Developing alliances between non-charitable advisors (attorneys, CPAs
and financial advisors) and advisors to charities (e.g., development
officers for non-profit organizations) can provide better service to the
team's clients, make fundraising more effective for the charitable
advisors, and thus be beneficial for all concerned.
In this issue of The Wealth Counselor, instead of focusing on
the technical side of charitable planning (tax and estate planning), we
will take a look at the marketing side. We will explore the various
forms of fundraising, what fundraisers do for charities, how they are
compensated, how they can become part of the estate planning team, and
how working together will benefit all involved, professionals and
clients alike.
Fundraising Overview
Fundraising, or the process of soliciting and gathering contributions,
such as money or other assets and resources by requesting donations from
individuals, businesses, charitable foundations or governmental
agencies, is multi-faceted. Its major divisions are annual giving,
capital campaigns, major gifts, and deferred (or "planned") giving.
Annual Giving
Annual giving focuses on donor acquisition, repeating the gift and
upgrading the gift. Most first gifts are small, but annual giving
creates the habit of regular giving and, typically, increasing gift size
over time. Direct mail solicitations, telemarketing, e-solicitations
and special events are most often the methods used to increase annual
giving. The ultimate goal of annual giving is lead generation for the
other categories of fundraising.
Capital Campaigns
Capital campaigns are the most common way charities raise the funds
needed for special large projects, such as a new building or a permanent
endowment. A capital campaign is an intensive, time-limited effort
seeking a larger than usual sum of money from the charity's perspective.
Most charities consider hiring an outside consulting firm for a capital
campaign rather than hiring or using internal staff. Frequently the
outside consultant will guide the existing staff.
Major Gifts
Unlike annual gifts, which are typically made with cash, major gifts are
often made in the form of publicly traded stock, bonds or other
negotiable financial assets and, in some cases, real estate and valuable
personal property, like art. Each charity establishes its own threshold
for what is considered a "major" gift. For a religious denomination, it
might be $25,000 or more, whereas a small local charity might set
threshold at $1,000. Typically, making a "major" gift entitles the donor
to special benefits, such as membership in a giving society (i.e.,
"Circle of Friends"), recognition in the charity's publications, or
ticket priority for charity events.
Deferred ("Planned Giving") Gifts
Deferred gifts are gifts that a donor establishes now for the charity to
receive at a future date. Most attorneys, CPAs and financial advisors
are familiar with these. In some cases, the donor will receive income
and tax benefits during his or her lifetime. Most are complicated and
require planning; hence, the term "planned giving." Typical deferred
gifts include Will bequests, post-death revocable living trust
distributions, charitable remainder trusts, gift annuities,
charity-owned life insurance, and pooled income funds. Although not
completely "deferred" (the charity receives a benefit starting in the
first year), most planners include charitable lead trusts in the
category of deferred gifts.
Grants
Charities today also sometimes raise money by obtaining grants from
individual or corporate private foundations or government agencies.
Applying for such grants may be the assigned responsibility of a staff
member or outside consultant.
What Charities Do with the Money They Raise
Charities are just like everybody else. They do two things with the
money they get - spend it or save it for future use. Some contributions
will be unrestricted and thus available to be used immediately for
day-to-day expenses and charitable functions. Many charities also have
an endowment fund in which gifts are set aside and held in a special
fund to earn income that is used by the charity for general or special
charitable purposes. Major gifts and deferred gifts other than for an
identified purpose, e.g., a new building, typically go into the
charity's endowment fund. The size of a charity's endowment fund is
often used as a measure of its fundraising and overall success.
Endowment funds are often divided into sub-funds to accommodate major
contributors who wish to have their gift earmarked for a special
purpose, such as scholarships.
How Charities Organize Their Fundraising Efforts
Many charities have at least one employee whose primary responsibility
is fundraising. In smaller charities, a development officer may handle
all of the facets of fundraising. Larger charities may have multiple
fundraising staff members who are assigned to different fund raising
functions within the charity's office. For example, one may be assigned
specifically to developing deferred gifts.
How Development Officers Are Compensated
Development officers are paid a salary; it is unethical for them to
receive a commission. Most are evaluated by their success in closing
charitable gifts on an annual basis. Deferred giving officers are
evaluated not on actual gifts received, but on expectancies, as they
have no control over when a donor will die and thus when the gift will
"mature."
