Helen Brown Group

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Time to Take Your Temperature: Warm vs. Cold Prospecting

by: Melissa Bank Stepno, President & CEO

In the past few months, The Helen Brown Group has seen an uptick in the number of nonprofit organizations interested in finding new major gift prospects for their organizations.  In brief, we call these “Prospecting Projects,” and they typically involve identifying net-new potential donors, based on some combination of potential capacity and previously demonstrated mission alignment.  Sometimes, these are called cold prospects.

This is a common type of project for prospect researchers but before you decide to journey down this path on behalf of your nonprofit, I would recommend taking a giant step back and asking yourself: Why?

While I understand that there are some instances where cold prospecting is the best path forward, fully evaluating your current database first is typically a more successful strategy.  This is typically called warm prospecting.

 

“Warm” vs. “Cold”

Warm prospects are in your database for a reason.  Maybe they graduated from your school, attended a performance at your theater, was a patient at your medical facility, signed up for your newsletter, volunteered, etc., etc.  Any one of these demonstrates some connection to your organization, even if it is a loose one.

Cold prospects have no prior relationship with your organization.  They might not even have any awareness about your organization.  Any outreach you do will be … well… cold.

Okay, now I’m going to sidebar for a moment and ask you: do you like cold calls?  Do you respond to emails from random people that you don’t know?  Are you as annoyed as I am about the amount of spam I receive from people thinking that I “must” be interested in what they are selling?  Now, put your cold prospect donor hat on and let’s return to my post…

 

Prioritize Warm Prospecting

Simply put, working with warm prospects typically has a higher conversion rate, meaning they are more likely to respond to your outreach and ultimately give.  It is also easier to build a relationship with someone who has a baseline understanding with what your organization is and who you represent.  Warm prospecting is about identifying and nurturing potential donors who already have a foot in the door.

So, the next time you hear someone say: “we need more prospects,” look no further than your own database.  There are dozens of ways to do effective segmentation and data mining in your database, from simple RFM analyses, to wealth screenings, to sophisticated predictive modeling exercises, to relationship mapping, to looking at engagement data, and the list could go on.

If you want to read more about how to warm prospect, check out my colleague, Jen Turner’s blog post from earlier this year: A Field Guide to Prospecting Within Your Database.

 

Use Cold Prospecting Strategically When Appropriate

Only once you have exhausted your internal connections, or when you are looking to fundraise for something completely new/ancillary to your core mission, should you consider external prospecting.  Here are five quick examples of where cold prospecting makes sense:

  • Historically your research-focused organization has relied primarily on federal funding, you are concerned that those funding channels will dry up (or they have already been cut), and you do not have a database of previous donors
  • Your geographically focused social services agency is expanding into new territory – maybe the next county or state over – and you are looking to build a donor database within that region.
  • You are building a new museum, literally and figuratively from the ground up. You’ve been provided with initial funding from a handful of benefactors – mostly the board members – and you have been tasked with identifying potential funders for the rest of the project
  • You work for a large and sophisticated organization with a natural constituency base. The organization has a ground-breaking program or initiative that would appeal to donors familiar with the topic area, even if they are not connected to the larger institution
  • You are looking to diversify your donor database, maybe because it is primarily corporate and foundation focused with few individuals, or because your individual donor population is aging rapidly

 

Summary

Many nonprofits are seeking new major gift prospects, but before diving into cold prospecting, it’s critical to fully explore the warm prospects already in your database. Warm leads—those with prior engagement—typically convert at higher rates and offer better long-term potential. Cold prospecting has its place, but it should be used strategically and only when appropriate.

Image credit: Melissa Bank Stepno

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The Importance of (Dis)Qualification

by: Melissa Bank Stepno, President & CEO

Many years ago, I read a study that indicated that the human brain can only effectively manage 150 person-to-person relationships at any given point in time.  This statistic has stuck with me over the years, especially when thinking about some of the typical practices within our industry.  While the study was focused on all relationships – personal, familial, professional, etc. – I consistently draw a parallel to the typical size of a major gift officer’s portfolio.

If you ask anyone in major gift fundraising what the average or typical portfolio size is, you will get a myriad of responses.  The most consistent is: “it depends,” followed by some concrete number that usually ranges from 75 – 250.  That’s a big range.  And, those are big numbers.

Regardless of the specific ‘ideal size’ at your organization, it is safe to say that when you add 75 – 250 prospects to the rest of the relationships a gift officer is managing (again, personal, familial, professional colleagues, etc.), every gift officer is above the 150-person threshold.

Yet, every organization that I encounter is in the process of identifying new major gift prospects.  This creates a conflict because unless your organization is planning on hiring an unlimited number of gift officers to match the prospect pool (which I bet it’s not), what are you doing with all of these new prospects?

This conundrum is exactly why I’m such a big believer that Disqualification (yes, with a capital “D”) is just as important, if not more important than Qualification.  Removing prospects from existing portfolios is frequently the only way to make room for new prospects that are being identified. That is, of course, unless you are aiming for the bloated portfolio.

