Tag Archives: high net worth

Are Capacity Ratings Obsolete in the Age of AI?

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The short answer: not yet. Capacity ratings built from public records wealth screenings still do their job, helping organizations prioritize prospects. But they’re facing real pressure from newer, AI-generated wealth ratings that weigh many kinds of wealth signals — not just hard assets.

From Magic to Ho Hum

Capacity ratings arrived in the late 1990s, when real estate records, SEC filings, and other public data started going digital. Suddenly it was possible to match those wealth markers to individual names — at scale. It felt like magic.

Before digital records, researchers had to dig up wealth markers one name at a time. What used to take a team of researchers months, wealth screenings could do in hours.

The early versions were rough — counting multiple assessments on the same property as multiple properties, for instance. But the technology matured, and today wealth screenings and the capacity ratings they generate have surfaced countless prospects who otherwise would have gone unnoticed.

But calculating capacity from asset values alone has always had a ceiling. And that ceiling has gotten a lot more confining as wealth has exploded among the ultra-wealthy.

From Assets to Signals

The term “capacity rating” grew up alongside wealth screenings, but any wealth rating can do the same job: filtering prospects by wealth. Windfall entered the fundraising research market with AI-generated “precise net worth” values. More recently, DonorAtlas, built entirely on AI, pulls a wide range of wealth signals from the internet, translates them into Estimated Net Worth, and shows its reasoning along the way.

Does AI’s ability to crunch huge datasets and weigh all kinds of wealth signals make its ratings more accurate?

Yes — and the higher the net worth, the bigger the gap. This is exactly where wealth-screening capacity ratings hit a wall. They can land someone in the top range and still badly underestimate the ultra-wealthy, because how many houses is one person really going to buy? The ultra-wealthy carry more signals that aren’t hard assets at all — but point to far greater wealth.

What Happens Next for Capacity Ratings?

Capacity ratings have never been just one thing. Like prospect profiles, they come in a lot of variations. And they were never meant to stand alone — a capacity rating is one filter, one criterion, for mining major gift prospects who also show other signs of caring about your organization, aligning with your mission, or otherwise being engaged with you.

Capacity ratings from wealth screenings remain a trusted, proven technique for organizations in campaign or building out a major gift program. And prices have dropped over the decades, putting wealth screenings and capacity ratings within reach of a much longer tail of nonprofit organizations across the US.

AI is certainly disrupting the status quo. But the most likely outcome isn’t replacement — it’s convergence. Public records will get folded into AI approaches and evolve into new, better, more accurate wealth ratings.

How can you get help if the pressure to raise major gifts is outpacing your capacity ratings?

From private team trainings to RPM (Research and Prospect Management) Assessments, Aspire has been helping organizations articulate their goals and focus on their strengths to create a roadmap to their desired destination.

And capacity ratings are one of the hot issues right now!

Your Vice President of Development wants the wealthiest prospects in portfolio yesterday. You need to work consistently, methodically, and accurately. Those two positions can feel out of sync — and that tension is real.

It doesn’t have to be that way. When Aspire performs an RPM Assessment, organizations typically begin developing consensus and start working toward a shared destination before we even deliver the final results!

Curious if Aspire can help your team? Schedule a discovery call today: https://aspireresearchgroup.com/contact-form

Top 5 Capacity Rating Insights for Research Professionals

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We’ve all been there. The gift officer needs a capacity rating “super quick” before meeting with someone. The electronic screening shows a low number, but the prospect’s occupation suggests there’s more. Sound familiar?

After years of calculating ratings, fielding anxious questions from researchers and fundraisers, and watching the gap between promise and reality, following are the top 5 capacity rating insights for research and prospect management.

1.No Matter What Rating You Choose – You Will be Wrong! (And That’s OK)

Surrender your anxiety! Capacity ratings can never be 100% accurate because too much of the information is private. Capacity ratings are directional, not definitive.

Your job is to provide the best assessment possible with available data. But if you want to feel anxious, get worried about under-rating the prospect not over-rating them. You want build your development officer’s confidence to ask boldly.

