. As consumers, we have come to expect we’ll get what we want, when we want it, and be pampered by the amount of choice we’re offered. In that same way, expectations to receive a bespoke stewardship experience further down the donor pyramid are becoming more common and more difficult to fulfill. Technology may be a mitigating factor here, as it can deliver more time for personalized outreach by reducing administrative burdens on the advancement team.
That said, donor communications and stewardship are a common weakness at many nonprofits. So, the narrowing of the pyramid might place greater urgency to address existing shortfalls.
3. Complex Charitable Tools Demand More Expertise
The financial complexity of top-tier donors may challenge conventional approaches to organizational structure and staffing. For example, it might warrant a concierge-type role, staffed as a dedicated Donor Relations or Board Relations position. The new stewardship model might need to resemble that of a private bank or high-end luxury consumer brand with high-touch engagement to maintain the relationship.
Mega-donors also require greater business, legal, and financial expertise on the part of gift officers—e.g., working across a range of asset types and structures. For example, DAFs have exploded in popularity: quadrupling from 2017 to 2024. Today, more than 2 million DAFs exist in the U.S. making $52B in grants, compared to about $100B from foundations. Securing a large gift also now involves donor representatives across disciplines such as estate attorneys, wealth managers, family foundation staff and family members, and potential heirs who may retain a strong interest in those funds.
Development leaders must decide whether to train-up frontline gift officers, or to build a dedicated group within the team with the necessary specialized legal and financial expertise.
4. Questioning the Strategic Emphasis on Donor Size
Finally, it can help to step back and strategically assess how important mega-donors should be. Focusing on them is understandable; it may be the most direct route to the highest ROI on the effort to secure large gifts. Is it in the best interest of the organization to reallocate resources and prioritize the wealthiest donors which may hollow out major gifts and annual giving and reduce those revenues?
Further, “top-tier” can be a relative term. In smaller cities and communities, locally focused organizations (such as performing arts or social service organizations) may attract a top tier of local donors. In such places, although those donors may not qualify objectively as mega-donors, they are still top-tier in their respective markets and may require the same focused solicitation discussed above.
More Boards are pushing fundraising that focuses on the biggest gifts to support their biggest dreams. There’s less emphasis now on a holistic view of the philanthropy program. Fundraising programs are often judged by their own individual balance sheet, and not solely by its contribution within the total organization. By that measure, chasing the wealthiest donors makes tactical sense. But does it make strategic sense across the whole landscape of a nonprofit organization?
We can only be sure of one thing: wealth concentration trends are not going to reverse any time soon. That makes these questions ever-more pressing.
As always, we’re interested in your feedback and insights on this issue, both its challenges and opportunity potential, to help our profession learn, grow, and succeed.
Contributing author:
Gregory Leet, Senior Consultant, Aspen Leadership Group
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WE WILL BE TAKING A SHORT BREAK OVER THE HOLIDAYS. THE NEXT PIECE IN THIS SERIES WILL BE A ROUNDTABLE DISCUSSION ON THE NARROWING PYRAMID, ON JANUARY 21.
We will be joined by three advancement leaders to discuss how they view these trends on increasing wealth concentration—i.e., the narrowing pyramid—and how it presents challenges and opportunities for fundraising teams.
HAVE A WONDERFUL HOLIDAY SEASON AND NEW YEAR — WE’LL SEE YOU BACK HERE IN JANUARY!
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