The Great Wealth Transfer: A Fundraising Gamechanger

Gold Key Depicting Great Wealth Transfer

Millennials have long been regarded as the generation that “didn’t quite make it.”

Although a large percentage of this generation earned high levels of education, they accumulated the student loan debt to match. With many entering adulthood in the middle of the Great Recession, they faced a difficult economic market and growing real estate bubble, leaving them swimming in debt and unable to acquire the wealth that the baby boomer generation used to define success.

That is all about to change. In the coming years, it is expected that an economic phenomenon dubbed The Great Wealth Transfer will shake markets up as baby boomer parents begin to leave their wealth and estates to their millennial children. While chatter about this wealth exchange is finally beginning to heat up, the concept has mostly flown tightly under the radar, leaving many markets, and even millennials themselves, unprepared for the financial changes of the coming decade.

While investors and real estate agents should begin preparations for this transfer, the effects will reach widely into other sectors. Politicians, financial advisors, and (especially) nonprofits alike should begin adapting for the future, as millennials use their inheritance to shape their own societal and financial landscape.

What Exactly Is Generational Wealth Transfer, Anyway?

Generational wealth transfers happen when a younger generation begins to receive inheritances passed down by their aging parents and grandparents. The concept isn’t new, but the upcoming transfer from baby boomers to millennials is unprecedented. Baby boomers make up a large percentage of the American population; in 2019, those between ages 55-73 totaled  71.6 million people.

Not only does the large population of baby boomers impact the current generational wealth transfer, but they are also the richest generation. There are nearly 68 trillion dollars about to be handed to younger generations — certainly enough to redefine the financial and political realms that we know and understand today.

The Great Wealth Transfer is about to rock millennials’ financial world. Although there are nearly 72 million millennials, there are a mere 618,000 millionaire millennials in the United States. With the younger generation making up most current home buyers, this statistic paints a bleak picture. These millionaires are generally between the ages of 34-37, meaning most are not feeling financially comfortable enough to enter the pricey real estate market until much later. The rest of the generation is facing an uphill battle to acquire property while maintaining financial wellness.

When the wealth transfer begins to kick into high gear, American society will have to recalibrate to cater to a cohort of people who suddenly have money, real estate, and accumulated wealth powering their decisions.

Millennials In Shock: A Learning Curve Ahead

It is safe to say that the rapid acquisition of wealth may shock unprepared millennials. As a generation that has navigated adulthood in a state of financial fragility, this sudden influx of wealth transfer will require a skillset that the majority of millennials simply do not have.

It has been thought that only 16% of American millennials are financially literate. Despite millennials having record-high levels of college education, this statistic is not surprising. Without being able to consistently access jobs that pay well during the recession and years following, there was no need to learn about basic financial skills such as investing or retirement planning.

As recipients of inheritance, they will come to the crossroads of financial decisions. Balancing investing, real estate management, and estate planning can be overwhelming. The future of the baby boomer’s collective economic legacy will be in the hands of heirs who may have been wondering if they could make the previous month’s rent.

Along with monetary inheritance comes real estate ownership. Many baby boomers will leave family homes and commercial properties to their children. They will have to make decisions between staying in their current cities and living situations, where they may not be able to buy property, to leaving it all behind to move back to their hometowns. This could encourage the redistribution of skilled, educated workers into less populated areas of the United States.

A New Age for Nonprofits

Nonprofits stand to greatly benefit from this generational wealth transfer. While there are fewer millennial millionaires than those from older generations, 56% of these millennials participate in philanthropy. This is an increase from the 51% of overall millionaires who donate. Millennials trend toward being a more charitable generation, perhaps due to the hardships that they faced themselves. As they begin to acquire wealth from their inheritances, it is likely that they will continue to donate to causes that they feel aligned with.

Perhaps the most significant characteristic of millennials is that they consider themselves to be charitable trailblazers. Combining this trait with their social well-being mindset, their philanthropic style may differ significantly from previous efforts.

In the past, it has sometimes taken numerous interactions and years of involvement with a non-profit to secure a major gift from a donor. Due to the unique disposition of millennials, major gifts officers should start focusing their fundraising efforts on this upcoming pool of new donors. They want to put their money toward causes that will produce immediate, visible societal improvements.  Focusing only on donors who are hoarding wealth to disperse at end of life may no longer be optimal. They are more likely to donate in significant sums in their younger years than wait for estate planning.

While millennials are known to never forget a wrong, they also never forget a positive interaction, and these years leading up to wealth transfer could potentially make or break your long-term fundraising goals. Millennials have learned that they can speak with the money they do have, so they may be willing to give generously to a nonprofit they believe in while just as quickly pulling away due to a single misstep. Relationship building is more crucial than ever with this generation.

And as the wealth transfer begins, it is also essential to secure any potential major gifts that may be up in the air. Baby boomers are being encouraged by their financial advisors to discuss and provide guidance to their millennial adult children, in order to properly manage the money the millennials will receive as heirs. Many financially savvy millennials are also hiring their own financial advisors, which can shake up previously discussed plans. It may be beneficial to get a jump on potential donors you have lined up as a major gifts officer before they finalize their estate plans.

