Here at DonorSearch’s blog, we strive to include the best content we can regarding prospect research and, more broadly, the nonprofit sector. With that goal in mind, we feature posts by guest authors from time to time to bring in a fresh perspective and new ideas. This guest post was written by Samantha Swaim of Swaim Strategies.
Some fundraisers feel that scouting for planned giving prospects is a lot like the world’s most difficult game of Where’s Waldo. You know he’s on the page, somewhere, but for the life of you, you cannot find him. The flip side of that situation is, of course, once you find him, you cannot stop seeing him.
This post is here to help you find Waldo and then Waldo Jr. and Mrs. Waldo and Waldo III.
With prospect research, once you know the characteristics of whom you’re looking for — red and white striped sweater, matching beanie, glasses, blue jeans — you can set out on your mission to identify and solicit those potential planned givers.
Identifying a planned (or, deferred) giving prospect is not an exact science. There’s definitely a certain amount of finesse and intuition involved that comes from experience. However, most supporters who make deferred donations fall under a specific subset of characteristics.
To fully understand the prospects you’re looking for, it is important to first understand the three main types of planned gifts these supporters could make. Gift type will factor into the traits you’re scanning prospects for.
The three types of planned gift prospects are:
#1: Bequest Prospects
These are what you typically think of when you hear planned gifts mentioned. Bequests are allocated in the donors’ wills. They could be lump sums, estates, or a set percentage of the donor’s assets.
#2: Charitable Remainder Trust Prospects
A charitable remainder trust donation is made after the terms of the trust are complete. In these cases, a trust is established that pays a specified amount annually to set recipients over a fixed period (often times until death). Once the fixed period is complete, the remaining sum of the funds goes to the nonprofit.
#3: Charitable Gift Annuity Prospects
For these gifts, donors gift a large sum of funds to a nonprofit. The nonprofit then pays the donor a set income from that sum yearly until the donor passes away. When the donor is no longer alive, the remaining funds go to the nonprofit.
As you can probably tell, in order to fall into prospects two and three territories, the person would have to be wealthy. However, a donor does not have to be incredibly wealthy to make a bequest.
In fact, there’s a common misconception that planned givers are all inherently wealthy. As you’ll see when we break down the various traits of these prospects, that is definitely not always the case.
We place the identifying factors of planned givers into two buckets:
Bucket #1: Cause Connectors
By cause connectors, I’m referring to evidence of a connection to your organization. Legacy is a major concern for those leaving planned gifts, and donors want to have a legacy at an organization that they truly care about. You simply don’t make a major planned gift haphazardly.
Consider these four connectors:
(A) Frequent Donations
And the no-brainer award goes to…frequent donations. It is highly probable that a past donor will become a future donor. Loyal donors are planned giving candidates. How do you measure donor loyalty? Well, you see how frequently they donate and how long they have been doing so. For this point, the donation amount is not nearly as important as the act of donating is.
(B) Conviction in Your Mission
This goes hand-in-hand with frequent donations. Logically, if someone is consistently contributing, they support your mission. Even if someone hasn’t been a regular donor, there are other ways to demonstrate conviction in your mission, like volunteerism.
(C) Desire to Give a Larger Gift than is Currently Realistic
Point C puts the possibilities of points A and B in perspective. A supporter who has been a volunteer for years or gives small donations annually has a demonstrated desire to help your cause.
Many charitable people are not wealthy enough to be major gift donors, planned giving is almost a loophole to get around financial limitations. If your annual income isn’t such that you have the spare finances to make major gifts, you can put a bequest to your favorite charity in your will, and give your remaining funds when you no longer need them.
(D) Positively Affected by Your Organization’s WorkA candidate in this category could be a recipient of your services, like a grateful patient. Basically, this comes down to someone who has tangibly experienced the potency of your mission. The best method of acquiring these types of prospects is to continue the good work of your organization.
Prospect research and annual giving go together like peanut butter and jelly, like Simon and Garfunkel, like Turner and Hooch.
What I mean to say is that prospect research and annual giving are a great pair, and prospect research should certainly be used to assist your annual giving campaigns.
To best explain how the two fundraising components fit together, we’ve provided detailed answers to the 4 most common questions regarding the relationship between prospect research and annual giving.