 2. HNWIs Are Your Blind Spot

The wealthier the prospect, the more likely their wealth is hidden. Private equity, angel investments, Delaware LLCs, family offices – none of this shows up cleanly in databases. Machine-generated ratings consistently undervalue HNWIs because the data needed to identify “whales” isn’t available for algorithms to process.

Accept that spotting transformative wealth still requires human intelligence and industry knowledge.

 3.  Estimated Net Worth vs. Gift Capacity: Know When Each Matters

Gift capacity ratings provide an assessment of a stretch gift amount from the prospect and the approach to calculating depends on the prospect. At Aspire, if someone appears to be below $1M in estimated net worth, we use the old-fashioned general calculations based on visible assets.

But if they are $1M or above, we place them in a net worth tier based on quantitative and qualitative data points and then take a percentage (typically 5%) of estimated net worth to create the capacity range.

 4. Data Isn’t the Strategy

Technology keeps promising instant major gift identification, but it’s not delivering for everyone, especially wealthy minorities such as women, people of color, and others. And we know that the best data is locked inside the donor’s head and heart.

As a researcher, you can go beyond gathering information and become the fundraising partner who translates pages of information into ways the development officer might take action with the prospect.

 5. Inclusive Research Pays Off

Traditional approaches miss wealthy minorities. But identifying prospects by demographic characteristics such as ethnicity can be ineffective and uncomfortable.

Instead, research with inclusive assumptions. Question your own biases when two similar prospects get different ratings. Check if you’re undervaluing first-generation wealth creators or making assumptions about giving patterns.

Moving Forward

Capacity ratings aren’t perfect, but they probably are not going anywhere. As A.I. creeps into our tools and makes all of our scores and ratings even better, we might find them eventually replaced or perhaps renamed and improved. But for now, you can make them as useful as possible while managing expectations about their limitations.

We all struggle with the same capacity rating anxieties. The most successful researchers combine data analysis with relationship intelligence, inclusive practices, and clear communication about what they know and don’t know.

Engage gift officers in conversations about how you arrive at ratings. Some of your best collaborations will come from fundraisers who want to understand your methodology. Join professional forums, attend APRA sessions, and don’t be afraid to ask for input from colleagues. Capacity rating is as much art as science.

And of course, the Prospect Research Institute has lots of resources to help you with capacity ratings!

  • Connect with other prospect research professionals tackling these same challenges in the FREE Forums at the Prospect Research Institute.
  • Invest in your education and buy the Capacity Ratings book or the course.
  • Check out the Institute’s Capacity Rating Section in our Free Library, which includes a capacity rating calculator download.

Public Company Insider. So What?

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Maybe no-one in your fundraising office would say “So What?” but that does not mean they are not thinking it. What is the big deal about public company insiders and how can you succinctly convey that relevance in conversation – or even profiles? I have three things to say about that!

1. Years of Growth (or not)

Especially during economic volatility, a 5-year or 10-year chart of stock performance can visually demonstrate whether your insider is experiencing heady wealth accumulation – or not.

Because your insider is likely getting paid a cash salary and a cash incentive/bonus, those stockholdings represent long-term incentive and they grow at rates your savings account can merely fantasize about.

That means that if the stock price chart is moving up significantly in value, your insider’s stockholdings are highly appreciated assets that are untouched by living expenses.

What is that stock price chart? Oh that. That is your insider with “excess” assets making great rate returns.

2. Gifts of Stock

I do not know what percentage of insiders make gifts of stock, but at Aspire, we find a good portion of the insiders we research make gifts of stock. However, it is not always to an operating nonprofit.

But many times the stock is gifted to a family foundation, which is significant, or to a family trust, which is, again, excess assets making great returns.

Regardless of who the stock is being gifted to, the key point here is that the insider has the knowledge and maybe even has the habit of gifting stock.

When you reach a deeper relationship and the insider is keen to make a significant investment in your organization’s work, gifting stock may be an option your prospect already uses – no education required.