How You Can Work Together
Development officers and other wealth planning professionals can work
together primarily in the area of deferred giving and sometimes with
major gifts, especially when gifts of property (real estate, stocks,
etc.) are involved. For example, an attorney may be needed to draft the
documents, a CPA for compliance and tax issues, and a financial advisor
for a life insurance policy or securities transfers. All should be
involved in the process as needed to make sure the gift makes sense for
and provides the greatest benefit to their client, the donor.
What the Development Officer Can Bring to the Team
When a client wants to support a charity with a deferred gift, it makes
sense to bring the charity's development officer onto the estate
planning team. Some of the benefits he/she can bring to the process
include:
- Knowledge of the charity's needs and goals;
- Making sure the gift is used the right way;
- Hearing and responding to the donor's desires;
- A general knowledge of planned giving.
Generally
speaking, other advisors should not feel threatened by bringing a
development officer onboard, as they won't go against investment advice,
provide tax advice, or draft the needed documents. A development
officer, however, will be a dedicated member of the team and can be
valuable in helping to define the donor's desires and goals and align
them with the charity's needs and goals. For example, a donor may be
thinking he wants his gift to be used for scholarships, but the
development officer, who knows that the scholarship fund has plenty of
money, may be able to direct the gift toward a building that needs
immediate repairs.
A Source of New Business for You
The client conversation that leads to a major or deferred charitable
gift can start with either the planner or with the charity, and both are
in the position to bring in other professionals to help with the
process.
Occasionally a development officer will need to refer donors to
attorneys, CPAs and financial advisors in order to complete gifts, and
will generally give the donor two to three names from which to choose. A
development officer will want to refer his or her donor to
professionals who are reliable, have experience in planned giving, will
be responsive and are in relatively close proximity to the client. It
helps if the professional also personally has charitable intent, which
gives him or her valuable insight into what a client/donor wants to
accomplish.
A Source of New Business for the Charity
Your estate planning clients are also prospects for charitable giving,
and they can be a source of additional business for you and for
charities. Your clients and prospects generally of age 50 and older are
the same audience the charity wants to reach. Make it a habit to ask if
the client or prospect has any desire to support a charitable cause,
either now or with a gift after death, and if so which one. Doing so can
only enhance your status as the trusted, knowledgeable advisor. Include
a question or two on your intake form or ask in your initial interview.
When you get a positive response, take the opportunity to bring the
development officer into the planning process.
Cultivating Development Officers as Referral Sources
The best way to meet development officers and have them become referral
sources for you is old-fashioned networking. Here are some suggestions
to help you get started.
Networking Tip #1:
Get to know the nonprofits in your area and learn about the resources
and services they offer to the community. If your client has charitable
desires, it would be very helpful if you already know which
organizations would fit well with your client's intentions and would
benefit from your client's gift.
Networking Tip #2: Local and regional planned giving
councils have regular meetings with guest speakers. You can join,
attend, and even offer to speak at these. Regular attendance will yield
the best results.
Networking Tip #3: Some national organizations
(including The Advisors Forum and WealthCounsel) provide monthly
webinars. You could host them at your office and invite local
development officers, as well as other professionals with whom you would
like to work.
Networking Tip #4: Ask other professionals with whom
you already work if they know any development officers in your area. Ask
for an introduction and/or a lunch meeting.
Networking Tip #5: Cold calling. Look up nonprofits in
your area, then call the planned giving or fundraising office and
explain that you would like to meet the development officer. It's not as
good as a personal introduction, but it will get you noticed.
Networking Tip #6: Some nonprofits host their own "Get
to Know Us" educational seminars as a way to attract potential
volunteers and donors. Attending one is a great way to show your
interest, learn about the nonprofit first-hand and meet the development
officers.
Networking Tip #7: Offer to provide free seminars for
the nonprofit's donors (and potential donors) on estate planning,
planned giving or other current financial planning topic. It's a great
way to find new leads for the nonprofit and for you. Repeating seminars
at the same time and location will make it easy for attendees to bring
or refer others.
Conclusion
Developing alliances between attorneys, CPAs, financial advisors and
development officers for non-profit organizations is an excellent way to
expand your networking opportunities, become more aware of the services
and resources available in your community, and generate new business.
But most importantly, it will feel good to help your clients and
charities in a way that is beneficial to both.
To comply with the U.S. Treasury
regulations, we must inform you that (i) any U.S. federal tax advice
contained in this newsletter was not intended or written to be used, and
cannot be used, by any person for the purpose of avoiding U.S. federal
tax penalties that may be imposed on such person and (ii) each taxpayer
should seek advice from their tax adviser based on the taxpayer's
particular circumstances.
For professionals' use only. Not for use with the general public.