Key Concept: Lose Ownership, Keep the Wealth

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It took a vacation, but I finally read the book, Capital Without Borders, written by sociologist Brooke Harrington. Reading a well-written book like this makes it so much easier to identify key concepts and muse on how they apply to other situations, such as fundraising research, of course! There were a few prospect research insights I’d like to share, starting with the humble but mighty trust.

Lose Ownership, Keep the Wealth

A key concept upon which everything in the book hinges, is the use of trusts to separate the wealth-creator from his or her wealth. Sounds counter-intuitive, right? If I create staggering wealth, I want to retain ownership, preferably for as many generations as is reasonably possible.

There are many different kinds of trusts and the laws governing them have transformed as invisibly to the public as an alien Skrull in the recent movie rendition of Captain Marvel! But the essential premise of a trust is that ownership of an asset is transferred to the trust by the wealth-creator and under the control of the trustee. The trustee might be the wealth-creator, but for the very wealthy, it is way smarter to make the trustee your wealth manager.

The DAF Example

One way to understand the importance of the trust transformation is to compare it to the Donor Advised Fund (DAF). What are the major benefits driving people to DAFs? I’ve put the following benefits in order of importance.

  1. Anonymous giving
  2. Indirect ownership
  3. Beneficial tax treatment (a/k/a tax avoidance strategy)
Privacy / Anonymity

Privacy is most frequently of paramount concern to someone looking to preserve great wealth for as many generations as possible. A DAF is a fund of a larger entity, such as a community foundation, and grants made from the DAF are not required to be reported to the public. Trusts also provide a lot of privacy and, when used skillfully, can offer complete anonymity.

Indirect Ownership

Indirect ownership is a means of preserving wealth, even in a DAF. When a wealth-creator gives to a DAF, s/he loses ownership of the money – but does NOT lose influence over that money, the ability to “advise” on giving. This is the same with a trust. The trust owns the assets that were transferred by the wealth-creator, but the wealth-creator retains influence over those assets, if only through his/her relationship with the trustee.

Tax Treatment and Debt Avoidance

The implications of indirect ownership are great. In the case of a DAF, the money gifted to create the DAF receives favorable tax treatment (depending upon specific tax circumstances, of course).

Generally speaking, if a wealth-creator does not technically own the assets/money in a trust, there are more opportunities to avoid taxes on that wealth, and debt owed by the wealth-creator might not be collectible from the trust. The benefit of influence over the money is kept, but the risk of taxes and debts can often be reduced or avoided altogether.

Skillfully using trusts in this way is completely legal.

Why it Matters for Fundraising and Research

Development officers have been some of my best teachers over the years. I’ll never forget the time when someone questioned my capacity rating, suggesting that holding real estate in a Dynasty Trust implied much greater capacity to give than the rating I had provided. She was right!

And now that I am in roles where I teach other prospect research professionals, I find myself frequently challenging them on the technical aspects of ownership.

For example:

  • The prospect had two big tax liens in the past five years, resulting in a lower capacity rating.
  • The prospect had a bankruptcy a few years ago, so there isn’t major gift capacity.
  • The prospect transferred ownership of the real estate (company, plane, whatever) to a family trust and is not the trustee, so I didn’t include that in the gift capacity rating.

Now that you understand a little bit of tax and debt avoidance strategies using trusts to separate ownership of wealth from the wealth-creator, while still maintaining influence, can you see the problem with the three statements above?

The one example that sticks in my mind is a prospect I researched who was from a family of extraordinary wealth. He had a big, ugly (and public) divorce and the judge ruled that his wife should get half of his family trust. But when he and the court asked for the money from the trustee, the trustee refused. It was determined that the trustee was within his full legal right to refuse and the ex-wife was unable to collect her millions.

Chalk one up for debt avoidance and wealth preservation strategies using trusts!

Did that prospect have wealth? You bet! I’ve researched other prospects who have had multiple bankruptcies and continuously emerge from them, having assets in various trusts and companies that are all walled off from each other.

Fundraising Action Steps

It isn’t always possible to know a prospect’s gift capacity with any degree of accuracy, but you can almost always identify key wealth indicators that separate the affluent from the high net worth individuals (HNWIs).

  • When you see a trust or multiple companies that don’t appear to have any business purpose (such as LLCs that appear to multiply faster than rabbits), you probably have a prospect who can make a 5-year pledge of at least $100,000.
  • If your prospect was born into a HNW family, assume there are trusts, even if your prospect has no significant income. Every time I find a prospect who lives very well and is an artist, I immediately look for the family-wealth connection!
  • When you have spotted the trappings of great wealth and realize this person is a HNWI, keep this rule of thumb in mind: the higher the net worth, the fewer the visible assets.

I hope you found this key concept useful for your work in fundraising and research. Stay tuned for next month’s blog post where I demystify regulatory arbitrage as a wealth preservation strategy. Regulatory arbitrage sounds exotic and intimidating, but fear not! I will break it down for you.

Additional Resources

Traveling with Prospect Research

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At the birth of The Great Recession in the U.S. in 2007, I embarked on a quest to create a lifestyle that would provide me with the freedom to travel for extended periods of time. The internet was wide open and the possibility of a free-roaming lifestyle seemed feasible.

Fast forward to today, and while I do travel widely, it’s not the utopian free-for-all I initially imagined. In May of this year I have been living and working in Amsterdam in the Netherlands.