3. Counting Cashed Out Stock

It is possible to skim through the insider’s Form 4 filings for specific file types that indicate which sales of stock resulted in cash in the insider’s pocket. But you have your work cut out for you untangling them from all the sales of stock used to exercise stock options, pay taxes, or other sale types.

Aspire recently subscribed to Kaleidoscope’s Insider Focus research tool and it is the perfect use for A.I. The software has no problem making the calculations to tell me exactly how much stock was cashed out during a specified time-period.

This is an amazing number! Did your prospect cash out stock to the tune of millions of dollars in the past year or two? Now you can know with a click!

Knowing that this cash is above and beyond salary and bonus gives you a snapshot of what kind of money is “psychologically” available. In other words, it is money that the insider is already comfortable cashing out of stockholdings.

Even if this cash is being invested elsewhere, it gives you a sense of how much money could be available if the insider is deeply motivated.

When someone is an insider it is a good bet there’s significant wealth

For at least the three reasons above, if you are trying to identify $1 million+ potential donors for your campaign, or otherwise trying to spot the most capable prospects in your donor base, do not underestimate the insiders!

Money is never enough, of course. Prospects need to have an interest, be philanthropic, and be reachable, but there is no doubt that big visions need big money.

Do you need to learn to read SEC filings?

If you are looking for training on how to assess public company insider wealth from Securities and Exchange Commission (SEC) filings, check out the training offered at the Prospect Research Institute!

Curious about compensation and beneficial ownership, but also how to incorporate into capacity and the profile? This 3-workshop bundle has you covered! Enroll Now

Additional Resources

Insiders and the Paycheck that Keeps Paying

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Most of us are familiar with getting a paycheck as well as the practice of receiving a bonus incentive for achieving top performance. And many people are familiar with investing in mutual funds to benefit from the stock market without having to manage a personal portfolio. But exactly how is it that public company insiders can accumulate such tremendous wealth? Is it just because the total numbers are bigger?

I have always thought of stock options and stock grants as the “paycheck that keeps paying.” If the company’s stock price continues to rise – and perhaps rise dramatically – the original option or stock value also increases.

In my head I imagine I have my Toyota at the starting line with the insider’s Formula 1 race car next to me. Sure my “Toyota” mutual fund rate of return is awesome, but the insider’s “Formula 1” performance stock units can go so much faster!

But how does the insider make incredible gains on their incentive awards in real life?

NVIDIA Corp. (NASDAQ: NVDA) chief financial officer Colette Kress is our obliging volunteer with a demonstration below.

The savings account is not even a real comparison is it? In that scenario, my Toyota is more like a beat-up, barely moving, 20-year-old Toyota compared to the insider’s Formula 1 – and that is with what has been a generous, harder to get 1% rate!

But when we get to a double-digit rate of return on the mutual fund – which is invested in the stock market – we see something close to a comparison to the NVIDIA stock rise — but not really. Why? Because NVIDIA stock rose in value faster and I had to make the initial investment. Ms. Kress was given the stock for her performance. Yup. The paycheck that keeps paying!

At this point someone usually reminds me that stock prices can go down, too.

This is true. But for a public company executive insider like Colette Kress, she earns a cash salary and bonus every year too, which has been around $897,000 from 2022 through 2024.

Her Performance Stock Units are a long-term incentive (i.e., long-term bonus). She receives her annual salary and short-term bonus in cash and her long-term incentive in performance stock units (PSUs), which vest into stock a little bit each year — adding a very generous layer of stock value.

This is Why I Say That Long-Term Incentives are Like the Paycheck that Keeps Paying

Hopefully, this example gives you a better perspective of how stock is an outsized addition to salary and cash incentives in the compensation package. And it is not just the executives who receive stock as part of their compensation package.

Top executives are considered insiders and must publicly report their compensation, but management and other employees likely receive stock awards, too. Just not quite so many!

When your prospect is a public company insider this automatically indicates the potential for significant wealth.

To know how much – or how little – requires some knowledge and skill. This is where the prospect research professional steps in to clearly present the full wealth picture of a prospect.

