Charity suffers as rich prefer opulence to philanthropy

Charity donations have suffered as the uber-rich are preferring to maintain their opulent lifestyles over philanthropy in the gloomy economic environment, a specially commissioned report to “decode” the high networth families said.

“The high networth families give priority to maintain their lifestyles, which gives them the societal status, due to which, we have found some shifts in behaviours, with contributions to charity going down,” rating agency Crisil, president for research Mukesh Agarwal said.

He said the phenomenon of lifestyles maintenance is a universal factor across the high networth households (HNH) with all the segments showing a propensity to reallocate resources towards the purpose.

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[caption id=“attachment_365495” align=“alignleft” width=“380” caption=“Self-made entrepreneurs and wealth inheritors are found to have chosen to cut down on charity. Reuters”]  [/caption]

Self-made entrepreneurs and wealth inheritors are found to have chosen to cut down on charity, while the professionals dig into their savings for the purpose, Agarwal said, citing the report which has surveyed 150 high networth families and relied on official data from a host of agencies.

Any family having a networth of over Rs 25 crore qualifies to be an HNH, he said.

As a percentage of income allocation, contribution to charity and other philanthropic activities slipped to 4.4 percent in 2011 from 2010, the report titled ‘Top of the Pyramid’ commissioned by Kotak Wealth Management,’ said.

Interestingly, it found that there was 50 percent increase in spending on apparels and accessories by the HNHs in 2011 over 2010, followed by 23 percent hike in vintage spirits and liquor.

It said allocation towards meeting expenses has risen to 28.2 per cent from the year ago’s 22.4 per cent while also finding that individuals in such HNHs are allocating more income towards enlarging personal wealth rather than into their respective business as a result of economic slowdown.

The number of HNHs rose by 19,000 during 2011 to 81,000 with the report pegging the number to grow to 2.86 lakh in the next five years. The assumption is based on an average GDP growth of 7.5 percent annually, Agarwal said.

In investment patterns, the report highlighted how allocations towards the highly volatile real estate sector dropped to 30 percent in 2011 versus 37 percent in 2010. The HNHs are increasingly resorting to parking their money in the lower-return but more secure debt instruments, which witnessed an increasing in allocations to 29 percent from 20 percent in 2010, given the uncertain times.

However, the allocations towards equities seemed to be resilient to the choppy markets, and allocations remained unchanged at 34 percent, the report said.

PTI