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How Wealth Screening CAN'T help you.
38 Plays7 months ago
In this episode Tom shares some of the realities of wealth screening results, where they fall short and how to understand what those optimistic results really mean.
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Transcript
Introduction to Wealth Screening
00:00:03
Speaker
Welcome to the Abundant Vision Fundraising Podcast. Whether you're a seasoned professional or a first-time fundraiser, we have the advice you need to take your next step towards major gift mastery. I'm your host, Tom Dauber, president of Abundant Vision Philanthropic Consulting. Today is part two in a four-part series on wealth screening and qualifications. Last week, we discussed how wealth screening can be helpful.
Misconceptions about Wealth Screening
00:00:29
Speaker
Today, though, I want to spend some time looking at the downsides of wealth screening. What I mean is some folks mistakenly think that all their problems are gonna be solved in terms of qualification if they just go out and pay for wealth screening.
00:00:44
Speaker
It isn't that simple. And here's a few reasons why. So last week we talked about the different sorts of things that a wealth screening looks at in order to evaluate a potential donor's ability to give. Well, usually Well, almost exclusively, it's looking at publicly available information about that donor, primarily their real estate. Well, that's great. Real estate can tell you a lot of things about somebody, but here's what it's not gonna do. It's not gonna tell you anything about a donor's privately held assets.
The Hidden Wealth of Frugal Donors
00:01:23
Speaker
It can't tell you how large their IRA is. It can't tell you what's in their savings account. And even their real estate might be hidden in an LLC. So just get that through your head right away. If you're seeing a number in a report from a wealth screening software package, that could just be the tip of the iceberg for what else is there. Upside, like let's say somebody has a lot of affinity for you and you can tell that by maybe their their frequency of giving or the way they come to your stuff or serve with your organization. But just because your wealth screening software doesn't show them having a lot of capacity, that doesn't mean it's true. I think we've all seen those news reports when the person you'd least expect, the janitor,
00:02:16
Speaker
the shoeshine guy, the school teacher end up leaving a large amount of money to an organization that they've loved their entire life. Those sorts of folks aren't showing up on wealth screening. Nobody knows they're good
Why Donors Hide Wealth
00:02:30
Speaker
savers. Nobody knows they're living a life of great frugality and intention, but they are. You can find those people. We'll talk more about that in another episode.
00:02:42
Speaker
So one thing that you've got to keep in mind is that donors often hide their money. Now, why, why would they do this? Trying to be secretive or they, you know, uh, they have some nefarious purpose. No, oftentimes they want to be a good, a good member of their community. They don't want to make people feel weird. They want to fit in.
00:03:10
Speaker
They don't want to be used for their money. They don't want to be seen as nothing more than the sum of their bank account, right? I can think of a professional that I knew who lived in Appalachia, and he drove a pickup truck. He wore jeans and t-shirts. He was a very down-to-earth sort of guy. He didn't want his clients thinking that you know he was profiting obscenely off of their business. He wanted to be seen as just another person in the community. He was being caring. He was being thoughtful and considerate of his neighbors.
Limitations of Wealth Screenings
00:03:51
Speaker
you know when we think about When we think about real estate, even though that may be something that comes up on a wealth screening, it might not, especially if it's not
00:04:03
Speaker
a donor's primary residence. Many landlords, many real estate investors have LLCs that don't have their name on the LLC directly, and their real estate might be hidden in that. So again, just because someone isn't showing up as a high net worth individual on your wealth screening, you should not take that as the gospel truth that they are indeed not a yeah ah net worth individual. Now, when you do these screenings, it's gonna give you a giving capacity. Now, that giving capacity is meant to represent
00:04:49
Speaker
the total amount of money that they have to give for charitable purposes over a five year period. So if you see a million dollars, that does not mean that you can go ask them for a million dollar check. That means you could ask them for a five year pledge of a million dollars, right? So 200,000 a year.
00:05:09
Speaker
for five years. However, very few donors give at 100% of their capacity. Even fewer direct 100% of that capacity toward a single organization.