If you are looking for training on how to assess public company insider wealth from Securities and Exchange Commission (SEC) filings, check out the training offered at the Prospect Research Institute!

Curious about compensation and beneficial ownership, but also how to incorporate into capacity and the profile? This 3-workshop bundle has you covered! Enroll Now

Want to know more about insiders? Check out “Why Insiders” by Elisa Shoenberger.

Do you “get it” when it comes to wealth? Probably not.

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Let’s test your wealth instinct and find out if you “get it” or not.

Pretend that your boss comes to you and says: As you know, leadership is taking the company public next year. You can choose how you want to receive your $100,000 annual compensation from the three options below:

  1. $25,000 in cash and $75,000 worth of the company’s new stock
  2. $75,000 in cash and $25,000 worth of the company’s new stock
  3. $80,000 in cash and $0 worth of the company’s new stock

Which one do you choose?

This choice is difficult for you and me!

If the only wealth you have is cash in your bank accounts, maybe some retirement funds like a 401(k), and you are renting or own the home you live in (probably with a mortgage), your options are very limited. Could you survive on $25,000 cash for a year? You are considering the options based on your disposable income.

If you have a dual-income household, a second home, or some reasonably liquid investments that you could cash-in, all three choices might become plausible options. You have disposable income plus additional investment wealth.

I know you know that the $75,000 worth of stock could take off and double or triple in value-or even more. You want that stock!

Now, what if suddenly your parents passed away and you inherited the house they owned for 50 years, which sells for $800,000. Would that make it easier to accept $25,000 in cash with $75,000 in stock?

Of course it would!

And this is the shift in thinking that you need to make when you are researching and cultivating major gift prospects.

You do not want a cash gift.

Check out the asset allocation chart below. This chart is telling you many things, but among them is that in the first quarter of 2021, the high-net-worth individuals (HNWIs) surveyed were holding 24% of all of their wealth in cash and cash equivalents. A cash equivalent is something like a certificate of deposit (CD) or money market account–things that you can very easily turn into cash.

Source: Capgemini World Wealth Report, 2021

When you ask your donor prospect for a gift, do you want her to think:

“Gosh, they want me to give $50,000 out of my $250,000 cash. That feels a bit steep. The kids private school tuition went up a lot this year.”

Or would you rather ask for a gift of appreciated stock and have her think:

“If I give $50,000 of appreciated stock out of my $750,000 investment account, I can take a charitable gift tax deduction for the full amount and offset the capital gains taxes. I’ve always wanted to have this kind of impact on this cause.”

But you shouldn’t just believe me.

What do I know? Instead, you should believe Dr. Russell James who took the time to review a million nonprofit tax returns filed between 2010 and 2015. Numbers don’t lie. Dr. James discovered that nonprofits that received asset gifts raised more money. Check out the figure below for a snapshot of his findings.

Source: Cash is Not King in Fundraising: Results from 1 Million Nonprofit Tax Returns, Professor Russell James III, J.D., Ph.D., CFP®

Note: If you want to find whether your organization has a history of accepting asset gifts, you can check Schedule Min its public IRS Form 990.

Evaluating your donor prospects for wealth

If you want to grow your fundraising in major gifts, a key strategy is to ask for non-cash gifts. Understanding the asset allocation model from Capgemini featured above allows us to quantify this shift in thinking. We can now estimate the relative size of the cash vs. non-cash wealth held by our donor prospect.

Once you have estimated the value of the cash and non-cash wealth of your prospect, you can better understand how your prospect might view your ask amount relative to those values.

Below is an example of what this allocation looks like if we use the Capgemini asset allocation percentages on someone research has determined has an estimated net worth of $5 million.

Assets Value
Cash and Cash Equivalents $850,000
Non-Cash $4,150,000
Total $5,000,000

Imagine for a moment that you want to ask the prospect for $250,000. How does that stack up against each of the two categories, cash or non-cash?

Lean-in to the psychology of giving

Why would you want to fight against human nature and continue asking very wealthy donors for cash gifts when you could switch to asking for non-cash and raise more money overall? Lots of reasons. Maybe you feel much more comfortable asking for cash gifts.