Way back in 2007, it vexed me that NGOs were averse to telecommuting arrangements and the rigid time clock of the typical job exacerbated my health issues. I loved solving the mysteries of prospects and crafting the prose of profiles. Going solo as a consultant felt like a reasonable solution. Worst case scenario was that I would fail and have to find a job.

Initially it was terrifying! But I was fortunate to land a client on the first day I was officially self-employed. I continue to serve them to this day. I did sub-contracting work, too. I barely paid my bills, but it was a start. And in 2008, my husband and I moved to Prague in the Czech Republic for five months.

These days we still rent an apartment and travel far away once a year, but only for a month. Renting an apartment means we get to live in a neighborhood, cook meals in our kitchen, and acclimate to life in a foreign city. We buy public transit passes, learn where and how to recycle and throw away garbage, and depending upon our language skills, get to know some of the locals.

Sounds great, right? It is! But maybe not quite in the way people initially assume.

First, there is the double-edged sword of money.

When I first became a consultant, I had more time than money. I had energy in abundance to roam around a new city, immerse myself, and enjoy it. Trying to decode the Czech language in the grocery store, restaurant menu, public transportation – well everywhere – was fun and interesting.

But as my business has grown over the years it consumes a great deal more of my energy and my time. My first week in Amsterdam this year was spent working long days on my laptop in a cramped space because of an unexpected surge in tight-deadline work orders. Trying to figure out which carton is milk vs. cream in the grocery store becomes a lot less fun under those circumstances!

Second, the internet is no longer open. It has guarded country borders.

Technology makes my lifestyle possible, but as the internet has matured, it has become increasingly difficult to perform my work in another country. It’s a crazy see-saw!

I remember the first year that my trusty VOIP phone connection failed in Prague. I set everything up and when I tried to login to my account online I couldn’t – the page would not load. Calling via Skype I learned that they did not operate outside of the U.S.

Google now fails me nearly entirely when trying to perform searches on a foreign server. I’ve opted to use a VPN connection, but that means that I am requested to prove that I am human over and over again. And not just from Google, but my bank, and my subscription tools and other accounts.

Especially with the rise of GDPR in the EU, if I don’t use a VPN, many innocuous websites in the U.S. simply will not load. The country borders online have become walled gardens. I’m certain the VPN “hole-in-wall” will be plugged soon.

Nevertheless, I still find it exhilarating to live temporarily in a foreign country.

Living and working somewhere else takes me out of everything I take for granted. I am deliberately putting myself in situations that are way out of my comfort zone. It’s exhausting sometimes, but it changes my perspective. I get to view my life and my work from new angles.

I love to work. And having flexible work hours is a dream come true, but I need to balance myself. Trying to structure my days to take advantage of festivals and arts and culture in Amsterdam helps me question my choices about work.

Being able to spend an entire month in Amsterdam also means I’ve been able to schedule two meetings with local NGOs to learn about their work in the Netherlands and to share fascinating conversation about their views on fundraising. I am continually reminded how humanity is the same the world over as well as how the differences in philanthropic cultures can deeply affect relationship building, which is the crux of fundraising.

As a result of those meetings, I learned about a fantastic resource, the Center of Philanthropic Studies at the VU University Amsterdam. They perform research and provide education in the philanthropic sector.

Following is information about which philanthropic sectors receive the most giving. Enjoy a bit of the Netherlands!

Source: Center of Philanthropic Studies at the VU University Amsterdam
Source: Giving USA

The Future of the Prospect Research Profession

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Image by Bruno Glätsch from Pixabay

The prospect research profession is gaining momentum. The truth of this is evident in many places, but especially in the number of open positions being advertised and the growing number of researchers with leadership titles, such as AVP and VP. But where is this momentum taking us?

I’m ready to risk being wrong and to make a prediction beyond today’s reality and into the future.

I had a relaxing and social weekend. For me, that’s the equivalent of letting the soup sit for a day before serving – all the separate flavors meld and settle into something delicious. When I sat down to type up a post this Monday morning, lots of different ideas had melded. It’s as if the mist had receded and my crystal ball was crystal clear.

The prospect research profession is going to grow wider AND deeper.

To hear the visionaries talk about artificial intelligence and cognitive colleagues, like Adam Martel of Gravyty and David Lawson of NewSci, respectively, one might believe that the ranks of researchers will be thinned by advancing technology. In my imagination, those visions translate to thousands of prospect research professionals clogging up a funnel that is trickling out only the best multi-skilled research talent – those individuals who can perform higher at all levels.

But three things have happened to dispel that imaginary funnel-fuelled mist.

1| I finished reading a book, Being Mortal by Atul Gawande.

Gwande is a surgeon writing about the tortured relationship physicians have with patients at the end of life. A great book for anyone to read, but especially helpful if you are involved in caring for an elderly or terminally ill friend or relative.

In the book Dr. Gawande covers much, but relevant to the prospect research profession, he suggests that most doctors treating a dying patient either take a paternal role and tell the patient what treatment is best or they take a “Dr. Informative” role and present all of the options and leave the decision to the patient.

He advocates for doctors to take a third, very different role, as a coach or guide. Through a series of questions, doctors can better understand how a patient wants to live in the remaining time, explain the options, and recommend a course of treatment that fits the patient’s needs and preferences.

I’m simplifying for the sake of brevity, but consider how this might apply to any profession, including prospect research. Doctors face similar threats from artificial intelligence. Who can read and interpret scans and tests better, and who can spot patterns among lots of drug and other treatment options? Machines, of course.