Planned giving prospects demonstrate significantly different wealth and philanthropy characteristics from major gift prospects. Traditional wealth markers, such as value of real estate, are not accurate indicators of planned giving. The philanthropic activities, such as significant political giving and prior major gifts, that are strong predictors of future major gift philanthropy, are also not accurate indicators of planned giving.
The key factors in identifying planned giving prospects are loyalty to the nonprofit, as evidenced by the number and frequency (not the dollar amount) of gifts, and the age of the prospects.
This article will not differentiate between gifts given before death and gifts given at death. There is currently no methodology to predict what type of planned giving program will most appeal to any specific donor. The information in this article is applicable to all types of planned giving, including bequests, trusts and other planned giving vehicles.
Planned Giving: A Significant and Growing Source of Revenue
According to Giving USA, in 2011 giving by bequest increased by 12.2% to $24.41 billion over 2010. The Council for Aid to Education (CAE)’s Voluntary Support of Education (VSE) survey shows that the 10 biggest higher education fundraisers received 10.5-31.1% of their gifts from planned giving from 2005 to 2010.
Because age is a significant factor in identifying planned giving prospects, aging trends can help predict future giving trends. As of 2010, only one state (Florida) had over 17% of its population over the age of 65, and 26 other states reported that 13.1-17% of their population was over 65, according to the US Census Bureau. By 2030, the same study predicted that all but four states would have 17+% of its citizens aged 65 or older.
Key Trends in Planned Giving
Often, planned giving involves two factors: a desire to support an organization, cause or mission, and an unwillingness or inability to provide a significant gift in the present.
Much of that unwillingness to donate today is driven by fear, uncertainty, and doubt about financial security. According to a 2011 survey by the American Association of Retired Persons (AARP), 57.4% of older Americans are somewhat to much less confident that their income will remain steady, while only 5.6% predicted their income would increase. For planned giving, which asks donors to promise a future gift that will cost them nothing now, this is good news. Donors can support nonprofits in the future without jeopardizing their present financial circumstances.
A second significant trend, a 2009 survey by the Hartford Financial Services Group, shows that 76% of Americans ages 50+ support charitable causes, compared to 60% for Americans ages 49 and younger. As Baby Boomers age, Giving USA expects non-bequest giving to flatten, while bequest giving increases.
View more prospect research statistics.
Wealth and Planned Giving
While wealth is not the most significant predictor of planned giving, the likelihood of a planned gift rises with the size of an estate. According to IRS data as reported in Giving USA 2012, 4-5% of all Americans leave a charitable bequest in their will, but that percentage is significantly higher for those that leave larger estates:
In fact, for estates large enough to file estate tax returns and their giving histories, charitable bequests far exceed lifetime giving. According to David Joulfaian, a U.S. Dept. of the Treasury economist/researcher, a study of 11 years of IRS data concluded that charitable bequests exceeded donors’ total lifetime charitable giving by 2.74 times. Development officers who’ve seen large bequests given by donors whose lifetime donations were much smaller will not be surprised by that statistic.
Development officers will also not be surprised to learn that giving by bequests has risen much faster than the general level of giving. According to Giving USA 2012, total estimated charitable giving by individuals rose by 4.0% from 2010 to 2011, while giving by bequests rose by 12.2% during the same period.
One more significant fact: 78% of planned giving donors gave 15 or more gifts to the nonprofits named in their wills during their lifetimes, according to a survey by Lawyers.com and the CAE VSE survey.
Learn more about the limits of wealth screening.
Understanding the Differences Between Planned Gifts and Major Gifts
The methodologies that effectively identify planned giving and major gift prospects vary, with six of the eight methodologies DonorSearch routinely uses differing significantly between the two groups of prospects:
Screening methodologies that are effective at finding major gift (and, by extension, capital campaign and annual giving) prospects cannot accurately identify planned giving prospects. Married couples, for example, are much more likely to give major gifts than single adults. However, there is no evidence to show that widows, widowers, and adults who are divorced or never married are more or less likely to include planned giving in their estate planning.
Learn more about major gift prospects.
Planned Giving and Major Gift Markers
The markers that identify planned giving and major gift prospects also show significant variations:
Because the engagement strategy for planned giving prospects can be lengthy, and development office resources must be used as efficiently as possible, identifying the strongest planned giving prospects is critical.
DonorSearch has developed a specialized prospect research tool, Planned Giving Prospect Identification (PGPID), to more accurately find planned giving prospects. In a project for a major university, PGPID identified 2,259 planned giving prospects based on loyalty, which was 9.5% of the total file which included 23,827 records.