I’m suggesting that it’s time to get comfortable with being uncomfortable.

To help you get more comfortable, check out this collection of work by Dr. James for more insights into the psychology of giving and techniques and tactics you can use in your work:

http://www.protopage.com/prospectresearch#Planned_Giving_(Dr._James)

Why Do Insiders Disclaim Beneficial Ownership?

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If you are a prospect research professional, odds are that you have searched for the beneficial ownership of securities table in a proxy filing with the SEC. But do you really know what beneficial ownership means Why do insiders sometimes disclaim the beneficial ownership they reported? Should you care? Maybe. If you have to explain it to others, such as development officers, then definitely!

The proxy (Form Def 14a) is the document a public company files each year to explain and be transparent about the securities or stock it has on offer for purchase by the public. After all, the SEC came into existence in 1933 to restore investor confidence in our capital markets after the stock market crash of 1929. From that perspective, beneficial ownership makes a little more sense.

A beneficial owner is…

  1. A person who enjoys the BENEFITS of ownership even though the stock is not directly owned in his/her name.

    For example, I may change the title of my stock to a trust, or a foundation, or an LLC, but still, maintain the benefit of ownership as a trustee or beneficiary or both.
    .
  2. A person (individually or as part of group) who has the power to vote on shares, or who wields influence over a shareholder’s vote.

Fundraising research is less concerned with whether the prospect can influence the votes of shareholders, but we do care about enjoying the BENEFITS of ownership, because this can have an impact on our prospect’s wealth picture.

James Dimon Example

Let’s look at an example: James “Jamie” Dimon is CEO of JP Morgan Chase & Co. (JPM). According to the beneficial ownership table in the proxy filed on 4/6/2020, he owns 9,538,667 shares of company stock. Or does he?

Footnote #3: Includes 115,800 shares owned by entities as to which Mr. Dimon disclaims beneficial ownership, except to the extent of his pecuniary interest therein.

If Mr. Dimon BENEFITS from those 115,800 shares, but DISCLAIMS this beneficial ownership, who might have legal and direct ownership of them?

A Form 4, Statement of Changes in Beneficial Ownership, must be filed every time an insider has a change in the number of beneficially owned shares. It often gives us greater detail on who owns exactly what shares. Could it help us with Mr. Dimon’s disclaimed, mystery 115,800 shares? Indeed, it does!

Form 4| Filing date 10/14/2020(much later than the proxy filing

Note the footnote #1 next to ownership by “LLC”? This savvy guy doesn’t want us to know the name of the LLC, just that it is an LLC.

Footnote #1 reads: Reporting person [James Dimon] disclaims beneficial ownership of such shares except to the extent of any pecuniary interest.

Mystery solved?

An LLC of undetermined name legally owns title to 143,388 shares of JP Morgan Chase & Co. stock. And Mr. Dimon DISCLAIMS that ownership, even though he is legally required to report it because he benefits from the ownership.

Translation / Interpretation

In Mr. Dimon’s example above, we are discussing fewer than 200,000 shares out of more than 9 million shares. From that perspective I care a lot less about that mystery LLC. But I have researched more than one prospect where the mystery LLC owns the lion’s share of stock. Sometimes I even know the full name of that LLC.

And too often, even knowing the company name doesn’t help.

As I have described before, someone like Mr. Dimon could be a member of an LLC in Delaware and the public (and even the Delaware Division of Corporations) wouldn’t know it!

The DISCLAIMING of beneficial ownership in Mr. Dimon’s case feels interesting because he benefits from a laundry list of indirect ownership that he does not disclaim: 401(k), family trusts, spouse, etc. Since he does indicate a pecuniary (financial) interest in the LLC shares, we might speculate that he expects to profit from whatever the mystery LLC is going to do with his shares, but that he argues that he is not influencing the investment.

Is Speculation Warranted?

Speculating is fun! And sometimes it does help to put numbers into perspective, especially if you are fussing over exactly how much and what kind of gift proposal to put together for a prospect.