Navigating Change: How Can Nonprofits Prepare?

Focus on Major Gift Departments

For nonprofits with a long-term vision and money to invest, shifting funds to your major gifts department now may prove to be beneficial in the upcoming years. While major gifts departments are known to be fundamental to nonprofits, they do not always receive the amount of attention and funding they deserve. In order to jump on a new influx of wealth, it is essential for astute organizations to make this move quickly.

In the past, major gifts efforts were targeted primarily to the wealthier, older generation. Focusing and cultivating relationships with two separate generations at one time may strain resources in a field that already experiences a high turnover rate.

In order to properly target fundraising campaigns, it may be important to diversify your major gifts team. Having specific officers to deal with donors of specific generations can allow you to bring in talent that works best with either group. Due to the differences and preferences between baby boomers and millennials, these groups must be approached with different tactics. Even the most experienced major gifts officers may hit walls when dealing with newly wealthy millennials if they do not adapt quickly.

Retargeting Fundraising Techniques

The most important thing that nonprofits can do to prepare to shift their fundraising efforts to millennials is to understand their characteristics. While they may have similar levels of inherited wealth, the way this group operates is vastly different than older generations. Previous methods of determining potential donors may no longer be applicable. For example, while owning real estate is a wealth indicator, many wealthy millennials prefer to rent condos. They tend to be travel-loving city dwellers, and it isn’t always desirable to own property when they are flying around the world.

Millennials are an educated bunch, too. About 39% of millennials have a bachelor’s degree or higher, compared to only 25% of baby boomers. This could indicate a tendency to give more freely to educational initiatives, as they clearly hold this value themselves.

They are also generally left-leaning and accepting of the LGBTQ2 communities, abortion, immigration, and general human rights and may tend to stay away from organizations that have spoken against these issues in the past. In 2017 59% of millennial Americans identified as Democrats. Nonprofits need to make their stance clear on these issues, because millennials may not appreciate having to dig for this information. Yet at the same time, many millennials are voting for increased taxation — thus driving left-leaning groups to the right.

Accenture, a financial services firm, says that 89% of millennials want businesses to “court” them, and this may not be different for nonprofits. Being able to reach out via donors’ preferred platforms is crucial to engaging and developing relationships. More and more donors are also educating their donors on the importance of estate planning or having a will in place. Considering that over 60% of Americans do not have an estate plan in place, they are hosting their own online will planning services at no cost.

Millennials spend a significant portion of their day on their phone. About 25% report spending more than 5 hours a day using their phones, and 47% credit social media with influencing their purchase decisions. While they are likely to ignore a letter or phone call, they are more than willing to engage on social media. It is essential that nonprofits adapt to this and focus their marketing efforts on social media plans, as well as ensuring their online donation channels are easily accessible. Millennials are not predictable and may decide to donate spontaneously. It is your job to ensure they can do this at a moment’s notice.

Re-evaluating Female Donor Relationships

There is also a higher level of wealthy female millennials. While older generations tended to have women at home in homemaker roles, millennial women are not playing the same game. They may prefer to donate to causes that support and uplift women and girls.

Young, wealthy females are also more likely to donate to female-led nonprofits due to the levels of sexism they experience from male executive directors and major gift officers in their donor interactions. This is a truly missed donor acquisition opportunity. Gender sensitivity training is the logical step to improve relations for female donors, board members included.

Female donors are unique and must be appreciated for the perspective they bring to the table. Women are more likely to donate than their male counterparts, and they generally have a longer lifespan, leading to more donation opportunities. Providing an inclusive environment for soon-to-be millionaire millennial women is in everyone’s best interest.

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The Golden Key to Wealth Transfer: Adaptability

For forward-thinking nonprofit organizations, The Great Wealth Transfer should be the foremost consideration for fundraising initiatives. Nonprofits that hit the ground running by catering to millennials may see the greatest financial payoff. Courting a generation that has considerable wealth in their 30s and 40s provides for a much longer and much more engaged donor cultivation period.

Being slow to pivot toward fundraising and marketing strategies that cater to younger donors can cost your organization considerable funds. Ensuring that you are operating on platforms that meet millennials where they are could be your lifeline in future fundraising endeavors. Clinging to tried-and-true strategies may cause you to fall flat in your upcoming interactions. Donors generally participate in philanthropic giving with selective nonprofits, so if you have already missed several years of relationship building, the intrinsic motivation to give may be satisfied by another quick-moving organization.

But the biggest mistake nonprofit organizations can make is to assume The Great Wealth Transfer will happen sometime in the future, instead of actively pursuing donation opportunities now.

While the bulk of millennial wealth acquisition will happen over the next decade, it is naïve to assume that it hasn’t already started.

Executive directors should be planning to have these conversations and strategy sessions with their board of directors in the coming months and year. Presenting the importance of making immediate changes in fundraising strategy will help you stay on top of current trends — and keep your organization at the front of the fundraising pack.

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