by Andy Ragone, CGPP
But wait… there's more!
What should you know about getting leadership buy-in?
In part one of this blog series, I touched on two major obstacles to hurdle when building your planned giving program. Here is a quick recap:
Leadership and donors must believe in your organization's vision. They also need a clear and compelling picture of how their planned gifts will contribute to that vision.
When building your program, repeatedly remind your leaders that ROI generally does not happen in the first year.
Building a gift planning program can be challenging, requiring a fair amount of finesse and orchestration. But it's worth every ounce of energy. I've said this before. Once you have tasted successful gift planning, you will not fundraise the same way ever again.
In part two of this blog, I would like to dive into planned giving metrics. Tracking metrics, including outright gifts such as IRA distributions and future estate gifts, is vital in demonstrating progress and engagement. Routinely sharing these metrics with leadership will provide you with the opportunity to carry out your program successfully.
So, Let's get into it!
Planned giving may use different types of metrics, but that depends on how you define planned giving.
I briefly want to unpack a definition of what planned giving encompasses. Historically, planned giving has been understood to include only future-oriented estate gifts, whereby donors intend to leave organizations a percentage (or fixed amount) of their estates, usually via wills, trusts, or beneficiary designations. Yes, other complex gifts are included as a part of future giving, but for even the more sophisticated planned giving shops, bequests make up for 80-85% of future gifts.
While with my previous work, I often talked with development officers who initially felt confident about their knowledge of planned giving, only to eventually realize during our conversations that they were just skimming the top of what would emerge as an immense universe of exciting opportunities. Planned giving is much more than they expected.
How do I define planned giving?
I heard the great Wayne Olsen say it this way:
"Planned giving includes any kind of gift that requires a plan."
I hope I did this justice, Wayne.
Somewhat related to Wayne's definition, I define planned giving, or gift planning, as follows:
Gift planning allows donors to give their greatest gifts today OR tomorrow while helping relieve their tax-related "pain points." It also allows donors to make gifts while benefiting from the income that comes after making those gifts.
The greatest benefits of gift planning are not only for the organization but also for the donors. Gift planning helps donors solve painful tax problems for today and tomorrow.
Outright gift metrics:
Regarding metrics, gift planning may include outright gifts from IRA distributions, Donor-Advised Funds, or appreciated property such as stock, bonds, real estate, or business interests. If you do not have mechanisms to track these gifts, I encourage you to begin doing so. With appropriate marketing to an ideal target audience, you will begin to see an increase in these types of gifts within one to two years. Tracking and sharing the increase with your leadership will help build your case for planned giving.
For example, if you have donors who already give to you, help them see how they benefit from giving from their IRA distributions instead of cash. You are likely aware that traditional IRAs make up for about 10% of all American wealth, somewhere in the neighborhood of $12-15 Trillion. You are also mindful that withdrawals are mandatory beginning at 73 for all traditional IRA owners. A donor must take her Required Minimum Distributions each year and be taxed as ordinary income, whether she needs the money or not. Furthermore, the percentage of the withdrawal amount goes up each year after that. This is a "pain point" for these donors who do not wish to claim the income or the tax that goes with it.
Once donors learn to give from their IRAs, they tend to prefer to give that way in the future. As a nice perk to the nonprofit, their giving can become an annual event, and depending on their circumstances, their giving can also go way up.
These types of outright gifts, which allow for additional tax savings, need to be marketed, tracked and shared with your leadership.
But what about future gifts?
How do we identify the metrics for future gifts, especially when waiting for gifts to materialize? Yes, this can get a little more tricky, but there are important metrics to share with your leadership routinely. They need to see progress, and you can provide helpful indicators to show that progress is taking place.
While ROI takes time, eventually, it begins to trickle in. As mentioned before—I know this is a very delicate matter to address—future gifts materialize only after our beloved donors pass away (for the most part anyway). But delicate or not, we move in this direction for our benefit AND theirs. Donors who believe in our mission and our work want to make their biggest impact, and many cannot or will not until they pass away.