So, before continuing to assign new prospects to your gift officers’ portfolios, let’s take a step back and ask a few questions:

First, start with the gift officer, your overall major gifts program and your expectations of both:

  • What is the personal capacity of the gift officer? Is their full time role managing prospects? If not, how much time are they spending on other responsibilities? And, conversely, what percentage of their time do they spend managing prospects?  The more “other things” the person is responsible for, the fewer prospects that they should manage.
  • How experienced is the gift officer? Newer gift officers might benefit from a smaller portfolio that allows them to gain experience, whereas more experienced gift officers are frequently able to manage larger portfolios.
  • What type of prospects are in the gift officer’s portfolio? Warmer, more engaged prospects may require a shorter timeline from Qualification to Solicitation, whereas colder, less engaged prospects will require more time for relationship building.
  • What stages of the Development Cycle (Qualification, Cultivation, Solicitation, Stewardship) are gift officers responsible for? In some organizations, gift officers are responsible for all stages, whereas at other organizations, gift officers are responsible for only some.
  • If you expect gift officers to make in-person visits, what is the geographic dispersion of their region? How long will it take to travel to and from and in between?
  • What capacity level prospects are they managing? $10K+?  $100K+?  $1M+?  $10M+?  Larger gifts typically require more time to develop and close, requiring a smaller portfolio.

Then, turn to the prospects currently in a portfolio to determine who should stay and who should go:

  • Has there been any recent contact between the gift officer and the prospect? If not, why?  Has the gift officer attempted to engage and the prospect is unresponsive?  Or, has the gift officer not even tried to engage? If the prospect is unresponsive after several attempts to engage, it’s likely worth removing them from portfolio to make room for a new prospect.
  • Do you have a data-driven reason to keep the prospect in a portfolio? Have you assessed the prospect’s capacity to give at the major gift level?  Do you have any internal engagement scores or indicators that can help assess their inclination?  Has a predictive model indicated that they may have potential to give more?
  • What stages of the development cycle are prospects currently in? A prospect in perpetual Stewardship takes less time to manage than a prospect in active Cultivation.
  • Are there extenuating circumstances that a data-driven and metrics-focused analysis cannot decipher? There may be specific reasons that an individual prospect should remain, or should be removed, from a portfolio.  These circumstances should be reviewed carefully to assure exceptions reasonably fit the expectations of the organization.

Here are a few practical examples:

  • A small community hospital might determine that the ideal portfolio for Gift Officer Smith should include 100 prospects, split such that 25% is in each of the four main Development Cycle stages (Qualification, Cultivation, Solicitation and Stewardship). Upon review, it is determined that Smith’s portfolio has 150 prospects and more than 50% of them are in Qualification.  Most have been stagnant for over a year with no contact by the Gift Officer Smith.  A decision is made to remove most Qualification prospects and assign them to another gift officer with more bandwidth.
  • A national advocacy organization has determined that they want their most seasoned gift officer focused exclusively on cultivating $10 million+ gifts. It is acknowledged that doing so will require nationwide travel and significant coordination with the president’s office and other high-level stakeholders.  It is determined that an ideal portfolio is only 50 prospects.
  • A prestigious research university has a very large major gifts team that benefits from a high retention rate in their development office, with many young alums joining the team and spending their entire career at their alma mater. They recently hired three new junior team members and decided to create new portfolios of 200 prospects each, all in need of Qualification.  The initial Year 1 goal for these officers is not to close a gift, rather it will be to work the pool.  Over time, Disqualification will naturally drop the portfolio to a more reasonable size for long term Cultivation and Solicitation.
  • An emerging regional arts organization with one major gift officer is launching its first campaign. After their feasibility study is completed, a gift officer settles on 90 top prospects, which includes 20 “top-tier” longtime supporters with strong capacity and inclination, 40 “warm” connections who have consistently supported the organization at lower dollar levels but have a clear philanthropic commitment to the arts, and 30 “new” prospects including community arts patrons with business and personal connections to board members.

As these examples demonstrate, there is no one-sized-fits-all answer. But, a thoughtful approach can help you determine the right size portfolio for your major gifts team, and what steps might need to be taken to ensure portfolios are optimized.

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This is Not Another Post About AI

By: Melissa Bank Stepno, President & CEO

I really didn’t want to write another post about AI.

AI is such a hot topic that it is becoming overplayed in our communication channels, at least in my opinion.

But that doesn’t mean I don’t acknowledge the incredible impact AI is having (and will continue to have) in every aspect of our lives.

It’s just to say that I’d like a moment to not have to think about it, debate its merits, or defend whether we should or shouldn’t be using it.

A few weeks ago, I wasn’t thinking about AI at all.  I was engrossed in a novel set in time when cellphones were just starting to hit the mass-market.  You know, that ancient time back around the early 1990s.  So long ago that AI, as we currently know it, didn’t exist.

While reading my book (yes, one with actual pages to turn!), I had the TV playing quietly in the background, and I wasn’t paying attention to what was on. That is, until something caught my attention and pulled me away from my book.