But it is only a human professional who can understand the technical options, interview a human being, and recommend a course of action. It requires competence, trust, and rapport. This applies just as well to the fundraising researcher.

And this is what I mean when I say that our profession is growing wider. New kinds of roles are opening up to us as professionals.

2| Jason Briggs wrote an article, Out of the Shadows: Why prospect research helps fundraising

In this article, Jason argues that prospect research professionals have the skills to be great leaders, which include the following:

  1. Sound interpersonal skills;
  2. Good decision-making; and
  3. A comprehensive understanding of fundraising.

He doesn’t mention this in the article, but I happen to know that when he was employed by The University of Sheffield, he and the research team created a Philanthropy For Us Insight Report, which went on to win an Insight in Fundraising Award in 2016. What is so special about that?

The team evaluated data on the various countries where the University had alumni and made some surprising discoveries about which countries were most likely to be philanthropic across country boundaries and had a density of alumni. This is a stellar example of the kind of intel that translates to lower costs (countries close by) and higher fundraised dollars (higher gift amounts from more alumni).

When we researchers tell our story well, it’s one of raising more money – sometimes a LOT more money. I call that fundraising prowess. And yes, it is performed from behind a desk.

Growing into top leadership roles is another example of our profession growing wider.

3| I spotted a $500k+ prospect marked “unable to rate” by a screening

I can’t seem to keep my hands out of the nitty gritty of performing research and as I was fussing over trying to get two files to match on database IDs by checking the record counts, I saw some weirdness in the screening results.

Surrendering to forces beyond my control I stopped and ran a quick internet search on the name. I suspect the euphoria of successfully identifying this retired investment banker is something akin to the feeling a gambler feels when hitting the jackpot on the slot machine: total validation that my intuition is better than the odds!

Even with all of the beautiful automation of electronic screenings, sometimes the data is missing or corrupt. No matter how useful a cognitive colleague could become, there are some things people do better than programs.

And this human advantage is how our profession will go deeper.

Already specialization has begun deepening the profession. And I don’t just mean fundraising analytics or prospect management. There are researchers who have extremely deep knowledge of specific industries, such as banking or private equity.

Our profession is poised to grow wide to lead fundraising, development, and even the organization. But we are also growing deep roots of knowledge and understanding to support that leadership.

We are learning how to intuitively leap across data to identify opportunities for decision-making. We are specializing in the knowledge of how people create wealth and decide to give it away. We are coaching our front-line fundraisers to develop custom strategies for philanthropy.

Some may find our profession dull and technical, but our work has amazing results. And now in my imagination I see our profession as a prism through which fundraising refracts into rainbow of opportunities.

The future of the prospect research profession is bright and beautiful!

Additional Resources

Have we forgotten how to research? Does it matter?

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If you don’t want to be replaced by an algorithm, don’t do the work of an algorithm.

Tim Olivieri

That seems obvious, doesn’t it? But reality can be confusing. Should a prospect research professional be spending so much time doing the “hunt and gather” profile when the software tools are becoming progressively better at that hunting and gathering?

It depends.

It depends? That’s what consultants say to rationalize a higher price tag. Or is it?

If you asked Tim Olivieri, member and presenter at Apra Greater New York’s ProspectCon about it, he might argue that we should behave like consultants within our organizations, filling the gaps – in leadership, in information, and in all of our areas of expertise.

Could there be any “gaps” left having to do with the profile?

Imagine you are planning your campaign. It’s big and ambitious. The consultant is telling you that you’re probably not ready, but you can feel that the time is now. Your gut says you have the prospects to pull this off. You gather your top names and start building your strategies.

You have the automated information and ratings, but you know these people personally as part of your local community. Maybe some are long-since retired. Maybe some are pretty private. What you need is a deep look at them. Where do you turn?

Really good prospect research, that’s where!

Once we researchers know what you are trying to accomplish – “I think she could give $50M if motivated; she has five rescue dogs that get to roam her estate” – we get to work unraveling the wealth indicators, and collecting clues about her philanthropy, especially any similar relationships with other organizations.

At Aspire Research Group, our top-level profile is called a Strategic Assessment and it’s expensive. We spend anywhere from 7 to 10 or more hours crafting these masterpieces. It’s custom research.

It’s a thrilling mystery to solve and the impact of really good research is immediate. Delivering a masterpiece creates fabulous discussion. I’ve heard clients say things such as…

“This really gives me the confidence to ask for that amount.”

“We had no idea they had a son and that he was also involved in their philanthropy.”

“I didn’t know she was so involved with that organization. Maybe we should consider changing our timeline for the ask so we can find a leadership role for her.”

The gap we fill with custom research is fundraising strategy. And it takes a different skill set than short profile research.

As you might expect, strategic research takes high-level wealth research skills. Understanding how people accumulate and hold their wealth means you can recognize and interpret the indicators or clues. It takes time, practice, and a lot of reading to develop these skills.

It also takes a different approach to the research. Instead of checking off boxes or filling in a template, this research calls for following every relevant clue. It may surprise you, but this is much more difficult for a prospect research professional to do these days, for two reasons.

First, it’s tough to switch gears to detailed research. Once you’ve been in the groove of churning out quick research reports, it can be tough to shake the feeling that it’s not worth the effort to untangle a public company insider’s derivatives or perform a range of searches on every single real estate address found.

Second, if you don’t have a strong understanding of fundraising and philanthropy, especially major gifts, you don’t know which bits of information you find are truly relevant. I’ve been reviewing other researcher’s work for many years now and usually they find all the important items – but don’t include them in the profile. Why?

