Endowment Strategies:Essential Infrastructure and Conversations with Donors

Create a Jewish Legacy of Western Massachusetts

Why Are We Here?

Building a culture of Legacy and endowment can be challenging.

Now, time to engage in endowment building at your agency or synagogue.

This is an ongoing process – it takes preparation, and activity.

Today will focus on key elements of the process you are undertaking.

Essential Elements for Endowment Success

An Overview

Building endowment is a proactive – not reactive process.

To be successful, you must create a strong infrastructure, understand the donor’s perspective, and engage in conversations.

The Paradigm Shift

Ten years ago – endowments were an embarrassment of riches

Now, fiduciary duty However, the urgency of current

programs must be balanced with preparing for the future

Why So Much Talk AboutCreating a Jewish Legacy?

The economy is tough and taking a toll on donors Since 2000 Now, uncertainty in markets, interest

rates, jobs, inflation, oil Affects all wealth/age groups

Why So Much Talk About Creating a Jewish Legacy?

Government grants are disappearing – greater needs with less available funds National Association of State budget

Officer – “Fiscal Survey of States” June 2008 - $48 billion shortfall in 2009 Cuts will occur in public health, elderly

and disabled, education, work force Federal government deficit at high

Why So Much Talk AboutCreating a Jewish Legacy?

Private foundation grants are shrinking

The number of charities reaching out to your donors is increasing 819,000 in 2000 1,128,367 in 2007

Board have a fiduciary duty to address mission

Understanding the Role of Endowed Gifts in Development

Planned gifts, legacy gifts, and endowment are closely tied

Annual gifts – from income “Lasting” gifts – from assets Continuation of the relationship with

the donor

The Fundraising Pyramid

ANNUAL GIVING

MAJOR GIVING

PLANNED GIVING

Donor Commitment

Nonprofit Contact

Building Relationship with Donors

The most exciting – and strengthening – element of this process is building closer relationships with donors – sharing their visions and goals

Conversations let you get to know a donor

It takes more than one conversation And it requires a strong infrastructure

Balancing Solicitations

One of the greatest concerns expressed by staff and boards is: How do you balance needs and solicitations?

You have limited staff and budget. And you cannot afford to lose current

revenue. You may feel you have to wait until the

time is “right” – but that day will never come.

An Exercise

As a group, tell me your greatest concerns about the impact of endowment on your ongoing fundraising.

The Infrastructure Required to Build Endowment

A Strategic Assessment

Your Strengths You have local and national resources. You have a strong, committed Jewish

community. You have a group of charities going to

the community at the same time – this will help in education and marketing

A Strategic Assessment Your weaknesses:

Most of your organizations are new to the process.

Most of your organizations have limited staff.

Staff is not trained in complex gift options.

It may not be easy to build infrastructure, assemble, and manage the volunteer team – and expand the marketing.

A Strategic Assessment

Your Opportunities: You’re creating a long-term resource. An endowment provides funds to

capitalize on opportunities or expand strategically.

You’ll have resources to respond quickly to critical and urgent needs.

You’ll have resources to take on new ventures not covered by annual revenue.

A Strategic Assessment Your Opportunities

You’ll have the opportunity to build stronger relationships with your donors – sets the stage for ongoing communications.

You can do it right – you’re starting at the beginning.

You can build strength in the Jewish community for Jewish causes.

There is an enormous transfer of wealth underway - $41 to $136 trillion

A Strategic Assessment

Your challenges: Articulating the case for

Legacy/endowment, and building it into conversations with donors.

Finding the time to prioritize the work. Changing the culture of your organization

to build donor relationships Positioning endowment to encourage

donors to make annual, capital, and endowed gifts.

An Exercise

Divide into teams and identify your organization’s greatest strengths and weaknesses in building endowment. You may select up to 3 of each.

The Case Statement

The internal case for support: Start by building the case among staff and

board Why do you need endowment? Take the board through the exercise of

answering these questions: Do you have a long-term purpose? Do cyclical economic variances impact annual

fund? Do you have new programs you want to

pursue – but no dollars?

The Case Statement

The questions, continued: Do you anticipate future needs not

currently funded? Is there more competition for annual

gifts? Are you dependent on grants? Are you losing donors through

mortality, or a move from the community?

The Six Greatest Concerns

How can we hold money for the future, when there are so many needs today?

We will appear rich.

We don’t want restrictions on gifts.

Won’t endowment giving hurt annual giving?

These gifts seem complicated.

This process costs money.