On that Sunday evening, 60 Minutes aired a segment on Nvidia, the computer chip company.  Part of the story featured an interview with Pinar Demirdag, the co-founder and CEO of Cuebric, a generative AI company serving content creators and that uses Nvidia products.  In some ways, none of this matters.  It is what Demirdag said that keyed me into the segment:

“Humanity will have the choice to see themselves inferior to machines or superior to machines.”

She went on to say:

“Just because a machine can do faster calculations, comparisons and analytical solution creation that doesn’t make it smarter than you, it simply commutates faster. 

In my world, in my belief, smarts have to do with your capacity to love, create, expend, transcend.  These are qualities that no machine can ever bear, that are reserved to only humans.”

I was captivated.

So captivated, in fact, that I rewound the segment (something you couldn’t do back in the ’90s) to hear her words again. Now, weeks later, her message is still on my mind, and I’m writing this blog post as a result.

There’s no denying that AI is already affecting the way we work as prospect development professionals. From search engines to wealth screening tools, to social media platforms, and even the word processor I’m using to write this post—AI is embedded in nearly every tool that we rely on.

However, we do have a choice of how actively, or passively, we want to integrate AI into our work. While it’s not realistic to avoid using the tools we rely on that already have AI built in, we do have control over whether we actively choose to use specialized AI services, like generative AI tools that can rewrite text for us.  (*for example: I used one of these tools to rewrite this paragraph for me). 

At HBG, we’ve noticed an increasing number of our clients including clauses in their contracts asking us not to use AI in the course of our work for them.  We view this as an opportunity to educate the client, explaining why we can’t avoid AI entirely.  At the same time, we also assure them that we currently do not pursue the use of these tools (like for the purposes of generative AI, as I did in the paragraph above) to assist with the research that we produce for them.

So, what does this mean for our profession as a whole?  While we can’t ignore and shouldn’t eliminate AI, we can advocate for our role alongside it. As Prospect Strategy and Fundraising Intelligence professionals, we bring something that AI cannot replicate: the ability to grasp the nuances, ethical considerations, and unique circumstances that shape our research.  It’s the human touch. Sure, machines can quickly aggregate data and analyze it at incredible speed, but speed is just one piece of the puzzle.

What truly sets us apart from the machine is our ability to apply context, understand the bigger picture, and make thoughtful decisions based on more than just the data points.

If you want to read more of my musings about AI check out my Intelligent Edge blog post from November 2023, Alternative Interpretations of AI.

 

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Great Expectations: Setting Goals That Stick

By: Melissa Bank Stepno, President & CEO

As I write this, it’s January, and many of us are focused on New Year’s resolutions. We enthusiastically set Big, Hairy, Audacious Goals (BHAGs), feeling optimistic—or even excited—about what we can achieve. We might take those first few steps forward…

And then, inevitably, we stop.

We slip back into the routine of life, much like it was just a few weeks ago, adopting that familiar “last year” mindset. Even though the calendar has turned, we are, in many ways, still the same people we were before.

This is why research consistently shows that between 75% and 90% of New Year’s resolutions fail. By extension, this means that only 10% to 25% of resolutions actually succeed.

I stopped making New Year’s resolutions years ago for this very reason—there’s too much pressure tied to a somewhat arbitrary timeframe. But that doesn’t mean I’m not goal-oriented. It simply means that I prefer to set goals based on timelines that are meaningful for the specific project or what it motivating me at a particular time, not just the calendar year.

And when I do set goals, I don’t take a haphazard approach. I try to carefully set myself up for success—especially when my goals are Big, Hairy, and Audacious.

So, whether you’re reading this in January or at another time of year when you’re reflecting on your goals, I want to share some tips to help be a goal achiever.  After all, why set yourself up for failure?

The Power of SMART Goals

Many of us are familiar with the SMART framework for goal setting. It’s a proven approach that ensures your goals are:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time-bound

SMART goals are a solid foundation, but I’ve found that adding a few additional considerations can significantly increase your chances of success. These ideas complement SMART, but take a slightly different angle on how to approach your goals.

Introducing SMART + BRAGS

Here are a few powerful additions to help you stick to your goals and make real progress:

  1. Baseline Setting
    Before you dive into your goals, it’s essential to understand where you’re starting from. What is your current situation? Gathering data and assessing your starting point will help you set more realistic and achievable targets. Understanding your baseline gives you a clearer picture of how much progress you can realistically make.
  2. Rationale
    This is, in my opinion, the most important element—the Why. You need to understand the underlying reason for your goal. Why is this goal meaningful to you? A clear rationale gives your goal purpose and helps you push through when things get tough. It becomes your motivation when challenges arise, reminding you of the bigger picture.
  3. Accountability
    Share your goals with others—whether it’s your team, leaders, friends, or family. Their encouragement can help keep you on track, and they can hold you accountable. Not only does this create external motivation, but it also provides a valuable “gut check” to ensure your goal aligns with the SMART framework. In professional settings, involving others also ensures buy-in from the people who are, or will be, affected by your goal.
  4. Good Communication
    Communication is key to almost any initiative, but especially so when it comes to goal setting.  It ensures that everyone involved understands the goal, its purpose, the timeline, and the expected outcomes. This clarity helps everyone stay aligned and ensures that you have the support you need to succeed.
  5. Sustainability
    If your goal is focused on long-term success or change, it’s crucial to consider sustainability. Are the actions you’re taking repeatable? Will you be able to adapt if you encounter obstacles? Thinking ahead about how to handle roadblocks can help you stay on course, even when challenges arise.

