Managing the Donor Downgrade · 2019. 1. 29. · upgrading have created a competitive fundraising environment where managing the Donor Downgrade will be critical to your overall success

Northern California Planned Giving Conference

May 4, 2018

© Copyright 2018 by Sharpe Group All Rights Reserved 1 www.SHARPEnet.com

Managing the Donor Downgrade

Barlow T. Mann, J.D.

C.O.O. & Legal Counsel Sharpe Group

[email protected]

901.680.5311

Multiple challenges are facing

many programs

Donor acquisition, retention and

upgrading have created a competitive

fundraising environment where managing

the Donor Downgrade will be critical to

your overall success going forward.

The majority of fundraising programs

have been flat or down in recent years.


May 4, 2018


A number of factors are at play.

• Demographic

• Economic

• Tax

Demographic

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

17 20 23 26 29 32 35 38 41 44 47 50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95

Nu

mb

er

of

Bir

ths

Year of Birth

Births in Americafor Period 1917-1997

70 60 50 40 308090

- 23%

- 27% + 87 % + 33 %


May 4, 2018


Economic

Some are still recovering from The Great

Recession and Financial Crisis of a

decade ago.

Greater economic inequality exists now

than before the Recession.

Tax

The biggest tax reform act in 30 years

could cause huge reductions in charitable

giving of between $12 and $24 billion per

year.

With most of the largest generation of

donors in history turning 70 over the

next 15 years, are you prepared to

manage the inevitable “Donor

Downgrade”?


May 4, 2018


Remember, people tend to make

different types of gifts at different points

in their lives based upon their particular

interests and capacity.

Three Types of Gifts

• Regular

• Usually unrestricted cash

• Special/Major

• Cash or property, often restricted

• Ultimate/Planned

• Cash or noncash, usually unrestricted

The Later Years

Age 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

0

25

50

75

100

125

150

175

200

225

250

275

300

325

350

375

400

425

450

475

500

CAPABILITY

MOTIVATION

ULTIMATE

SPECIAL

DEFERREDGIFTZONE

REGULAR

Sharpe Donor Lifecycle© Copyright 2018 by Sharpe Group

Generation X/Millennials Baby Boomers G.I./Silent Generation


May 4, 2018


Most of the focus has traditionally

been on donor ...

• Acquisition

• Retention

• Upgrading

But the demographic, economic and

tax factors will increase the importance

of developing a strategy and tactics to

manage the “Donor Downgrade.”

How many of you have programs in

place to recognize gifts by size?


May 4, 2018


How about recognition of

cumulative giving?

How many of you are confident that

all of your older donors will continue

to make gifts until they die?

Regular and special giving may begin

to wane just at the point where some

donors traditionally begin to seriously

consider ultimate and planned gifts.


May 4, 2018


Household income tends to peak in the

45-65 age range,

and net worth tends to peak slightly

later before beginning to decline.

Age 60-70 is a time of transition for

many people as they consider:

• Social Security 62-70

• Medicare 65

• Retirement Plans 59½-70½

• Tax & Economic Issues Ongoing

By age 70, the majority of people

are retired—or semiretired—

collecting social security, on

Medicare and experiencing a drop

in household income from the loss

of earnings.


May 4, 2018


Yet many charitable and nonprofit

organizations have large numbers

of donors in the 65-85 age range.


May 4, 2018


Economic/Demographic Stages

Young (<50) Middle Age (50-70) Older (>70)

Work/career Entry & moving up Career peak Mainly retired

Household income Low/increasing Peaks Declining

Home ownership Low/increasing High/increasing Highest

Debt Increasing Peaks/declines Low

Wealth Low Increasing/peaks High/declines

Median Household Net Worth by Age

Age 2007 2016

35-44 $99,100 $59,800

45-54 $207,600 $124,200

55-64 $285,300 $187,300

65-74 $268,800 $224,800

75+ $239,700 $264,800

Median Household Income by Age

Age 2007 2016

35-44 $71,914 $74,481

45-54 $75,794 $77,213

55-64 $66,429 $65,239

65-74 $41,710 $49,072

75+ $26,891 $31,313


May 4, 2018


Are you ready to master the Donor

Downgrade process?

1. Recognize that every donor will

lapse or stop giving eventually.

2. Recognize challenges facing older

donors and encourage appropriate

gifts now and in the future.

3. Segment your donor file by age, wealth

and giving history, and target your

fundraising communication to the right

people at the right time in their lives to

consider various gifts


May 4, 2018


Divide your active current donor file by

age and wealth.

Age Wealth

Young (<50) Modest (<$250,000)

Middle Age (50-70) Moderate ($250,000-$1,999,999)

Older (70+) Wealthy ($2,000,000+)

The goal is to create a Donor Matrix

with nine segments.

A1 B1 C1

A2 B2 C2

A3 B3 C3

YOUNGER MIDDLE-AGED OLDER

WEALTHY

MODERATEMEANS

LIMITEDMEANS

Sharpe Gift Planning Matrix©

Copyright 2018 by Sharpe Group


May 4, 2018


Continue to market regular, special

and ultimate gifts but recognize

changes that are occurring among

those in their 60s or 70s.

Tactics to Consider

• Recognize cumulative giving

• $1,000+

• $10,000+

• $100,000+

• Recognize longevity of giving

• More than 10, 20, 25 years

• Recognize year of first gift

Listen for the “I’d like to give but ...”

• ... I just don’t have the cash I had before I retired.

• ... I need to plan for my upcoming retirement.

• ... I am concerned about running out of money.

• ... I am helping with my children’s (or

grandchildren’s) educational expenses.

• ... I do not want to disinherit my children.


May 4, 2018


Evaluate lapsed donors by age and

giving history.

Create separate strategy for older

donors who appear to be in danger

of lapsing for regular gift purposes.

Should the process for renewals of a

long-term donor over the age of 75-80

be the same as a 45-65 year-old donor

who has only made a single gift?

Developing and mastering a

strategy now for managing the

Donor Downgrade will extend and

expand giving from the large

Boomer Generation.


May 4, 2018


This is especially important

because the Boomers are in the

process of transitioning into the

older group of donors while the

much smaller “Baby Bust” Gen-X

group will not be large enough to

replace giving of the Boomer

Generation.

Conclusion

Carefully managing the aging Boomer

donors will maximize that generation’s

giving by increasingly combining and

blending regular, special and ultimate gifts

to meet the needs of the largest generation

of donors in history.

Questions & Answers


May 4, 2018


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Documents

Managing the Donor Downgrade · 2019. 1. 29. · upgrading have created a competitive fundraising environment where managing the Donor Downgrade will be critical to your overall success