I haven’t done any rigorous research on the question, but I can make some good guesses. Researchers are often separated from the frontline development officers and don’t know what it’s like to visit prospects. Continuing education is heavily focused on research skills, often without the complementary fundraising knowledge. Too many times the research education just doesn’t put the new knowledge and skills in the context of fundraising.

And the ratio of researcher to gift officers can be overwhelming. When one researcher is assigned to 20 or more officers, switching into survival mode can be necessary. Where could there possibly be time for 10+ hours on one prospect?

And yet… spending 10 hours on a prospect who will probably make a $50 million gift is a GREAT use of time. Pondering donor motivations and interests and spending time discussing strategy with the development officer is something no algorithm can do.

We want to be efficient and keep costs down. We want performance metrics, such as number of prospects identified, that are easy to count.

But there are some pretty easy steps we could take to begin walking away from the algorithms. For example, we talk about presenting and training development officers about using research, especially as new hires. Good stuff.

What if we asked development officers to train us on moving a major gift prospect through the gift cycle?

That little step could possibly transform how you present all of your research, including profiles. You might begin using the same words as development officers. You might even re-format your profiles to meet their needs. They might seek your advice.

And then you can scratch your chin and say, “It depends.”

The Path(s) to Major Gift Fundraising

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The Path(s) to Major Gift FundraisingI will admit to being fascinated by, if not obsessed with, the path that leads to a major gift program for smaller nonprofits. What I hear and read about the most are large nonprofits, most of which are in higher education.

This frustrates me. It’s akin to walking into retail stores only to find nearly everything is focused on the top 1% ultra-high-net-worth individual. What about the rest of us 99%?

With the cost of research tools going down and their quality and usefulness going up, the world of major gifts is beginning to tempt the masses of nonprofits serving our communities. Whether it’s a wealth screening, look-up tool, or a database with CRM capabilities and built-in ratings, the small nonprofit can see those major gifts on the horizon.

But what is the path between starting and arriving in a major gift program?

Assuredly there is no single path to a major gift program, but research can provide illumination along the way. Over the past couple of years my consulting practice has become more focused on helping the smaller nonprofit – inside AND outside of a campaign.

The first step to major gifts is having a development officer who embodies relationship fundraising and has experience asking and receiving large gifts. Previous experience where there was access to and good use of research means things will move along much faster.

Start with the Data

The foundation of a sustainable major gift effort, whether that is larger annual solicitations or multi-year leadership gift opportunities, is good data practices. It really doesn’t matter how big or how small the development shop, without good data practices there is no sustainable progress.

Sometimes organizations are ambitious and reach out to hire a prospect research professional hoping that by using research early they will get a head start. But once hired they discover that the researcher must spend the first year or so doing nothing but getting the data practices in order. This can be very frustrating for both parties!

A well-run development office demands good data. Gifts are properly recorded, acknowledged, and thanked. Direct appeals are regularly mailed and emailed. Sponsors and guests are invited to a signature event. Grants are tracked and program results reported. Volunteers are tracked and supported.

Leverage the Data

Once you have good data practices, you can avail yourself of affordable research technologies such as wealth screenings. For quite a while now I’ve been helping nonprofits with wealth screenings in two primary ways:

  1. Screening the active donor base to assess fundraising potential for goal-setting and to prioritize the best prospects.

Many times I get called on by a fundraiser who has taken on a new development officer position. She wants to really organize and grow the nonprofit’s fundraising and puts a high priority on relationship-building with the best donors and prospects.

But working through the screening process is a big distraction. I help her get the screening results and understand the picture painted by those results. We walk through what kind of fundraising potential is there and how she can most effectively apply the results to her existing fundraising program.

  1. Screening all or a portion of the database and verifying the top-rated to identify major gift prospects.

Outside of a campaign, most often I do screenings and verification for newly hired fundraisers who are dedicated full or part-time to raising major gifts. The record count is manageable and I deliver new names monthly while reviewing past outreach.

With a skilled relationship-based fundraiser, this kind of project yields exciting results! Donor connections are made on many levels with leadership, board members, and staff. It’s an intense period of time, but once the list has been worked through I’m usually finished. Strong fundraising results mean staff is often added to assume some research duties.

Create New Procedures

With good data underpinning fundraising efforts, most organizations benefit next from slightly more formalized procedures. For most of the nonprofits I work with, even with some impressive total fundraised dollars each year, they are operating with skeleton staffing and very limited external resources.

Working with nonprofits to develop new procedures is one of my favorite activities. It’s a messy business as they try to figure out how to make things work best inside their organization and also with their constituents. I like to stick with them as they begin really calling on and building relationships with donors and prospects.

We work out what a good prospect looks like, talks like, is motivated by, and where a good prospect engages with the organization. Then I get to translate that into replicable procedures. I outline the way we used multiple data points to segment donors. I document how decisions were made about prospect assignments. And I offer advice and resources whenever appropriate.

Slowly a major gift program takes shape and begins performing.

Inform Cultivation and Solicitation Strategies

By far my favorite activity is researching prospects and having strategy conversations with the development officer. The bigger the gift opportunity and the deeper the research the more fun it is.

Doing this kind of work is like taking a tangled mess of jewelry and carefully and methodically unraveling it and polishing it until a glinting, sparkling necklace is revealed in all its glory!