A Prospect Research Example

  • Goal: Within the next 6 months, identify 100 new major gift prospects at the $100K+ level to seed the portfolio of the new MGO we will be hiring later this year.
  • S – Specific: The goal is clear, you know exactly what you are aiming (major gift prospects at the $100K+ level), the quantity (100), and the timeline (6 months)
  • M – Measurable: Track progress through a weekly or monthly report that detail the number of prospects identified and their associated capacity level.
  • A – Achievable: Assess historical data, such as the number of prospects your team identified in the previous 6 months, to determine if the volume seems achievable (also see Baseline Setting below). It might also be helpful to set a smaller monthly target (e.g., 8-10 prospects per month) to ensure the overall goal is achievable
  • R – Relevant: This goal directly aligns with the organization’s decision to hire a new MGO and supports the major gift program’s growth. Identifying these prospects will ensure that the new MGO has a well-prepared portfolio when they begin, accelerating their ability to meet fundraising goals.
  • T – Time-bound: The timeline is clear – you have 6 months to identify 100 prospect. Breaking the timeline into monthly targets (e.g., 8-10 prospects per month) will help maintain focus and ensure steady progress.
  • B – Baseline Setting Assess historical data, such as the number of prospects your team identified in the previous 6 months, and at what capacity levels, to determine if the volume seems achievable. Also consider your other priorities over the past six months to determine whether you think you will have more or less time to work toward this goal.
  • R – Rationale: The rationale, or the “why,” behind this goal is straightforward: the organization is investing in a new MGO who will need a well-qualified portfolio to begin their work. This effort will lay the foundation for successful major gift cultivation and ensure that the MGO has a strong starting point.
  • A – Accountability: Hold yourself accountable by providing regular updates to your manager and the Director of Major Gifts. Set up regular check-ins to assess progress, troubleshoot any challenges, and adjust other priorities if necessary.
  • G – Good Communication: Keep stakeholders informed throughout the process. In addition to your manager and the Director of Major Gifts (see Accountability above), ensure your  peers and any other colleagues who might request work from you informed as well so that everyone understands what your priorities are and why.
  • S – Sustainable: Ensure the prospect identification tactics you use are sustainable and replicable in the future. Consider leveraging wealth screening tools, past donor lists, modeling scores and other tools at your disposal. Create a process so that you can assess if the tactics you use for this goal can be adapted for future projects and/or if adjustments might be needed to maintain this level of effort in the future.

 

Summary

By incorporating these SMART + BRAGS strategies into your goal-setting process, you’ll increase your chances of being in the successful.  And, if it is your New Year’s resolution, let’s make sure you are one of the 10%-25% who actually achieve their resolutions.

And who knows? Maybe you can then be someone who brags about meeting your goals. (See what I did there? Corny, I know!)

Happy goal-setting!

 

*Image Credit: File:Dickens Great Expectations in Half Leather Binding.jpg” by Jameslwoodward is licensed under CC BY 3.0.

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2024 Intelligent Edge Year in Review

‘Tis the Season!

Whether you will be counting down the 12 days of Christmas, the 8 nights of Hanukkah, the 7 days of Kwanza, or the seconds until the New Year’s ball drops, this time of year is typically a time for counting and a time for giving.

Here at The Intelligent Edge, we thought we would join in the holiday spirit by using this last post of 2024 to re-share our most popular posts from the past year.

So, with no further preamble, here are the Top 5 Intelligent Edge posts* of 2024:

  1. Topping the list are a pair of posts sharing Helen Brown’s Exciting News that HBG was acquired in August by Melissa Bank Stepno, who shared her thoughts on the acquisition in Looking Back & New Beginnings.
  2. Next up, Kristina Gropper, our HBG in-house expert on all things related to art, contributes her top Tips for Researching Art Collectors and Artists.
  3. Getting very practical and tactical, in Building Research Systems That Work by Michelle Guzman talks about the importance of putting guidelines and guardrails in place that help manage inbound research requests.
  4. And, speaking of those requests, in Crafting a Meaningful Donor Profile: Connect with the Donor Behind the Dollars, Susan Barclay explains why it’s not just about dollar signs and zeros. Understanding a prospect’s interests and values is just as important their capacity.

With that, we wish you a festive season.  We’ll be back with fresh new content in early 2025!

 

*at least according to LinkedIn Analytics!

