Prospect Wealth

March 6, 2012       Gary Morton      

When the $200 million Reed College Centen­nial Campaign began five years ago, the school turned to donor pros­pect research to help identify alumni and college friends who might be able to make a major gift.

One of the challenges was the uncertain economic climate. Hugh Porter, vice president for college relations, said that while research found people who appeared “prime for giving,” economic volatility made it hard to believe “that they would come forth with a major gift in the campaign.”

With alumni and friends of the Portland, Ore., college strung across the country, and twice as many prospects identified as the major gifts staff could visit, the key became updating the information from initial re­search and managing that information into a strategy for visiting prospects.

“We made sure we were always working with the people who had the best potential to give,” Porter said.

College officials announced Feb. 8 that the campaign, which ends on Dec. 31, surpassed $185 million. The money is earmarked for financial aid, hiring new instructors, construction of a performing arts building and residence halls, and expanded research.

“Prospect research has fundamentally changed in the past few years,” Porter said. It has moved from simply gathering information to help nonprofits identify potential major donors “to managing that information to strategize visits with prospects,” he said.

Prospect research also has to compete with an increasing flood of information available via the Internet and with the economic uncertainty. And, people with money are finding more ways to hide assets so they might not appear as a top prospect. Even with research, some fundraisers are surprised to find potential big donors already involved with their organizations either as a volunteer or donor, but who were never con­sidered for a major gift.

Nick G. Costa, vice president for university advancement at Arcadia University in Glenside, Pa., cited the Internet as an alternative source to donor research. “I’m frequently surprised at how much I can learn about an individual, company or foundation on public sites on the Internet,” he said.

While planning a trip to pick up his daugh­ter at her college in New England, he no­ticed Arcadia had alumni in the area, so he Googled them. “I learned that one had served as the director of the annual fund at two colleges. I decided to call her, introduced myself, and then met with her. She later decided to fund a scholarship through our annual fund,” said Costa.

Conversely, he recalled how a number of years ago electronic screening for donor prospects failed to pick up one board member “who was one of the 400 wealthiest people in the United States. … When we looked into this individual’s wealth, we discovered that his assets were hidden, in charitable trusts, businesses and real estate owned by trusts, and more recently donor advised funds.”

Planned giving offices often are surprised to learn of a prospect already associated with the organization, said Tony Glowacki, CEO of WealthEngine, an international prospect screening and analytics firm in Bethesda, Md. “I’ve always been surprised when we go inside and do a test, pull names … of fairly obvious prospects, but they (nonprofit officials) don’t know them.”

Recent trends in giving illustrate why organizations need prospect research, management and knowing better the people associated with the organization. High net worth households — those with at least $200,000 annual income or assets (excluding their residence) of $1 million or more — decreased charitable giving by 34.9 percent between 2007 and 2009, according to a 2010 study by Bank of America in conjunction with the Center on Philanthropy at In­diana University.

While sizeable numbers reported dropping support to one or more organizations, the typical high net worth household still gave to between six and seven organizations. Three-fourths of those households cited personal ties to a nonprofit, including their own volunteer work, as an important factor in why they chose to support the organization.

“When you have economic times that are uncertain you’re going to make decisions about what you want to continue making donations to,” Glowacki said. “What you have to do as an organization is be aware of these natural cycles and be aware of what you need to do” to keep in touch and reach out to donors, he said.

Lawrence Henze, managing director of Target Analytics, a Blackbaud company in Cambridge, Mass., has “a general feeling” that when people think the economy is on firm footing “they will increase the number of organizations they support. The question is whether they will give to the same organizations they have supported in the past,” especially any that they might have dropped during a period of economic uncertainty.

“Instinct tells me there will be opportunities for other organizations to get in,” Henze said. Unfortunately, Henze called the lack of engagement with major gift prospects “one-on-one, face-to-face,” one of his biggest surprises and it is “equal somewhat” to a disappointment. “If we engage more with people, the giving will be increased,” he said, citing the 2010 Bank of America study by the Center on Philanthropy.

Henze said a link between volunteer work and donations in the 2010 Bank of America study reinforces what he has told nonprofits with which he works. “I tell all my clients to encourage volunteerism among your pros­pects,” Henze said. “If they see the work you are doing they will engage at a higher level.”

Eileen Heisman, president and CEO of the National Philanthropic Trust in Jenkintown, Pa., said what surprises her is that many donors “still don’t understand that they don’t sell stock before giving a gift.” She also finds that while recognizing donors is important, “some of our largest donors choose anonymity. I think that is who they are as people. They give a gift for the purpose of the gift.”

She cited the role advisors to high net worth households play in gift-giving decisions. “We usually get most of our gifts through advisors instead of doing prospect research on donors,” she said. “We seek out advisers to high net worth households.”

Another challenge for donor research is donor advised funds, which had a high payout rate of 17.1 percent of assets in 2010 and 16 percent or more annually since 2007. By comparison, private foundations had a payout rate of 5 percent.

But a prospect with a donor advised fund often will say a decision on funding will be made later in the year, Henze said. Nonprofit officials “feel they have less chance to interact with these donors than in the past,” he said.

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Gary D. Morton is a Delaware-based freelance writer.