Psychological Factors in Giving
00:05:21
Speaker
So if you see a million dollar rating, don't assume that your organization will get that much money from the individual. I've found it's helpful to assume 50% of that number. Now I will ask a donor for twice as much as I think they're gonna give me,
00:05:37
Speaker
But as far as that wealth writing goes, again, I assume 50% of that number. Like if I'm going to go to my executive director and say, hey, look at what the wealth screening turned up. We've got.
00:05:49
Speaker
50 million sitting out there with these donors and their potential gifts, right? Well, don't give them 100% of that number because you're going to be misleading him and you're going to be over promising and under delivering. I promise you that. You want to assume 50% of that number. And why? Well, the average major gift donor typically supports between six to 10 charities annually. The exact number can vary based on factors such as the donor's financial capacity, philanthropic goals, engagement level with specific causes. Some individuals work even more than that. Now, if I'm making projections, which is not the topic we're covering today, I'll take that 50% and I'll assume I'm going to get half of that 50%, right? So 25%.
00:06:42
Speaker
um Again, because we always, in this profession, want to underpromise and overdeliver. Now, that capacity number doesn't account for the donors' trust in the organization and the way they view themselves.
Personal Stories and Peer Influence
00:07:00
Speaker
There's a psychology to giving.
00:07:02
Speaker
And it may take significant time for a donor to feel as if they can make a major gift, even if it's well within their ability to do so. So I think about one donor that I met with. And I had spent years getting to know this individual. And so he was very comfortable talking with me about his financial situation.
00:07:26
Speaker
I knew how big his IRA was because he disclosed it to me out of concern for what the government was going to do with his IRA if he didn't make some charitable decisions with it. But we had a conversation once um about a cash gift and we were talking about what it meant for him to be retired. And he said to me, you know, Tom, I've been looking at these numbers with my financial planner for years.
00:07:53
Speaker
And they're good numbers. But this is my first time not being employed. This doesn't feel real. These are just numbers on a piece of paper to me right now. And I have a lot of anxiety about giving money away when I don't have full confidence in this IRA that up till now has only been theoretical, right? So psychologically, there was too much discomfort for him to entertain a major gift. I had to be sensitive to where he was in his journey and where he was psychologically and the way he was thinking about giving. Tom Dauber here for Abundant Vision Philanthropic Consulting.
00:08:34
Speaker
Fundraising can be hard work and it can be hard to mentally get into the place you need to be in order to see new opportunities. Everyone struggles with it. We are like the fish in the fishbowl who just can't see the water they're swimming in. That's when having outside expertise comes in handy.
00:08:53
Speaker
For 25 years, I've been helping nonprofits analyze the challenges, discover new ways forward, and develop clear plans that lead to greater fundraising
00:09:18
Speaker
Now back to the show. The other person you might run into is the person who has capacity. who loves your organization, but maybe they've only given relatively modest gifts compared to what their capacity is. So let's say you have a person that's giving you $1,000, $5,000 a year. Well, that might be a really nice gift in some organizations, right? Might even be a major gift for some organizations. But for this individual, maybe they have million dollar capacity.
00:09:53
Speaker
Well, you're typically not going to lift someone one from a thousand or $5,000 to a million dollars in a single gift with a single ask. They may not view themselves as the sort of person that can make a seven-figure gift.
Prioritizing Personal Engagement
00:10:14
Speaker
There's a donor that I know who kind of fell into that situation.
00:10:20
Speaker
and What he shared with me was that it wasn't until he went to campus and he saw a peer with their name on a building and he inquired, how did my peer get their name on that building? And and he was told, well, they made a million dollar gift to this organization. And that's why their name is on the building. And he did not view this peer as someone who was more successful than him. In fact, I don't think the peer was more successful than him, but it began to stretch his self-concept about what he could possibly do. Some time passed. He continued giving. His gifts increased in size. And finally, he decided, hey, my buddy did this. I know
00:11:11
Speaker
I can do this too. But it took time. It wasn't an overnight process. And we'd be mistaken to not take that into consideration when we're thinking about our donors. We've got to talk with them and learn about what their comfort level is.