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Access and Enhance Data Without Leaving Your Spreadsheet

by: Kenny Tavares, Senior Consultant & Lead Data Analyst

 

Kenneth Tavares

Kenny Tavares

Microsoft Excel is undoubtedly one of the most adaptable tools I have used in my prospect research and data analysis work. To paraphrase an old commercial: “It slices, it dices, it makes julienne fries!”

Seriously, its many applications have led me to always assume Excel can accomplish what I need and then find a way to make it happen. I love unlocking the formula or macro that makes arduous tasks effortless. Even as I delve deeper into coding for data transformation and analysis in other more sophisticated tools, my foundational understanding of data structure is rooted in using Excel. I’m sure many of you share this sentiment.

Fortunately, Excel is here to stay, with Microsoft continually enhancing its functionality to match our evolving workflows. However, as creatures of habit, we often overlook these new features; we stick to what we know.

I’d like to highlight the Data Types feature, which enhances data, making it more dynamic, thus making analysis more robust. It’s straightforward to use and can save you valuable time. You might be surprised at what you can do without running to your web browser!

There are three Data Types available: Stocks, Currencies and Geography.  We’ll explore Stocks in detail as a case example:

How It Works

Imagine you’re tracking a prospect’s portfolio that includes stocks in Apple, NVIDIA, and Microsoft. You enter their ticker symbols in a column, select those cells, go to the Data tab, and choose Stocks.

Excel will then turn these symbols into linked data fields. If you see an icon next to the stock name, it means it worked:

Clicking on the floating menu next to the cell will give you more than two dozen data points to choose from:

Let’s say you are interested in stock price simply select that option and the data will then be added in a new column — Voila!

Then, you can just multiply the stock price by the number of shares:

Even better, the next time you open the spreadsheet, the stock prices will update automatically. You can also manually update the data by choosing Refresh from the Data menu.

Other Use Cases

Stocks: Another great use for the Stocks type is business valuation. To assess the value of a privately-owned company, create a custom list of similar publicly-traded companies and use the floating menu to add useful info like employee counts, market cap, and price-to-earnings (P/E) ratio. Instead of copying and pasting from a web browsesr, you can gather all this info using Excel.

Furthermore, you can pair the Stocks information with the STOCKHISTORY formula to generate a list of historical prices for a selected date range without exporting from another website.

Geography: The Geography type is great for enriching a list of addresses. By applying it to a zip code, you can get city/town info like population, county, state, and coordinates.

With the Power Map add-in, you can map out your prospect’s locations. From the county data, you can access more info like the largest city. From state data, you can get Census info like median income and home values. In no time, your simple dataset can be transformed into something more insightful.

Currencies:  Using the Currencies type, you can get updated exchange rates by entering the abbreviations for the two currencies you want to check, for example, Hong Kong Dollar to US Dollar (HKD/USD). Excel will give the rate, which you can then use in your calculations. This makes it easier to evaluate an international prospects’ wealth, especially one with a lot of foreign holdings.

Summary

Excel’s continuous evolution and feature expansion ensures it remains an invaluable tool for prospect researchers and data analysts. Hopefully, the Data Types feature will make your workflow more efficient. By leveraging these innovative tools, you can unlock new possibilities and insights, making your data work for you more effectively. So, take the time to explore these features and see how they can transform your approach to data.

 

 

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Giving Vehicles Aplenty! Private Foundation vs. DAFs? Why Not Both?

by: Melissa Bank Stepno, President & CEO

For most of us, when we think of omni-channel fundraising, we think of the three most common giving vehicles: donating online with a credit card, mailing in a check, or providing payment information during a telemarketing phone call.

However, the options for potential giving vehicles are way longer than just “The Big Three.”

PayPal, give-by-text, cryptocurrency, gifts of stock, giving circles, donor advised funds, private foundations, real estate, impact investing, LLCs* … the list just goes on!

While some of these are more accessible to the ‘average’ donor than others, for our high-net-worth donor population, the strategy for choosing which giving vehicle to use, and when, can be very complex.

At the 2024 DAF Giving Summit, there was an entire session led by Sharon Schneider from Integrated Capital Strategies that discussed her process for consulting with UHNWIs on how to craft their own personal giving strategy.

Key takeaway: major philanthropists use more than one giving vehicle depending on what they are giving, to whom and for what purpose.

One of the topics that she covered, and the one that I get asked about most frequently, is why a family would choose to have both a donor advised fund and a private family foundation.

In fact, according to Trends 2020, a benchmarking survey of family foundations from the National Center for Family Philanthropy, we know that more than one-third of families who have family foundations also have DAFs with a community foundation.  But again, why?

Here are just a few of the reasons that I am aware of:

 

Mission

Many private foundations are set up with a specific purpose in mind (perhaps giving to health care and social services), but a family may also want to provide philanthropic support to a broader range of nonprofits (perhaps an alma mater or the local theater)

Or, sometimes a family may be divided on certain politically-charged or socially-motivated issues and want all giving from their foundation to have full family consensus.