This is the work and these are the conversations that can’t be completed by algorithm or otherwise mass produced. It’s wonderfully and deeply personal for the development officer, the organization, and most of all, for the donor prospect.

Sometimes the development officer might be intimidated by the prospect, and I can offer validation, encouragement, and confidence. Sometimes the development officer is optimistic and ambitious, and I can offer grounding and multiple scenarios – just in case the biggest number isn’t possible.

It All Starts with a Relationship

Prospect research has been a good career fit for me. There is a wide variety of tasks to perform and being methodical and analytical just makes me happy. But understanding the importance and practice of relationship-building has come more slowly to me.

After being a research consultant for over a decade, I incorporate the tenets of relationship-building into my research approach to the best of my abilities. I have also learned to recognize development professionals and organizations that value relationship-building and those that don’t. These days, I only work with the former.

There are many paths to a sustainable major gift program, but every one of them requires a skilled relationship-builder.

Additional Resources

It’s not always about the ratings… or is it?

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It’s not always about the capacity ratings… or is it?Ratings… indicators… categories – whatever the name, we use them to help us make sense of too much data. We use them to solve the problem presented in the question: Where or with whom do I get started? They help us navigate the world. But they can also limit our world – and our ability to feed the prospect pipelines of the future.

As human beings we like – and need – to categorize people. We might choose to categorize by gender, skin color, nationality, ethnicity, zip code, or even by hobbies (I used to refer to the trout-fishing people that seasonally descended on my tiny neighborhood in Pennsylvania as “fisher-people”).

But as we all know, this categorizing, or profiling, can lead to a limiting bias. For example, hiding within wealthy zip codes are families struggling to make ends meet. That’s why prospect research professionals verify wealth screenings and evaluate prospects individually. We need to generalize and categorize, but we balance that by recognizing each person as an individual.

In his book, Big Good: Philanthropy in the Age of Big Data & Cognitive Computing, David Lawson tells us to prepare for resistance. Resistance against using a new technology. Resistance against ratings. Resistance against change.

With AI or cognitive computing, ratings can be sliced and diced using ever more data. Cognitive computing can reveal new perspectives and new ratings using computing power that is much better at detecting and interpreting patterns than our human brains ever will be.

But how can we trust ratings we can’t understand?

When I interviewed David in the Prospect Research #ChatBytes podcast, he conceded that if we ask the machine a biased question or feed the machine biased data sets, we will get biased results. But he also pointed out that we can leverage the power of cognitive computing to strip out known biases.

We can ask a program to include or exclude a variable such as age, gender, or zip code. And with this new powerful program that David has nicknamed our “cognitive colleague,” we can reveal new opportunities. And what do we know about new opportunities and new ideas? People will resist them!

Nevertheless, it remains our responsibility as development officers and researchers to navigate this resistance. To steer our organizations into the future we must introduce and manage our new cognitive colleague, and translate and present its findings in a way that can be understood, related to, and acted upon.

But don’t listen to me! Jump over to the podcast and listen to David yourself. He’s quite entertaining and full of visionary ideas. Even better, attend the AASP Summit in Chicago where you can hear David and Lori Lawson live, delivering the keynote presentation (Nov 14-16, 2018).

Additional Resources

Not asking for Millions? Why should you care about HNWIs?

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NOT ASKING FOR MILLIONS? WHY SHOULD YOU CARE ABOUT HNWIS?I get it. Your organization is not going to ask for millions even if the prospect could give millions, so why should you spend your limited emotional energy trying to understand HNWIs (high net worth individuals) and global wealth trends? The clear majority of nonprofit organizations in the U.S., around 80%, have operating budgets of $1 million or less.

Nevertheless, there are three very good reasons why you should care.

1-Mission

I’ve been a consultant for over a decade and no matter what the mission, every organization is sure that fundraisers with a different mission – children, animals, environment – have it easier. That somehow someone else’s mission is easier to raise money for. The truth is that every mission has passionate donors, but it takes careful, skilled fundraisers to understand the donor base and position the messaging and gift opportunities to match.

Sure, you might not have the budget or opportunities to attract million dollar gifts now, but isn’t your mission worthy of receiving million dollar gifts? Aren’t you working together with leadership to grow your organization’s impact?

If you don’t know anything about HNWIs how could you possibly position your organization’s messaging and gift opportunities to grow into million dollar giving?

2-Career Growth

Especially if you are working for a small nonprofit on a thin budget, you need to be in command of your career training. With rampant content marketing your free learning choices can be a bit overwhelming. You’re reading this blog post so I know you care about sharpening and growing your skills. The next step is to find and manage learning sources that are related, but outside the boundaries of fundraising.

Local and global economics, including HNWIs should be on your list. Following are three really good (and very readable) resources with a hot tip from each:

Capgemini World Wealth Report

Besides having a fun-to-navigate website that lets you dig in to the data, you can download the report to take advantage of the table of contents and the executive summary. But it’s the attractive charts on pages 17-19 that I want to highlight for you here.

Figure9-CapgeminiWWR-2018

For the HNWIs that participated in this study in North America, 12.4% of their wealth is held in real estate. This percentage is excluding the primary residence, which is helpful because individuals who own multiple properties are more likely to be HNW. We don’t want to use our “back of the envelope” calculations on just anyone – only those that have investable assets of at least $1 million.