Following is my completely fictional speculation about Mr. Dimon’s mystery shares as written for the prospect profile. For this fictional example, assume that I discovered the name of the LLC was MiamiBeach LLC and that I knew his daughter started a real estate venture in Miami Beach.

We know that Mr. Dimon’s 32-year-old daughter recently began a real estate venture in Miami Beach, Florida. We do not know who owns Miami Beach LLC because it was incorporated anonymously in Delaware. Since Mr. Dimon disclaims ownership of the shares owned by Miami Beach LLC, we might speculate that it is his daughter’s company, and that Mr. Dimon invested those shares in his daughter’s company, expecting a financial return.

We can speculate, be we can’t actually KNOW this to be true. The information about the true disposition of those shares is NOT available to confirm our speculation.

Be Clear. Be Firm. Have Fun!

If you are going to pick apart stock holdings and speculate, just be sure to use very clear language. Words such as the following are useful:

  • We do NOT know if this is true, but we are GUESSING based on…
  • We can NOT know who owns this company, but we SPECULATE…
  • Mr. Dimon disclaims his ownership of these shares and although we can NOT know the details of exactly who owns the shares, we SPECULATE…
  • Because this is SPECULATION, you might want to consider these shares as NOT available for gifting.

The pressure on your development officers to raise the most money possible to further your mission is real and it is powerful. If you are comfortable speculating, it can help your development officer to put the stockholdings into perspective relative to the full philanthropic and wealth picture of the prospect.

But there is a limit to what we can know. And when the prospect has deliberately placed information beyond public viewing, it is worth stating. After all, our prospects are just as entitled to their privacy as we are. To attempt to pull back the veil of privacy could be construed as disrespectful with the potential to damage the relationship.

I enjoy the tangled web of financial filings and the constant rebalancing of how exact to attempt to be when presenting the information. I hope this example made beneficial ownership just a little bit clearer.

Additional Resources

  • Want to dive in deep to insider SEC filings? Become a member and enroll in the Insider Stock and Compensation Course. >>Learn More
  • Wish you had an SEC filings reference book handy? Purchase the Insider Stock and Compensation Workbook and focus on filings and information that matters for fundraising. >>Learn More
  • Can You Really Hide LLC Ownership? You Betcha!| Jennifer Filla | 2020

Can You Spot the HNWIs in Your Database?

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So much of what we do in prospect research revolves around finding wealth. Sometimes it sounds like the only thing we talk about is money! As I finish facilitating another Capacity Ratings Workshop at the Prospect Research Institute I am heartened to reflect that in every discussion we had about the money, we were irresistibly drawn to another rating – affinity or engagement.

I’m not trying to suggest that we don’t need to be really good at spotting high net worth individuals (HNWIs) in our database. We do! When we segment our database by wealth we are better able to focus on finding what really qualifies someone as a major gift prospect – how engaged or aligned they are with our organization.

Following are some tips for finding HNWIs who also demonstrate affinity for your organization:

  • Go Beyond the Screening: Yes, verify the information in your top-rated segment, but don’t assume no-one else in your file has wealth. Professional researchers know how to identify the hidden HNW gems such as private company owners, women volunteers, and wealthy families.
  • Prioritize Giving: Don’t get blinded by bling! High lifetime giving and monthly giving are great indicators for planned gifts. The savvy researcher might look for things like long-term home-ownership, too. It’s all about knowing your unique constituency.
  • Leverage All of Your Data: When the gift officer and researcher work as a team, you can test out what pieces of information best prioritize your top prospects. Is it attendance at multiple events? Donors who have multiple points of communication or participation? Donors invited by other top donors to participate and give? Create a feedback loop!
  • Research Wisely: Profile research isn’t about completing a form anymore. The software tools do most of that groundwork for you. When you know what wealth looks like and you know what a top donor to your organization looks like, you can research wisely. Spend more time on the most relevant information – connections to and interests in your organization.
  • Prospect Smartly: Truth is that even if you are at a college or university, at some point most organizations will need to reach out to people who are not part of our existing constituency. Getting good at finding connections and having a researcher-gift officer team to better clarify what a top donor looks like to your organization (wealth + affinity) will position your organization to seize external opportunities for major gifts.