00:11:27
Speaker
Just because our data says that they can make a gift doesn't mean psychologically they're in a place to make that gift. So let's not make assumptions. Let's ask them questions. Let's find out from them what type of range of gift they would like to make in our conversation. And we'll talk more about that in a later podcast. Ultimately, you know none of this type of wealth screening can replace the hard work of doing in-person qualification visits. Wealth screening has the potential to miss so much private data and just nothing replaces meeting in person and getting to know a donor personally. If there's one thing that you take from this series of podcasts, I hope that's the thing that you need to get out in front of your donors.
Defining a Major Gift
00:12:23
Speaker
I'll tell you, I think about a time I visited a donor and I knew this donor had
00:12:28
Speaker
Wealth, A, because of where they lived, B, because of what I knew they did with their career. They were a very highly placed executive in one of the most recognizable companies in the US.
00:12:42
Speaker
um And so there was no doubt about their capacity to give. But when I went for a home visit the first time, and they escorted me to the back of the house to leave my jacket in a guest room, and I looked at the wall in the guest room in the back of the house, and I saw an honest-to-God Monet on the wall. A Monet. I have an art degree. I took a lot of art history as part of that art degree.
00:13:13
Speaker
it was definitely a real Monet. When I saw that, you know i I looked at my hostess and I said, oh my goodness, is that a Monet? And she said, yeah, yeah, mom really loved collecting art. And you know we all argue about who's going to get that someday, but sure is a ah real Monet. I did all I could to keep my mouth shut because I wanted to just drop my jaw to the floor.
00:13:42
Speaker
um It was remarkable. And then there was another time I was talking with an alum and I was chatting with him about different other graduates from the school. And he was telling me about a classmate who was a patent holder on one of the most commonly prescribed drugs that's out there. Again, had to keep my jaw from dropping.
00:14:09
Speaker
You may know that if you hold a patent on a drug and it goes to market and becomes a commonly prescribed thing, you're doing very well, remarkably well. See, both of these situations significantly impacted the strategy and planned asks for each of these individuals, but I would have never known them had I not done the relational work to learn these things. Wealth screenings,
00:14:36
Speaker
to my knowledge, aren't typically looking at patent information. They could. And as AI gets better and better, they probably will. And they're not going to know about what artwork I bought, right? So while screenings are great, but they are no replacement for getting in front of donors and learning about their lives. Now, one last thing I want to cover before we end. So we're talking about major gifts and qualifying people as major gift prospects.
00:15:04
Speaker
A really important thing for your organization is to identify what is a major gift at your organization. Now, that could be a whole nother podcast, but I want to address it here before we go. Think about all the gifts to your organization. Think about what's that top 10%, 20% of gifts to your organization.
00:15:27
Speaker
early whatever that threshold is, I would think about that as my major gift level. And it may change over the time. I mean, when I started at the Ohio State University, our major gift level was $25,000. And I was at a dental school, and I swear to you, I think pretty much every single one of our alums at the time could have qualified as a major gift prospect with that threshold.
00:15:57
Speaker
Three years later, they bumped it up to 50,000. Still, quite a few of them could do that, right? And then three years after that, they bumped it up to 100,000. Holy cow. Many of us, especially as it was probably younger in the fundraising world at the time, we were all thinking, oh my gosh, how in the world am I ever gonna qualify people at this level when everybody's been used to 25,000 and $50,000 asks?
00:16:26
Speaker
Well, believe it or not, it went fine. We found lots of people. We raised a lot more money. It was really quite transformative for the university, I think. But all I'm saying is that you need to be thinking about that number and how it relates to your organization. And you do that by looking at what is the capacity generally of your donors? What are they giving? And then thinking about the top percentage of those donors.
Conclusion and Call to Action
00:16:57
Speaker
Anyway, that's all the time we have today, but join me next week to learn about the questions you need to be asking. if you want to qualify a donor who's been identified through wealth screening. If you've enjoyed today's episode, please be sure to subscribe and give the Abundant Vision fundraising podcast a five-star rating on your podcast provider. And hey, if you see something you like, please share it on social media. Love to get the word out about this podcast and get more people involved with us.
00:17:28
Speaker
Thanks for joining me, Tom Dauber, on the long, long journey to Major Gift Mastery on the Abundant Vision fundraising podcast.