So, if you have someone who has multiple properties you can now perform some eye-opening “back of the envelope” calculations:

Real Estate ÷ 0.124 = Estimated Net Worth
Estimated Net Worth x 0.05 = Low Gift Capacity
Estimated Net Worth x 0.10 = High Gift Capacity

The New York Times – How to Get the Wealthy to Donate

Did you miss this article on “How to Get the Wealthy to Donate?” Did you hear about the underlying scientific research anywhere else? If not, you may find yourself frustrated and unhappy with the results of your conversations with HNWIs. It is squarely on your shoulders to understand and relate to donor prospects – in situ!

In this consumer-friendly world of content marketing, you don’t have to have a subscription to benefit from great resources like The New York Times. You can usually find a free e-newsletter or mobile app that will tease you with headlines. My favorite way of keeping up with multiple resources like this is to create a Twitter stream in Hootsuite of various topic lists I create from Twitter accounts that I follow.

Indiana University Lilly Family School of Philanthropy – Current Research

At Indiana University’s School of Philanthropy, the list of research projects creates a wonderful feeling of abundance! From Giving USA to the Study of High Net Worth Philanthropy to Women Give you can’t go astray.

“Nonprofit boards that include a higher percentage of women tend to have board members who participate more in fundraising and advocacy. Members of these boards also tend to be more involved in the board’s work, new research shows.” –Indiana University

The next time you attend a strategic planning session or any other leadership meeting, you now have scientific research at your fingertips to help your organization continue to grow and expand its reach.

3-Success = Preparation x Opportunity

Notice how I changed the formula adage slightly from “Preparation plus Opportunity” to “Preparation multiplied by Opportunity”? I wanted to emphasize how rare and transformative Opportunity is in this world. According to the Urban Institute, as of December 2016, there were more than 1.2 million public charities and private foundations in the United States. That is a lot of noise! How will donors and prospects hear you?

When opportunity does come, will you recognize it?
Are you prepared to seize it?

If you wanted to compete and win at the Olympics, would you wait until you passed initial qualifying tests before hiring a coach? No way! You would have had a coach from when you were a mere tot expressing interest. Don’t wait to get a fundraising mentor or coach. Regularly consume information about communicating with all kinds of people, including HNWIs.

Sales training abounds and one of my favorite resources is Sandler Sales. They have great white papers, articles, and newsletters. Do you have any kind of commute to the office? Visit www.sandler.com or search on iTunes to find their “How To Succeed” podcast, which is about 15 minutes per episode.

One of their recent episodes was how to make “touch calls.” This translates easily to fundraising! After all, we want to retain our donors and becoming more systematic about it is part of the preparation that leads to success. In the episode there is a reference to the DiSC profile and how each client personality is likely to respond to your call, which you might decide to investigate further.

You can create a personalized coaching team by pulling together key resources, like a podcast, and having the discipline to schedule time every day to learn.

Why am I focusing on Wealth instead of Philanthropy?

It is easy to argue that if you needed to focus on only one thing, it should be philanthropy first. After all, a person can have great wealth and refuse to part with a penny. Hands down, if you are in a smaller nonprofit, focusing on philanthropy first is a winning strategy. I’m not suggesting otherwise.

What I am suggesting is that it is important to focus on philanthropy with wealth. Your organization needs dollars and is worthy of money to pay the electric bill, hire competent staff, and deliver programs that are making our world a better place.

It’s important for all of us to assess our feelings about money and any bias we may have about wealth accumulation so that we don’t neglect our education and skill building around philanthropy with wealth.

Additional Resources

What is a Major Gift? That is the Question

4Fundraisers, 4Researchers, Major Gift Teams

What is a Major Gift? That is the Question!If you ask a consultant the question “What is a Major Gift?” you will no doubt get the answer that “it depends.” Of course it does! But how does one figure it out? Surely we don’t guess what it is, do we? Lots of people consider $1,000 to be a threshold number. But what if a $100 gift would you give you goosebumps? Is that a major gift for your organization?

“What is a Major Gift?” is a major question worth some deliberation, but let’s set the stage for that discussion with a structure based in actual data upon which we can rely. In fact, you might consider that there is an Actual Major Gift amount and a Strategic Major Gift amount. Allow me to suggest…

Actual Major Gift vs. Strategic Major Gift

In order to have a meaningful conversation about the dollar amount that defines a major gift, we need to know what giving amounts actually happen at our organization.

Once we look at the actual giving data, we can move on to discussing how we might want to lower or raise the bar (we almost always raise the bar!) on that amount based upon our fundraising strategies and goals, to land on a Strategic Major Gift amount.

Actual Major Gift Data

There are so many fun ways to explore your giving data! And if I don’t mention your favorite, it would be nice if you would comment and share here.

Using your most recent one, two, or even three fiscal years of total annual giving by donor, following are a few ways to slice and dice the pie:

  • Calculate the mean, median, and mode. You remember those formulas, right? Excel even has a Data Analysis ToolPak anyone can install that calculates this automatically from your file.
  • Figure out the 80/20 Rule on your donor file. The Pareto Principle or 80/20 Rule suggests that 80% of your fundraised dollars comes from 20% of your donors. Using your list of donors with total annual giving for each, you can figure out the largest gift amounts that total 80% of all giving and then look at how many donors it took to reach that 80% of giving.
  • Subjectively evaluate the top gifts over the past three years. Are you noticing gaps in between the low and high or higher gift amounts? Are there clusters of giving at certain amounts? What do you know about how your organization fundraises that could be causing those results?