In both scenarios, having a separate DAF (or multiple DAFs!) provides the ability to stretch beyond a foundation’s stated mission or an entire family’s interests.

 

Privacy

Sometimes, even those who are very public about their philanthropy, want to give privately.

While all gifts from a private foundation are listed on the foundation’s annual 990, gifts from a DAF have no public reporting requirement.

Therefore, for families with foundations who may want to make certain gifts anonymously, DAFs are an attractive alternative.

 

Independence

Many family foundations are controlled by multiple generations of family members who may, or may not, want to collaborate on making giving decisions.

At the conference session I mentioned above, one of the conversation topics was the sense of “forced collaboration” between family members.  Full collaboration is more of an ideal that isn’t always the reality in the modern world.

So, creating separate DAFs for individual family members or households allows them to make some of their giving decisions independently of the larger group.

 

Geography

In one very specific case study, I heard from a 4th Generation philanthropist whose great-great grandparents established a family foundation with the stipulation that all funding from the foundation be provided to non-profits within 25 miles of the family homestead.

Why?  Because that is approximately how far a horse can travel in one day and they wanted all of their giving to be “close” to where the family lived.  Remember, four generations ago it was common for multiple generations within a family to live on the same land, and neither the automobile nor airplane existed.

But, today, transportation options far broader than by horseback and the family has members scattered across the United States.

So, transferring funds from the foundation to individual DAFs at the local community foundation allows family members across the country to support organizations “close” to their local communities while keeping with the spirit of the founding documents.

 

Speed

Many foundations have complex structures established for approving distributions. Let’s say a family wants to give to an emergent situation, like a natural disaster, giving via a DAF can be immediate and without delay.

 

Distribution Requirements

Unfortunately, there are also some ‘bad actors’ who use their DAF simply to satisfy the 5% distribution requirement from their private foundation. Luckily, this seems to only happen in the minority of cases, but it is important to note because this type of behavior does exist.

 

So, if I had to sum up the list above in two words, it would be Flexibility vs. Control.  Simply put, a DAF provides significantly more flexibility than a family foundation.  On the other hand, a foundation provides its founders with significantly more control as to how their assets will be used.

We already knew that philanthropy is not a “one-sized-fits-all” endeavor.  Hopefully this post provided some insight into the rationale behind some of the flavors (or sizes!) we might encounter with our largest donors and prospects.

 

*For more reading on some of the other flavors, earlier this year, my colleague Christine Bariahtaris published an article for Intelligent Edge on giving via LLCs.

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Crafting a Meaningful Donor Profile: Connect with the Donor Behind the Dollars

by: Susan Barclay, Consultant

Susan Barclay

Profiles are the bread and butter of the prospect research world. We write them day in and day out. But, have you ever thought about what makes a good profile go from good to, well, great?

Say you’re like my colleague Karla Davis and you’ve been asked to research someone like This Guy. Your fundraiser has already had the initial visit with This Guy and is anxious to learn more, counting the moments until your profile is in their hands (or inbox). A good profile includes all the usual information, but what else can make it great?

A great prospect profile goes beyond the numbers; it delves into the prospect’s interests and values and presents a picture of the donor behind the dollars. It answers questions.

Let’s take a look at those different categories, shall we?

 

What’s in a Name?

First things first: always include the essential details. This includes the donor’s name, contact info, and affiliations.

But don’t stop there!

Make it a point to understand who they are beyond these basics:

  • What’s their background?
  • Who are their family members?
  • What led them to philanthropy?
  • What compels them to give?

By grounding your profile in personal details, you set the stage for a deeper connection.

Hint: Two of my favorite sources are LinkedIn (be sure to follow your organization’s social media policy) and Lexis Nexis for Development Professionals.

 

Uncover Their Philanthropic Interests

Let’s dig into what truly drives your donor. Research their giving history to spot patterns—this is where you can find insights that aren’t just about the size of their gifts but also about their values and priorities.

  • What causes are they passionate about?
  • Do you see a consistent history of giving to particular organizations, or are they one-time givers?
  • What are their most significant gifts?
  • Do you see any endowments, major gifts, multi-year gifts, or scholarships?
  • Are they involved with any organizations as a member of a board or as a trustee?
  • Do they serve as a volunteer in other capacities?
  • Do they support those organizations?
  • Have you run across any articles mentioning their involvement with non-profit organizations?

Hint: One of the first sites I always go to when looking for board involvement is ProPublica.

 

Analyze Their Giving Capacity

Look for wealth indicators—like properties or business ownership—but also consider their lifestyle.

  • Do they have an art collection, watercraft, horses, car collection?
  • What about public company securities?
  • Are there any assets held under their spouse/partner’s name or under an LLC?
  • Do you see evidence of a DAF, family foundation, or a family office?

Hint: DAFinitive® is a great tool to help you search for DAFs. It contains over 90,000 funds from over 700 DAF sponsors, with more being added every week!

 

Personal Insights Matter

This is where you really start to connect with the person behind the donations.

