There are over 80 million Millennials living in the U.S. and as they move to inherit wealth from their parents and grandparents, they will likely become one of the wealthiest generations in U.S. history.
The way in which high-net-worth (HNW) Millennials are sharing their wealth is also changing the dynamics of philanthropy.
In July 2014, professional golfer Chris Kennedy recorded a video of himself pouring ice water over his head as part of the now-viral Ice Bucket Challenge. Over social media, the 26-year-old called out three others – including his cousin whose husband suffered from amyotrophic lateral sclerosis (ALS) – to do the same within 24 hours or donate to charity.
The video went viral and by August, the ALS Association had received more than US$15 million and added 307,598 new donors.
“It was like wildfire, it just caught on and everybody was doing it," recalls Bill Ringham, vice president and director of private wealth strategies at RBC Wealth Management-U.S. in Minneapolis. Donations raised through the fundraising-as-meme spread across social media, ultimately leading to a scientific breakthrough for the incurable disease. It also proved a pivotal moment, a tip in the scales of social awareness and philanthropy. Millennials had ushered in a new way of giving.
“You look back on before the ability of the web and transferring videos via your phone, that wouldn't have had that same kind of impact," says Ringham.
This new charity
Commissioned by RBC Wealth Management, The Economist Intelligence Unit (EIU) undertook a study of 1,051 high-net-worth individuals (HNWIs), including 365 respondents in the U.S., from March to May, 2018. The survey explores how the meanings of legacy and wealth are being redefined across regions, genders and generations.
According to The new face of wealth and legacy research, 79 percent of Millennials globally say they believe societal causes have become more important than wealth accumulation in defining their legacy.
Where other generations typically turn to large, well-known charities, Ringham says Millennials are more targeted and focused on using social media to support grassroots organizations. For HNW Millennials who haven't accumulated the kind of wealth necessary to launch a foundation, vessels like donor advised funds – where assets sit in a fund in a tax efficient way and can be given to charities flexibly in smaller sums – have seen a spike in interest.
"Through the years I continue to see more of an emphasis on 'let's not write a large cheque at Christmastime, let's write a more palatable amount on a monthly basis that fits within the causes of individuals,' " says Ringham.
Giving USA's 2017 report found donations from individuals totalled an estimated $281.86 billion, a 3.9 percent growth from the previous year, outpacing foundation and corporate giving.
“I think Millennials are interesting … they're a very large population and they're still very young, so they can afford to be a little bit more idealistic (and) how they believe they can influence the future," says Angie O'Leary, head of wealth planning at RBC Wealth Management-U.S. in Minneapolis. “I think they're much more willing to sacrifice in the short term in order to have an impact whether that's how they spend, invest, or accumulate their money."
Ringham agrees, pointing to a recent client family who went through a liquidation event where the Millennial in the family inherited a significant amount of money from her parents, who were still alive.
“(The parent) didn't really have social restrictions in place on what their investment platform would look like, but fast forward to their daughter who had very strong convictions on responsible investing and what types of investments to avoid based upon her moral compass," says Ringham. “It was interesting to watch the two go about it (with) very different investment philosophies."