Over at the Prospect Research Institute, I develop learning materials. If you need more help exploring data like this, you can find tutorials and practice exercises in the Learning Community Research Connectors members-only section or as part of the Generalist Research on-demand Training.

Once you have the Actual Major Gift data to discuss, you are ready to add your Strategic Major Gift amount. This is the one that will help you achieve your ambitious goals.

Strategic Major Gift Amount

Once you are ready to start a major gift program, whether that is a campaign or simply intentional effort and dedication of resources, or if you are evaluating your major gift program for any reason, there are a few lenses through which you might consider your major gift amount strategically.

Following are three that make the top of my list:

  • Capacity of your donors. If you submit some or all of your donor records for a wealth screening, you will have a big picture view of potential capacity. How does your actual major gift amounts and your actual amount raised from those gifts compare to the capacity of your donor file?
  • Protection against undue influence. Before you get too excited about the prospect of asking for a colossal gift, consider that you don’t want a tiny number of donors to have undue (perceived or real) influence over your organization because of their support. Campaigns are a popular way to leap your major gift amounts to a higher plane because they offer discrete, one-time opportunities for impact. What percent of your annual budget would be too much for a donor to give?
  • Value of gift opportunities at your organization. It’s a “good” problem to have, but if you have donors capable of making transformational gifts, but your organization has no plan for transforming, there’s a dangerous disconnect. Donors need a gift opportunity that matches the level of their gift. It doesn’t have to be naming or endowment or even restricted giving, but it has to further your mission responsibly and meaningfully.

The Value of Thinking it Through – with Data!

There are so many things we take for granted in this world and the definition and meaning of industry words and phrases – including “major gift” – is way up there on the list. Having a conversation about how you define major gifts at your organization is not as simple as at first it might appear.

And hopefully it will lead to important discussions about fundraising and mission strategy. Surely that makes it a worthwhile conversation!

Additional Resources

After the Wealth Screening: Taking a New Direction

4Fundraisers, 4Researchers, Major Gift Teams, , , , , ,

Higher education and healthcare dominate the field of prospect research – and for good reason. They have income well above the funds they raise and these big budgets attract correspondingly big gifts. But those industries no longer dominate wealth/prospect screenings. Or at least, they don’t have to.

Prospect research tools such as wealth screenings have become affordable and accessible to the vast number of smaller budget (but not necessarily small) nonprofit organizations serving our communities, nationally and internationally. As I work with three intrepid beta testers in the new Essentials for Successful Fundraising Research course, it’s becoming clear that prospect research is changing shape and diversifying.

We can and should start talking about screenings differently.

It’s about time we recognize that one size does not fit all and the methods and practices of higher education and healthcare do not serve the majority of nonprofit organizations.

Misdirection #1:  Screening results should always be verified before being disseminated to development officers.

The very nature of the constituent records for the majority of nonprofits in the U.S. screams against this guidance. A local food bank has a much different relationship with its constituents than a university or hospital – and usually many fewer constituents overall. They may be attracting more people with mid-level income levels (net worth below $1M), who are local, and who may be very receptive to a phone call.

Screening information combined with a development officer’s knowledge of the community is frequently enough to start making phone calls. The development assistant or prospect researcher, if there is one, can help by looking up contact information as needed and making suggestions about what internal data pieces could be combined with the screening ratings to better prioritize the list.

Misdirection #2: Wealth screenings benefit major gift initiatives the most.

Smaller nonprofits usually know the wealthy people in their community. There might be a few hidden gems in their donor files, especially if the nonprofit is reaching a national audience through social media, but the real value in screenings is often the way the ratings can be used to improve the performance of nearly every fundraising activity.

When development staff numbers from one to ten, everyone in the office multi-tasks, so why should your screening results behave any differently? Your best donors are probably involved with your organization in multiple ways: volunteering, sponsoring, giving, and serving in leadership roles. Your screening ratings can help make your efforts more efficient.

For example, if you can only make phone calls to 50 or so people for a special campaign, or if you need to call people who haven’t RSVP’d for a big event, now you can go beyond past giving and also look at capacity to make a gift. You almost can’t help but raise more money by adding additional filters or prioritization to your efforts!

Misdirection #3: The more in the results file, the better.

A recent conversation with a screening vendor made me examine my own bias about the deliverables for smaller organizations. Overworked and underpaid development professionals take one look at that impenetrable spreadsheet or overwhelming software interface and go hemming and hawing into complete inaction. There is only so much the human brain can absorb in any one day, month, or year.

There are key data points in every screening that are very valuable. The various ratings are top among those. So why are they often buried? Why can’t you get more than one file from your vendor? How about a simple one for import and a more complicated one for your development assistant or prospect researcher to dig into?

If you can identify the key data points from the results and get those imported into your database – well, that’s the only way you are really going to be able to use the screening to improve your fundraising results overall.

Want to get the most bang for your buck out of screenings? Communicate!

Your screening vendors are nimble and eager to hear and listen to how their product could make you more successful. Tell them you want to import the ratings but don’t have dedicated IT staff – can they help? Tell them you need to start making phone calls immediately – can they give you a simple file you can work from?

Even better, your vendor likely has worked with many organizations just like yours. Do they have any success stories to share? Any innovative uses for the screening data? Any common pitfalls to avoid?

Where is Prospect Research in all of this?

Of the three participants in the Essentials for Successful Fundraising Research course, only one has “research” in his title. Nevertheless, these are the intelligent, resourceful individuals tasked with finding and understanding the data. Their organizations are going to have capital campaigns and all sorts of other fundraising initiatives no matter what title they give to these intrepid data explorers.