  • Can you find any personal anecdotes?
  • How about information on their hobbies, or passions?
  • Has the donor been featured in a local magazine or spoken at events?

Quotes or stories can provide a glimpse into what matters most to them. Occasionally a tiny nugget of information mentioned in an article about your donor can reveal a world of information you never expected.

Hint: My favorite resources here are to check out local publications and newspapers for your prospect’s hometown, as well as their alumni magazine and any trade journals within their business industry.

 

It’s Alive!

Finally, remember that donor profiles should evolve. Update them regularly with new information or changes in the donor’s status.

A dynamic profile ensures you always have the most relevant information at your fingertips, keeping the focus on the person rather than just the data.

Creating a detailed donor profile doesn’t need to be overwhelming or complicated. By keeping it simple, answering the immediate questions and focusing on the individual behind the donations, you can craft profiles that truly resonate.

By

Today is DAF Day

by: Melissa Bank Stepno, President & CEO (and Managing Director of DAFinitive)

Today, October 10, 2024, is the first ever DAF Day.

Here at HBG, we host an entirely separate blog dedicated to donor advised funds.  You can check out our DAFinitively Speaking blog here or follow DAFinitive on LinkedIn. But, given that today is DAF Day, there’s no reason not to cross-pollinate, just a little bit!

 

What is a DAF, you might ask?

DAF stands for Donor Advised Fund.

At its simplest, a DAF is an investment account that a donor can use to designate money for charitable purposes.

The vast majority of DAF donors are people, however a number of companies leverage DAFs as part of their corporate giving programs as well.

For non-profits, think of a DAF as a type of giving vehicle.  Just as a donor could send you a check via the mail, make an online contribution, or gift shares of stock, a donor could also direct funds from their DAF to your organization.

 

How does a DAF work?

Every DAF in the United States is managed by a sponsoring organization, which is a registered 501(c)3 non-profit.

The majority of sponsors are community foundations, like the Boston Foundation or Silicon Valley Community Foundation.

Sponsors can also be affiliated with a large financial institution, like Fidelity or Schwab, but it will always be under a separate non-profit umbrella.

Lastly, some single-issue non-profit organizations also serve as DAF sponsors.  You will see this with organizations like Jewish Community Foundations, Catholic Charities, some advocacy organizations, or even large universities.

When a donor makes a gift to a DAF, they are really making a gift to the sponsoring organization and designating their gift to be held in the DAF.  At that point in time, the funds become the fiduciary responsibility of the sponsoring organization, not the donor.  And, the donor is eligible to receive a tax deduction because, after all, they have made a bona fide gift to a non-profit organization.

While the money sits in a DAF, most sponsors offer investment options so that the money can grow over time, just like in a savings account or mutual fund.

The only way that funds in a DAF can be used or spent is for charitable purposes.  So, at their leisure, the donor can direct (or advise!) the sponsor to make a distribution from their DAF to any non-profit of their choosing.

 

So, what is DAF Day?

Ultimately, DAF Day is a marketing effort to activate DAF advisors to make distributions from their DAFs to non-profit organizations, today.  As of the writing of this post, over 1,000 non-profit organizations, 5 sponsor organizations and 20 technology partners have joined the movement.

Marketing efforts like this are not a new concept in philanthropy.  Combining a sense of community, rallying around a cause and creating a sense of urgency is a proven strategy – usually under the more generic title of a Giving Day.

As an example, Giving Tuesday was launched in 2012 to mobilize philanthropic activity on the Tuesday after Thanksgiving.  In 2022 alone, Giving Tuesday sparked $3.1 billion in giving.

According to the Annual Giving Network, “nearly 90% of colleges and universities report that giving days are increasingly important part of their annual giving program.”  While most higher education institutions tend to hold their Giving Days in the spring, dates vary, frequently to be significant to a particular institution’s events or traditions.

And, even before the phrase “Giving Day” existed, the first known ‘day of giving’ was likely the first Muscular Dystrophy Association (MDA) Telethon, which dates to the 1950s!  Hosted for decades by Jerry Lewis, it became known to many as the “Jerry Lewis Telethon,” and aired live on TV.

 

Why launch DAF Day now?

The popularity of donor advised funds has exploded in recent years.

There are roughly 10x as many DAFs today than there were a mere decade ago.

According to Giving USA, giving from DAFs accounts for nearly a quarter of all philanthropic donations.

And, one of the first-ever benchmarking studies on DAF donor behavior showed that both retention and lifetime value of donors who give through their DAFs are better than the typical one-time donor.

Yet, DAFs often get a bad rap as a place where people park money without distributing it to non-profits.

While this might be true in the minority of cases, DAF account holders are generally philanthropic individuals and the velocity of money moving in/out of DAFs is far greater than what we typically see at private foundations.

However, there’s always more than can be done to spark someone’s passion to support the charitable community.  And, research suggests that as of last year, there was more than $234 billion sitting in DAFs, earmarked for philanthropy, and waiting to be distributed.

 

So, why not now?