The Case Statement

The external case – why donors should give Should inspire vision Should inspire passion Should be urgent Should involve the donor

See page 15 – Ray Lynn Wilbur statement

An Exercise

Make a list of the top five elements of your case for support.

Gift Acceptance Policies

Primary benefit is to maintain discipline, while opening doors to additional assets

Often come late in a development program as charities move beyond cash and marketable securities

There is organizational and board liability for mistakes.

Gift Acceptance Policies – Why?

1. Decisions on a case by case scenario are inconsistent.

2. The glittering appeal of the gift obfuscates good judgment.

3. Without policies, you may send mixed signals to donors.

4. Good policies will keep donors from making mistakes.

Endowment Policies

Location and form of endowment Spending policy Minimum fund sizes Broad areas of endowment How decisions are made Publication and stewardship Investment management Other issues

Effective Data Management

Data is gold – the key to prospecting Data is key in building relationships It’s about more than membership or

annual giving – it’s about who they are and how they relate to your organization

Others can not sort, remember, or analyze what’s in your brain – unless you reduce it to data.

Key Data

Name, address, contact

Electronic as well

If family, key decision makers

Method of solicitation, contact

Personal interests

Family structure and interests

Volunteer history

Giving history Use of services

Sound Fiscal Management The scandals of a few have created

concerns about all No longer get “the benefit of the

doubt” – and you shouldn’t - you should have sound policies.

Dual controls and active board review

Standards for donor response Transparency to public

Building the Legacy Team

You need staff and volunteers – but will need to work with the resources you have

Rely on outside help for technical advice and guidance

Rely on staff and board to ensure key infrastructure is in place

Rely on volunteers to have conversations with donors.

Building the Legacy Team

Be patient – endowments and legacies take time

Remember you’re working with your best donors

Build a well-informed, motivated, inspired team

Each individual should understand the role they play in success

The Role of the Board

Engage in planning Participate in endowment design Ask questions! Ensure accountability Review regular report on progress Support process in budget Provide support in outreach Adopt policies, including ethics Consider a gift!

The CEO’s Duties

Drive strategic planning

Oversee case statement

Ensure board is on board

Make regular reports to board and staff

Recruit planned giving committee

Define endowment form Draft resolution to

commit gifts to endowment

Assign oversight of endowment

Set goals Establish way to

distribute Support calls

The CFO’s/Treasurer’s Duties

Work with development staff to create endowment agreement

Review administrative requirements

Make checklist for endowment support

Work with investment committee

Prepare quarterly and annual investment reports

Follow through on receipt of gifts

The Development Officer

Work with CEO/ED on case statement

Identify budget needs

Prepare marketing materials

Make calls on donors

Prepare gift proposals

Close and report gifts

Follow through with CFO/Treasurer

Contact donor after fund operational – send update

The Volunteers

Embrace learning curve!

Learn to articulate the case.

Consider a personal Legacy

Give thought to the impact of your gift.

Make the calls! Get help when you

need it.

Setting Goals and Objectives

Shaping expectations on goals – two common mistakes The expectation the endowment will

address short-term funding issues Expecting planned giving to generate

instant returns

Begin with Conceptual Goals Building the financial base of your charity Identifying new donors – and cultivating

connected donors Creating a marketing program to create

greater visibility Creating visibility for endowment and gift

planning Improving infrastructure Engaging board and volunteers

Next, Set Specific Goals

Year One Strengthen data management Building donor information Create prospecting process Adopt key policies Create marketing plan Update current marketing platforms to

include key messages Develop method of tracking calls

Next, Set Specific Goals

Year One (continued) Create recognition society Make calls on top 50 prospects Obtain endowment gifts from 50% of

the board Obtain endowment gifts from 20% of

former board Train staff/board on

endowment/planned giving

Next, Set Specific goals

Year Two Raise board participation to 75% Obtain 10 additional endowment

commitments from former board Make calls on top 75 prospects Celebrate success at 1-year mark Send letters to 500 endowment

prospects Create professional advisory council Expand staff to support activities

Next, Set Specific Goals

Year Five 150 members of the recognition society $2 million in endowment assets $10 million in endowment

commitments 150 ongoing solicitations per year Active committee/task force Active advisory council

Track Indirect and Direct Revenue Producing Activities

Indirect: Number of prospects qualified Number of records reviewed Number of training sessions/volunteers

trained Number of telephone contacts, written

contacts, personal contacts Number of seminars, events

Track Indirect and Direct Revenue Producing Activities

Direct Gift commitments – irrevocable and

revocable Cash revenue

Drafting the Implementation Plan

Start with your goals Incorporate infrastructure needs

(from assessment) See page 28

Task People responsible Staff/volunteer resources $$ resources Timeline

Tracking and Reporting

Update progress on quarterly basis Report internally - one page report

for consistency Report externally – thank donors

and report impact

Basic Marketing Strategies

Opportunities for Donors

Creating a Legacy is a joy – not a burden.