As part of their training, I created an “After the Screening” reference sheet that you can find in the Prospect Research Institute’s Free Resources. The reference sheet represents the beginning of the conversation. Once you’ve taken a look, hop into Institute Forum and let me know what you think about it!

Additional Resources

Facebook, Fundraising, and Data Protection

Focused Fundraising, , , , , ,

Are you busy? Do you have any of these: full-time job, children, elderly parents, friends, and maybe even a few interests or hobbies? How are you supposed to keep up with social media and data protection and privacy issues, too? Well, if you are involved in fundraising where giving is predicated on donor trust, your choice is to invest some time and resources now or suffer big losses later. Ask Facebook.

I’m going to give you a quick summary of the Facebook scandal, show you how easy it is to trip on information, and give you three things you can do now. Ready? Let’s go!

Quick Summary of Facebook Scandal

The recent Facebook scandal offers up a few salient lessons for fundraising.

In 2014 Cambridge University’s Psychometrics Center developed an app for Facebook users to take a personality survey. The app scraped some private information from their profiles and those of their friends (Facebook later banned this scraping activity). The Center refused to work with Cambridge Analytica, a political consultant firm, but Dr. Aleksandr Kogan, a psychology professor at Cambridge University, developed his own, similar app for Cambridge Analytica.

The users taking the personality survey were told it was being used for academic use, but it was not. The use of the name “Cambridge” aided in this deception. Dr. Kogan collected and passed along the information from the 270,000 survey takers, but also 87 million additional users. This information was then used to influence user behavior by showing them tailored stories and ads so to get them to vote for the designated political candidate.

The Fundraising and Data Issues

Have you heard about the General Data Protection Regulation (GDPR) going live in the European Union (EU) on May 25, 2018? Click here for guidance from the Institute of Fundraising. There’s talk of the US taking a cue from the Facebook-Cambridge Analytica debacle to draft something similar. One aspect of the regulation is that the person providing personal information should understand and consent to how that information is going to be used. A simple way to think about this is opt-in vs. opt-out.

When the Facebook users took the Cambridge Analytica survey they opted in, but to what information disclosure and use? Surely they did not understand explicitly what pieces of information were collected and that they would be used in an attempt to influence their behavior in a political election.

Do your donors know that you submit their data to a wealth screening or data modeling? Right now at this very moment could you fluidly explain to a donor what information is used in a wealth screening and why?

And even if you can leap that hurdle with the grace of a gazelle, there is the question of how a prospect not yet acquainted with you or your organization could be researched. How can you inform a donor prospect how you are going to use his/her personal information if you have not yet contacted the prospect? And then, what if you decide s/he is not a good prospect and don’t want to make any outreach? Do you still have to notify the person?

I pose these questions hoping you might begin to feel a little uncomfortable. And when you feel this way I’d like you to see how the US public feels about data protection as told through a Pew Research Center survey.

Roughly half of Americans do not trust the federal government or social media sites to protect their data

If Pew had asked the public if they felt that not-for-profit organizations protected their data, what do you speculate the answers would be? Skewed to the left with “not at all confident” or to the right with “very confident”?

Watch Your Step! It’s Information.

Trust is fickle. Based partly on emotions, trust is a decision and it is subject to change at any moment. You and I both know that the research we perform on our prospects and donors is done with the greatest care. But no matter how careful and ethical we are with information about our donors and prospects, ultimately their perception of our actions will determine whether they decide to continue to trust us.

All of us are subject to a firehose of data every day and our ability to trust any piece of data requires quick decisions. A simple example involves dates. If I want to know the answer to a question and I find an article online, a quick indicator of its value is its date. Is it very old information or newly published?

But look how easy it is to mislead with something as simple as a date:

Chart: What Assets Make Up Wealth? | Visual Capitalist | 2018

To look at the citation above you would believe it is very current. The article was written in 2018, but the data the article relied upon were compiled in 2016. Dates can be surprisingly complex. Ask Sabine Schuller, an expert in international prospect research. She wrote an entire blog post on the subject of dates!

3 Things You Can Do NOW

If you aren’t convinced yet that you and your organization should be re-evaluating data privacy policies, you should know that the UK Information Commissioner’s Office fined charities last year for data protection violations and those fines could reach millions under the new GDPR. The US is likely to enact legislation at some point. So what can you do now?

  1. Evaluate your data policies now. Start with some of the resources provided here and begin crafting a plan to assess and act. If you store and use data on EU citizens, that data will be subject to GDPR. And this goes beyond fundraising to all data held by your organization. Investing time and resources now will save you time and resources later. You need to continue earning the public and your donors’ trust in your organization.
  2. Get better – much better – at messaging around fundraising and prospect research. Do you understand prospect research? Do you still use words like “stalking” or “creepy”? Even in jest? If so, you have work to do to understand and better articulate the reasons for and benefits of fundraising research.
  3. Get serious about donor engagement. If you don’t already have some kind of advisory board or ad hoc committee, maybe it’s time to consider investing the resources to start one. Who better to be reviewing your policies and messaging? Or maybe you want to begin surveying or holding focus groups with your donors. Find a way to engage and listen to your donors.

Data privacy and protection issues may seem overwhelming, but if you start now and tackle it one step at a time you will be routinely strengthening and reinforcing your organization’s policies and procedures. And when new legislation or additional data scandals break, you will be ready and able to reassure the public and your donors.

Additional Resources