 

However, the proof is always in the pudding, so to speak.  Just as I do each year with so many other reports, I’ll be most interested to see the analysis after DAF Day has concluded.  If successful, I suspect that DAF Day will become an annual tradition, just like the other Giving Days that proceeded it.

 

To learn more about DAFs, check out:

 

Image Credit: “Dollar Heart” by cmpalmer is licensed under CC BY-SA 2.0.

By

The Real Estate Quagmire

by: Melissa Bank Stepno, President & CEO

Real Estate is often the easiest asset for us, as prospect researchers, to identify.  After all, more people in the United States own a home than have any other type of clearly identifiable (and quantifiable) asset.  However, using real estate as an asset to estimate household wealth or capacity is not as simple as it seems.

The list of reasons is long and varied.  For example:

  • When was the property purchased?
  • How are you determining the “value” of the property, and which “value” are you using?
  • Is there an outstanding mortgage? If so, how much and what type of mortgage is it?
  • Where is the property located geographically?
  • Does the property have any special features such as a boat dock, ski-in-ski-out, sits on a private golf course, etc.?
  • How many properties does the prospect own? If there are multiple properties, are they personal/private residences, investment properties, rental properties, etc.?
  • Is the property owned solely by the individual or spouse/partner pair, or are their other listed owners, or is the property held in trust?
  • Generationally, how old is your prospect?
  • What else can you learn about the prospect that is not related to real estate holdings but may inform your interpretation of those properties?
  • And, if there are no identifiable real estate holdings, what else can you learn about their place of residence? Is it in a ‘high rent’ or exclusive building?  Do they appear to be living with relatives?  Are there any other pertinent details?

Each one of these questions could produce its own blog post.  For the purposes of today, we will focus on just two – when was the property purchased and generationally, how old is your prospect.

Now, it might seem obvious that someone in Gen Y could not have purchased a home in 1991 – they might not have even been born yet!  However, the situation could be significantly more subtle than that.

I fully admit that this is not a common scenario but I do know of at least one Gen Yer who did inherit his grandparents’ home via their family trust.  At first, he wasn’t very much interested in owning a home where it happened to be located.  But then he realized the financial implication of it and understood that it would set him up for a very different financial future than he had anticipated.  He decided that relocation wouldn’t be so bad after all.

In another scenario, this time a younger Gen X couple where the female partner  was gifted a condo in a large city upon college graduation from her wealthy parents and the male partner  inherited his grandmother’s rural estate in another region of the country.  As the couple started to grow their family, they sold both properties and used some of the proceeds to purchase an incredible family home in the suburbs.

While a rarity, in both of these instances, while still in their 20s, these two households owned their homes outright without any personal financial outlay and no mortgage!  Think about how much further their household dollars would go than their peers, whose largest monthly expense is likely their rent or mortgage.

Now of course, there is the age old (no pun intended) question in both cases is whether additional financial stability and a significant amount of discretionary income will translate into charitable dollars, but that is not the purpose of this blog post.

I also realize that both of these examples are outliers.

So instead, let’s look at home affordability over time for those in a more normal, or traditional, circumstance.

Colloquially, we probably all know that home prices have been on the rise in recent years.  In fact, the Federal Housing Finance Agency report for Q2 2024 stated that nationally, home prices have appreciated in value every year since 2012.  Quantitatively, home prices have risen 319% since 1991 and 58% just in the most recent 5-years.

This may sound great for homeowners!  And, some might say that it helps to create wealth in the country.  However, everyone needs a place to live so we must add one additional layer to provide context.  That layer is home affordability.

To put it simply, the rate that household income is increasing over time is not keeping pace with the rise in home prices.

To be more specific, in that same time period since 1991 where home prices have risen a median of 319%, Median Household Income has only risen 167.5%.  So to use rough math, home prices have increased twice as much as household income.

The same is true over the most recent 5-year period when comparing the 58% increase in home prices to the 27.5% increase in household income.

Historically, home prices are rising roughly 2x faster than income.

Yes, for some, the rise in home prices might be creating wealth.  But, more commonly, the rise in home prices is creating an affordability challenge.

From a housing affordability perspective, a common metric is that a household should not spend more than 30% of their income on housing costs.  Typically, this doesn’t just include mortgage (or rent) but also includes things like property taxes and utilities.

A 2023 study reported that nearly 1 in 4 homeowners are “house poor,” meaning they are spending more than this 30% benchmark on housing costs.

Unfortunately, while impacting every generation, this phenomenon typically impacts younger generations more heavily than older generations, such as the Baby Boomers.  It’s also one of the many socio-economic reasons why the rate of homeownership is lower in younger generations.

So, what’s a researcher to do?

Most simply stated: we must look beyond a simple real estate “value” to determine capacity.   Refer to the top of this blog post to see the checklist of questions I propose you ask yourself.  And, stay tuned to the Intelligent Edge as I plan to dig into some of these in future blog posts!

***

Image Credit: “Houses on dollar bills” by Images_of_Money is licensed under CC BY 2.0. 

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