Donor can select the charity and purpose for Legacy

The gift can involve or honor family The gift should fit within context of

other planning Opportunity to give back Opportunity to change the world

Challenges to Donors It is uncomfortable to talk about

bequests or death – “I’ll take care of it later.”

How do I balance family with charity? Where do I start? Why do you need the money? I’m not wealthy. This is complicated. My family doesn’t live here.

The Many Facets of Donor Motivation

Commitment to role of organization in Jewish community

Deep religious faith Commitment to “give back” Services provided Contribution to quality of life Personal gratitude for success

The Many Facets of Donor Motivation

Memorial Facilitating change Desire to influence or control

activities Guilt Tax incentives

Donor Motivation: High Net Worth Philanthropy Study 2006 Study Focused on philanthropic profile,

motivations and goals of high net worth individuals (income >$200,000, assets >$1 million)

3.1% of all U. S. households 98% of group made gift to charity in

2005

Type of Gift Vehicles Used

Type of Gift % Who Have Created

Capital campaign 64.6%

Bequest 41.2%

Stocks/mutual funds 31.8%

Created foundation 19.5%

Created donor advised fund 15.9%

Important Motivations for Giving

Motivation % of Respondents Citing

Meet critical needs 86.3%

Giving back to society 82.6%

Reciprocity 81.5%

Bring about a desired impact 68.5%

Nonprofits should do what government cannot do

64.4%

Factors That Would Prompt Additional Gifts

Factor % of Respondents Citing

Spent less money on administration

74.8%

Donor can determine impact of gift

58.3%

Donor felt more financial secure

52.0%

Donor received better return on investments

46.6%

Donor not already financially committed

40.2%

Center on Philanthropy at IU Bequest Study

Report in March 2007 Combined high net worth with

surveys in Indiana, St. Louis, Memphis Goal to identify potential bequest

donors, and donor motivation 48.4% had a will

FindLaw 44.4% (2002) NCPG 42% (2000)

Age Demographics for Those With Bequest in Place

Age Bequest Study HNW Philanthropy Study

30-40 8.9% 1.4%

40-50 28.1% 9.4%

50-6- 21.9% 19.3%

60-70 20.6% 27.5%

70-80 11.0% 25.1%

80+ 8.9% 17.3%

Age Demographics for Those Willing to Consider a Bequest

Age Bequest Study % of Sample

30-40 18% 18.2%

40-50 28% 28.8%

50-60 24% 18.3%

60-70 5% 10.9%

70-80 3% 7.8%

80+ 1% 3.7%

Bequest Intention Potential

>$25,000

$25,000 to

$49,999

$50,000 to

$74,999

$75,000 to

$99,999

$100,000+

Bequest currently in place

6.6% 7% 7.6% 6.5% 10%

Would consider putting a bequest in place

28.4% 34.6% 28.8% 25.99% 35.63%

Giving Interests – Generational Differences

Younger donors are less likely to contribute to religious causes.

Generational Differences

After controls were factored, age had little impact on amount.

Motivations varied by generation – but not as varied as you would imagine.

Motivations for Giving – Generational Interests

Millen. Gen X Boomer Silent Great Overall

Basic needs poor

39.4% 39.6% 44.9% 46.7% 52.3% 43%

Better com-munity

34.3% 39.4% 35.9% 34.5% 36.7% 36.7%

Self help

28.5% 34.3% 38.6% 41.3% 43.9% 36.7%

Better world

44.5% 37.3% 33.8% 31.9% 26.5% 35.4%

Help – those w/ less

28.7% 27.8% 27.8% 28.5% 21.7% 27.9%

Generational Difference

Educational level affected donor motivation College degree more likely to cite

“responsibility to help those with less” and less like to “meet the basic needs of the poor.”

Identifying the Best Prospects

Internal: Multi-year donors Members Major gift donors Long-term leadership Long-term volunteers Current board Corporate leadership Staff

Finding the Best Prospects

External Community investors Always start internally

Educating Prospects (Marketing) Integrating the Legacy Message in

Current Platforms Annual report Website Annual fund solicitations Substantiation and “thank you” letters Stationery Newsletter Board meetings Annual appreciation luncheon

An Exercise

As a group, let’s brainstorm to identify current marketing platforms that may be available to you.