An important sidenote that we'll touch on in a later blog is how many of our donors with limited income can become world changers for your organization. Those without much disposable income—after all, they are still using it (I think there is a Monty Python reference in all of this. "Can we have your liver then?" "But I'm still using it. You can't have it."). Please remember that many of our retired donors live off their estates and are trying to preserve as much income as possible. They are still using it. Most donors will not compromise their living standards to make a gift. But that doesn't mean they will not make a significant gift from their estate. If challenged and given the right resources to complete their estate plans, these donors will step up. AND, there are many, many "middle-class" donors with significant estate wealth.
How do you measure this?
In a word… MOMENTUM.
Momentum metrics can be quantified, so let's get right to it. Here are some ways I recommend engaging such potential.
Identify those who are responsive to your marketing. Analytically, figure out who is returning to your website—Assuming you are using both online marketing and that your print pieces include QR codes or website URLs. Those who repeatedly engage with click-throughs are the individuals showing an interest. They would be ideal candidates to monitor from future engagement marketing, such as a survey.
Ask the right survey questions among your primary marketing audience—survey questions such as seeing if your audience would be interested in tax-beneficial ways of giving. Survey your audience to see if individuals have left you in their will or trust or as a beneficiary to their retirement plan. If not, would they consider doing so? These individuals are thinking about it and would be good candidates to attend an estate planning seminar.
Attendance at estate planning seminars. While our main goal for these events is to help individuals and couples complete their estate plans, a secondary goal is to have them consider including their favorite organizations in their estate plans.
Funnel movement between your organization and professional advisors drafting estate plans. From the estate planning seminars, how many donors engage with our professional advisors and are willing to talk about philanthropy? It is not uncommon to see half of the room sign up for follow-up consultations once the estate planning seminar concludes.
Gift intentions. We encourage our professional advisors to discuss philanthropy when providing services to their clients. They are happy to ask their clients, many of whom are our donors, to notify us when leaving us in their estate or showing interest in giving a non-cash gift. Through these notifications, we can offer our donors the opportunity to sign written gift intentions and participate in our legacy events. How much are we talking about? Since our donors are still using their estate wealth, we're not totally sure. As a place to measure, we may use the median estate gift (Around $75,000) to start. Furthermore, we may want to consider counting these intended gifts when donors reach a certain age (say 60 or older). There is much to say about this in a later blog.
Legacy event involvement. A legacy society has so much potential, but to start, we include prospects and existing legacy donors to participate and celebrate being a part of such an important group.
Donor responsiveness to CPR—Cultivating, Planting, and Reaping. This includes cultivating relationships, planting seeds of vision and opportunity, and reaping gift commitments that reflect your donors' best interests for tax or impact solutions. What does your portfolio look like? Moreover, what percentage of your time is given to maturing your portfolio? This area of donor visitation and challenge is the unsung hero of gift planning success over the long term. Donor responsiveness and "next moves" are important metrics to share.
Complex giving solutions increase, including irrevocable gifts. Bequest giving opens the doors to more complex giving solutions. Many of our bequest donors are unaware of their options and will likely not bother themselves with our solutions without us first conducting Donor CPR. This is yet another reason why having a legacy society is so important! It brings complex giving scenarios into play.
Increasing gift committee engagement with complex real estate and business interest gifts. As more complex gifts emerge, so will the need to conduct due diligence. Having an active gift committee can help. Receiving real estate sounds simple enough, but there must be due diligence conducted with property evaluation, title searches, mortgage matters, potential EPA issues, tenant challenges, etc. Even more due diligence is needed should you offer a Charitable Gift Annuity in exchange for the real estate. Having a gift committee to help hammer out a thoughtful gift acceptance policy and a team of professionals to see this through will be very helpful in these instances. Sharing their activities and the fruits thereof with your leadership will go a long way.
Gifts actively and systematically materialize. This does not happen right away, but it does happen. A reservoir of intentionally sought-after bequests and other planned gifts begins to fill. Of course, you will want to track any planned gift, but by year three, provided you have reached the right audience, bequest giving will be on the rise. By year ten, bequest giving will dominate overall giving if done well.
These are fairly complex metrics, as future estate gifts take time to secure and even longer to materialize. When getting leadership buy-in for your planned giving program, it is important to remind leaders that ROI often takes time to materialize and that metrics work differently. Metrics for planned giving can include both outright gifts, such as IRA distributions, which can be tracked and immediately counted, and future gifts, which require identifying, tracking and sharing your donor MOMENTUM.