Knowing what a HNWI looks like takes practice. Read the wealth and philanthropy reports published by places such as Indiana University and Capgemini. Once you learn to distinguish between someone living comfortably and someone who has significant wealth, the next step is to understand how HNW donors give differently from others. Cultivation and messaging for this group is distinct.

And the next time you are talking about wealth or estimated net worth and someone asks, “Isn’t it more important to know if they are philanthropic?” – you now know the answer! There has to be both wealth and philanthropy to raise major gifts.

More Resources

Net Worth: Nasty, Nice, or Neutral?

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cash-1169650_1280There was a cry for help on the PRSPCT-L list-serv: “I’m a new researcher and my boss wants me to provide net worth on a prospect. He says it was the previous practice to do this and I can get what I need to calculate it from Dun & Bradstreet.” What would your response be?

To begin, a simple definition of net worth follows:

Assets – Liabilities = Net Worth

The Three Common Responses to Net Worth

If you mention “net worth” in the prospect research field, you will likely hear one of the following three responses:

  1. Don’t do it! Or you will be voted off the prospect research island!
    .
    The argument against estimating net worth is usually this: If we cannot find or know the values of all assets and liabilities (which of course we cannot), then we have no business estimating net worth. This is often a strong, unequivocally held opinion.
    .
  2. Hide that you are doing it by using another term or keep it behind the capacity rating calculation.
    .
    This is the most common practice in our field. Instead of using the words “estimated net worth”, researchers rephrase with a term such as “estimated wealth”. Even more common is to use the results of wealth surveys, such as the chart on page 19 of the Capgemini 2016 World Wealth Report, to estimate net worth based on a known asset such as real estate and then take a percentage of estimated net worth as the gift capacity.
    .
  3. Boldly present estimated net worth.
    .
    There are researchers who feel comfortable presenting estimated net worth. Some provide disclaimers or educational explanations to communicate better generally or to clarify outlier situations.

Easy Formula, Tricky Calculation

Assets – Liabilities = Net Worth

The formula looks so simple, but this is deceptive. As prospect research professionals we know that we can’t discover and value all of a prospect’s assets or liabilities. It is the reason we use the word “estimated.”

Among the challenges in estimating net worth, there are two that jump out quickly:

  1. Many assets (and liabilities) are troublesome to value – none more than private company ownership.
    .
    I have discussed the difficulty of private company valuation before. A common route to wealth is to start a private business, and many of these successful entrepreneurs want to “give back”, among other motivations for giving.
    .
    And it brings us back to our fellow researcher’s list-serv plea. Dun & Bradstreet (DNB) sells data, including estimated values of a private companies. Assuming we know how much of that company our prospect owns, we could use the DNB dollar amount to estimate the prospect’s ownership value. Or could we? DNB uses its own formulas to estimate and can be very far off the mark.
    .
  2. Are we talking about titled ownership such as a name on the deed, or influence over money, such as sitting on a grant-giving family foundation board?
    .
    Our prospect could be a child of a wealthy family with very few public assets identified. And yet, we may find she has influence over millions of dollars in a family foundation. Estimated net worth and gift capacity clearly diverge at this point. You might estimate a low net worth, but still consider her to have a million dollar gift capacity because of her influence over grant giving.

Logic and Emotion – Let them Collaborate!

There is nothing simple about money. Money is one of the most emotionally volatile topics you can discuss, and those emotions flow into the workplace. Addressing your own emotions and biases about money is the first step.

You might want to seriously consider whether your difficulty imagining the wealth of multi-billionaires is affecting your ability to logically estimate net worth or gift capacity – and whether you have negative emotions attached to great wealth accumulation. Emotions are not your enemy. Ignoring them is.

Now you are ready to balance how you and your gift officers “feel” about your prospect’s potential wealth with the logical, quantifiable assets and liabilities found in the public domain.