Using a proprietary process that classified every record with a rating of A (most promising) through G, the results made a planned giving program much more manageable for the university:
Loyalty ratings can be overlaid with location (by state), age, wealth, known philanthropy or other factors, for further analysis and action.
Planned giving is a significant and growing source of gifts for nonprofits of all types. Identifying and cultivating planned giving prospects efficiently can ensure future income for nonprofits of all sizes.
If you’re new to planned giving or want to learn more about how planned giving can boost your fundraising then contact DonorSearch for a free demo today.
DonorSearch’s blog is dedicated to covering prospect research and different types of fundraising strategies, yet our readers and customers often ask about the difference between planned giving and bequests. So we reached out to Tom Ahern at Ahern Donor Communications to help alleviate the confusion.
“Pork. The Other White Meat.” was an advertising slogan introduced by advertising agency Bozell, Jacobs, Kenyon & Eckhardt in 1987 for America’s National Pork Board.
Brilliant and effective, pork sales in the US rose 20% in just a few years.
It got me thinking: in philanthropy, we have a somewhat similar situation. We have “major donors” … and then we have the “other major donors.”
Might it be possible to gain a 20% rise in charitable income thanks to some repackaging?
Here’s my thinking….
Conventionally, we think of “major” donors as those well-heeled prospects who have the capacity to make a large gift NOW. They deserve our applause. And they get it. Face to face. Frequently.
But are there other major donors hiding right under our noses?
Absolutely. And in abundance.
Bequests: Major gifts “for the rest of us”
The charitable bequest is the “other” form of major gift. But you don’t find it at the top of the giving pyramid. You find it amongst the masses, according to researchers like the UK’s Richard Radcliffe.
Please note: Most charitable bequests originate from middle-class households … not from the aristocrats who occupy Downton Abbey, but from the generous hearts of the normal people who watch Downton Abbey.
For those middle-class households, a bequest will typically be the largest single gift ever made. Lawyer and radio host Tony Martignetti, writing for GuideStar, says that the average US charitable bequest is worth $32,000. In Australia, says Pareto, the average 2011 bequest to charity equaled $54,453. In the UK, says Mr. Radcliffe, the typical charitable bequest is worth about €200,000.
“OK, I’ll take that!” I hope you’re shouting. “That’s quite a pretty penny.”
Oddly, American fundraisers seem quite bad at bequest marketing
In America, bequest giving is stuck.
Bequests represented just 8% of the annual contributions to charity in 2011, according to Giving USA 2012.
It’s 8% now.
It was 8% a decade ago.
And it was 8% two decades before that, if memory serves.
For all the money and time presumably spent on promoting charitable bequests in America, our fundraisers seem unable to move the needle overall. Really, you just want to reach out and tap the gauge to see if it’s still working.
In the UK and Australia, on the other hand, bequest giving annually hovers between 20-30% of the total haul.
I find their successes, and America’s persistent failure, a tantalizing challenge.
I wonder: Is the problem in the US a packaging problem?
Do we need to re-conceive what charitable bequests are? Do we need something like “the other white meat”? Are fundraisers just seeing bequests the wrong way?
“Would the person who thought up ‘Planned Giving’ please report to the principal’s office?”
Fundraisers commonly lump bequests in with things like Charitable Remainder Annuity Trusts (CRATs) and Charitable Remainder Unitrusts (CRUTs) under the inscrutable label “planned giving” … even though bequests are said to be, in fact, 90% of all “planned gifts.”
You have to wonder who comes up with this stuff.
Is there some diabolical, mischievous Committee Devoted to the Utter Obfuscation of Otherwise Incredibly Simple Things? (Answer: yes.)
Where’s the sense, though, in classifying a middle-class product like charitable bequests in with a bunch of products (CRATs and CRUTs) that appeal mostly to people so wealthy they need financial planners?
Those are two distinct target audiences.
Which means the sacred “laws of segmentation” kick in. And those laws dictate that you should market bequests separately from other “planned giving” products, because the core audience for bequests is different than the core audience for CRATs and CRUTs.
Yet we market them all together in the US … and we get 8% of our annual charitable income from bequests vs. the 20-30% realized in the UK and Australia.
About the Author: Tom Ahern is one of the top authorities on how to drive nonprofit revenue through effective donor communication and leads Ahern Donor Communications.
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