Create an Endowment/Legacy Brochure

A word from the Board Chair, Legacy Chair, President

The case for Legacy/endowment The endowment structure, options

in giving Basic giving options Two donor stories Reply form

An Exercise: The Most Effective Marketing Materials

What is the single most effective piece of endowment marketing material you’ve seen? Why?

Conversations with Donors

Making Calls on Potential Donors

The personal call is the most powerful, effective marketing tool you have.

Cannot be reduced to a formula. The good news is, it’s driven by the

donors interests – so easy to do. Planning is critical:

Information Calling strategy

The Secret for Success: It’s All About the Donor

Here’s where you start: Information about the donor’s

relationship with your charity Info from public sources Anecdotal information from staff

What You Must Know Before the Conversation

The strategy – why you’re there Why you picked this donor Basic gift options

Outright gifts Gifts that pay income Deferred gifts

Endowment options What happens to the money

Assembling and Training the Calling Team

The importance of volunteers Willing to be training and make calls Know the charity well Have made personal commitment Have participated in training

Training the team Role of endowment Purpose of Create a Jewish Legacy Strategy behind prospect selection Role of volunteer Basic gift options

The Top Fifty Prospects

Use identifiers discussed earlier Share list with volunteers Allow the volunteer to select 2 to 3

names they are most comfortable calling on

Setting Up the Call

Step One – review the info. Step Two – send the letter. Step Three – follow up. Step Four – set a time to meet. Step Five – follow the phone call

with a letter confirming the meeting time and place.

An Exercise: What Are Your Greatest Fears?

As a group, share the donor question or response you most fear as a part of this endowment conversation.

The Course of the Call

Establish a relationship with the donor How long have you been a donor to our

charity? When did you make your first gift – and

why? What are your concerns as you look out

10 to 20 years? What do you believe are our greatest

opportunities and challenges?

More Questions

What are the charitable interests you are most passionate about in the Jewish community?

How have you supported those interests? Do you realize you could create a fund

with our charity – either today or through your estate – that would address those priorities?

Would you like to talk more?

And Still More:

What is the most significant charitable gift you have ever made?

Why? What are your goals for you children,

grandchildren in philanthropy? Do you have an estate planner you

work with you can recommend to others?

Listen Carefully – Financial Needs

My CD income has been cut in half! The dividends and interest from my

investments has dropped dramatically. I wish I could sell my stocks – but I

don’t want to pay capital gains. I’m worried about taking care of my

parents – and my children! I have a child with disabilities – they

are my first priority.

Listen Carefully – Financial Transactions

My brother and I are going to sell land we inherited from our parents – tired of taxes, management, and conflict.

I’ve decided not to pass the family business to my children – I think I’ll sell it now to maximize its value.

I’m worried about having enough income in retirement – I think I’ll sell my stocks and buy tax-exempts

The Course of the Call

Share information about your charity.

Qualify the donor. Move the prospect to the next step. Ask for the gift.

Know the gift goals. Donor must be qualified. Determine amount and type to suggest. Set time to make the ask. Who should be there? Thank the donor.

The Follow Up

The follow up is key to your success – endowments are built overnight, and deferred gift decisions are not made on the first visit.

Make notes about the call, the information developed, and steps required for follow up.

Assess the value of the call. Make a list of follow up items. Send a thank you note for the call.

Seven Secrets for Success

#1 Find the Right Donors

It’s all about the donors Commitment better indicator than

wealth Ownership is key Find a way for each to participate

#2 Communicate Clearly and Consistently with Those Donors

Communication must express expectations.

Communication must be ongoing. Potential donors should be able to

identify themselves as the target and get key information on how to move forward.

#3 Stewardship is King

Stewardship is king Can’t begin with campaign – must

begin earlier Hard to find time when in planning –

make time Set stewardship as campaign value

#4 Spread the Endowment Building Responsibilities

CEO/ED duties CFO/Treasurer duties Development staff duties Board and volunteer duties

#5 Report, Report, Report

Boards love facts, figures and success.

They prioritize those activities heavily reported.

They must engage and take ownership of the results.

Treat every report like a donor call – provide stories, incentives, results, impact

#6 Never, Never Quit Building

The best campaigns reach goal and keep going.

Think about Harvard, Yale, etc……..they fundraise for endowment daily.

Also remember, many of these gifts will be revocable – don’t send the message you don’t need the gift any more.

Final Thoughts

Success requires a plan Focus on best prospects Make those calls Keep endowment visible Know the answers Stay with it! – building endowment

is an ongoing process