Following are the most frequently used tools or ratings:

  • Estimated Net Worth
  • Gift Capacity Range
  • Affinity (how close they feel to your organization)
  • Philanthropic Inclination (do they give at all?)
  • Linkage (how are they connected to your organization)

When used responsibly, estimated net worth is one more tool prospect research professionals can provide to assist frontline fundraisers in creating major gift solicitation strategies. Don’t be afraid to use it!

More Resources You Might Like

Capacity_Ratings_icon_v2

 

Join the Resource Collections online community to access this handout. Use it to facilitate discussion with your gift officers and leadership.

 

3 Steps To Social Media Major Gift Prowess

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Were you aware that social media is a competitive edge in major gift fundraising? You must have heard by now how organizations are leveraging giving days and crowdfunding as well as incorporating social media into annual fund drives – but what about major gifts?

As a fundraiser who asks wealthy individuals to make gifts to your organization, deliberate and professional use of social media will not only separate you from the pack, it could put you in league with your prospects. It’s time to own your participation in social media!

Start with Prospect Research

If you have a prospect research professional on staff, it’s time to have a talk about social media. Agree on the social media sites you want to know about and ask your researcher if channel participation and user ID can be added to the profile, or better yet, put into a database field that can be pulled into a report.

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To get on the same page with your colleagues, you could order copies of the Prospect Research Perspectives: On Social Media and have informal discussions about articles over lunch or coffee.

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Every organization has a unique constituency. Global and national statistics on social media use may or may not apply to your donors. As your prospects get researched, you will begin to see which social media channels are preferred.

Audit Your Personal Social Media Presence

You are probably on social media already. It’s time to audit your presence. Accept that there is no privacy online, no matter how diligent you are with your privacy settings. Decide how you want to be perceived – what your personal brand is – and make that uniform across every platform from LinkedIn to Facebook and beyond. Don’t underestimate the power of a professional head shot.

Consider what would happen if a seven-figure prospect invited you to connect on Facebook. What will your Facebook presence communicate to the prospect? You should also expect that prospects will explore your work history in places like LinkedIn.

You can get ahead of the requests and craft an action plan that will best demonstrate your personal brand and interests and your organization’s brand and giving priorities.

What does that mean? Take one channel at a time. Following are two easily accomplished examples that demonstrate channel-appropriate activity:

  • LinkedIn: Liz picks two days a week when she catches up on industry reading, posts about something she has read, and links to the article or commentary. Whenever she learns new information about a giving priority, she shares the related press release, video, or other content. She decides to write a short article this year about integrity in major gift fundraising to post on Pulse and have it show on her profile page.
  • Facebook: Liz uses Facebook to connect with friends and family, but colleagues and donors have requested to friend her. She’s a foodie and a country music fan so she decides that each time she goes out to eat or hear music she will find something unusual about the experience to share on Facebook. She also shares related articles, videos, and pictures on those topics. She still shares things like family and vacation items, but she’s careful not to share deeply personal information, saving that for offline. She posts occasional pictures from work events and office fun, too.

Now Get Your Edge On!

Once you know which social media channels have a critical mass of your prospects and donors, make sure you have an account on those social media sites. You can’t be everywhere, so choose carefully based on the data.

Now you are poised to use social media for cultivation. Many fundraisers successfully reach prospects through LinkedIn, but you could do much more.

When you discover a prospect is very active on one or more social media channels, connect with him or her there and regularly post content that is of interest to the prospect, as well as engage the prospect by sharing his or her content and making comments. This builds trust and rapport through genuine interactions – and all from your laptop, tablet, or smart phone.

Social media isn’t the way to reach out to every prospect, but if you polish your online brand and use prospect research to guide your social media activity you can sharpen your major gift edge.

5 Reasons Public Company Insiders are Great Prospects

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Unless you are fundraising for a prestigious business school, you probably don’t come across a whole lot of private company insiders as prospects. Maybe you wonder what all the excitement is about. Securities and Exchange Commission (SEC) filings are complex. Why bother understanding that world if you have those prospects so infrequently?

Apart from the noble pursuit of continual learning, following are five reasons public company insiders make such good prospects.

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