Philanthropy is being redefined by wealthy millennials and Gen Z.

• According to a survey from Bank of America Private Bank, young wealthy donors are more likely to volunteer, fundraise, and act as mentors for charitable causes than simply give money.
• Wealth and life cycles may be the reasons for some differences between generations.
• The shift in giving among generations will have significant implications for wealth advisors and nonprofits, experts predict.

The original article was published in CNBC's Inside Wealth newsletter with Robert Frank, providing a weekly guide for high-net-worth investors and consumers. To receive future editions, subscribe and have them delivered directly to your email inbox.

A study reveals that wealthy millennials and Gen Zers are shifting their focus from traditional charitable giving to seeing themselves as activists, driving change in the world.

According to a survey by Bank of America Private Bank, wealthy donors under the age of 43 are more likely to volunteer, fundraise, and act as mentors for charitable causes, compared to simply giving money. The survey of over 1,000 respondents with more than $3 million in investable assets also revealed that young philanthropists desire more public recognition for their giving compared to Gen Xers and baby boomers.

The way the next generation gives and the causes they support is likely to change the charitable landscape. Instead of just writing checks to causes they care about, the next generation of givers wants to be actively involved in addressing the biggest social and environmental issues.

"Dianne Chipps Bailey, managing director and national philanthropic strategy executive for philanthropic solutions at Bank of America Private Bank, stated that they perceive themselves as holistic social change agents. According to Bailey, they possess a greater sense of agency in the world and are determined to utilize their capital in a more comprehensive and robust manner to achieve their social impact goals."

Both younger and older multi-millionaires are highly charitable, with 91% of respondents having given to charity in the past year and more than two-thirds of both groups citing "making a lasting impact" as their motivation.

The reasons and methods for giving among donors vary widely based on age. Younger donors, specifically those under the age of 43, are more likely to volunteer and raise charitable donations from friends and peers. They are also more likely to act as mentors and serve on nonprofit boards rather than limiting their contributions to capital.

Donors over the age of 44 are more likely to give due to a sense of responsibility, while younger donors are more likely to cite self-education and social influence as drivers of their philanthropy.

The focus on peer networks and activism among the younger wealthy is likely to persist even as they accumulate more wealth and inherit their fortunes.

"Philanthropy can be viewed as the five T's - time, talent, treasure, testimony, and ties," she stated. "The older generation is concentrating on the treasure (financial contributions). The younger generations are gravitating towards the other four."

Young wealthy individuals are more likely to support causes related to homelessness, social justice, climate change, and the advancement of women and girls. In contrast, older philanthropists are more likely to support religious organizations, the arts, and military charities.

"Bailey stated that the younger generation, who have experienced a lot in recent years, including the events of 2020, are becoming more vocal in their response. This trend is not just a reaction to current events but a sustained movement. People may shift their giving based on headlines, but the younger generation has dug deep and is committed to making a change."

The generational shift in giving will have significant consequences for wealth advisors and nonprofits, as younger donors are more likely to utilize giving vehicles established by their families, according to advisors. Specifically, these donors were over four times more likely to employ charitable trusts, family foundations, and donor advised funds.

Bailey stated that the next generation prefers to discuss philanthropy during the initial conversation with a wealth advisor, prior to discussing their investment strategy.

"Bailey stated that the individuals have a desire to learn more about philanthropy, and since they already possess complex giving vehicles, the education aspect is crucial for both nonprofits and advisors."

To remain competitive in the charity sector, it is crucial to attract young wealthy donors who will inherit a significant amount of wealth in the future.

Bailey stated, "Their perspective is necessary and their money will be required."

To be effective advisors to young wealthy individuals, it is important to be generous with praise. A survey found that younger donors are more than three times more likely to measure the success of their philanthropic efforts by public recognition. Almost half of them said they are likely to associate their names with their charitable endeavors, while more than two-thirds of older donors give anonymously.

"Give them praise, celebrate them, and make them visible," she said.

According to a report from Foundation Source, 80% of young donors identify as "givers," while 63% also prefer the terms "advocate" or "changemaker." In contrast, only 27% of young donors accept the label of "philanthropist."