BACK TO BASICS. Debra Johnson Darling Director of Prospect Development Washington and Lee University

Transcription

1 BACK TO BASICS Debra Johnson Darling Director of Prospect Development Washington and Lee University

2 Goal of today s presentation: Define purpose of qualification research Identify free and/or low-cost resources Review comprehensive and surgical search techniques Discuss various sources of wealth and how to analyze them Provide guidelines for estimating capacity to give

3 Qualification Research Purpose to preliminarily rate their capacity to determine which bucket/pool/area of focus in which they belong Major Gifts Planned Giving Leadership Annual Fund Personalized Appeal v. General Appeal Board solicitation Special project

4 Qualification Research Purpose to preliminarily rate their capacity Why? Takes several factors to make someone a viable prospective donor for your organization, but the others don t matter if they don t have

5 Qualification Research Should be quick (less than 30 minutes) Stop when you have enough to make a decision Confirm it is your person who owns the asset(s) Locate assets that reveal a capacity to give at the level you are seeking Indicate in your research notes how you derived your rating, where you stopped in your research, and what the next steps would be

6 Research using Free Resources Have a methodology, but don t be a slave to it, be flexible Determine what you need, then decide what resources you need to check Time is money Google and other Internet sites may be free to use, but if it takes you hours to find what you need while keeping you from doing other important things, you are digging a budget hole.

7 Research using Free Resources Where to start? Depends upon how much you already know and how much you have left to find If no home address, utilize online directory like Search under both husband and wife s names (if known) confirm match: by initial, or other names included in the household like spouse or children, or age.

8 Research using Free Resources Switchboard.com: other tips Use state only + name to find additional residences (if unusual name) Use reverse search if only have phone number to find home address OR to find full name if you only have nickname, i.e. Deb Darling.

9 Research using Free Resources Once address and full name are confirmed, obtain estimated value of real estate (if own a home) Google Advanced Search: Enter full address and search results will pull up Zillow, Trulia, Home, and other real estate/realtor websites

10 Research using Free Resources Enter apartments, especially in larger cities like NYC, Chicago, LA, because you often can find apartments for sale in the same building and you can extrapolate an average value from those. Key pieces of data: Estimated market value Size of home and lot plus extra features, i.e. 5 bed, 4 ½ bath 5500 sqft home on 2.5 acre lot with indoor and outdoor pool Purchase date and purchase price Photo of property I usually don t include this in my research but sometimes a picture is worth a 1,000 words and can be instrumental in showing that the estimated market value may be much too conservative (or would be a nice place to host an event!)

11 Research using Free Resources STOP! Now that you have the value of their home, is that enough to qualify them for the purpose of your research: $2.5 million home $1+ million home $500,000 home $250,000 home Less than $250,000 home Depends are they a candidate for a $50K gift yes probably to the first two, maybe the third depending upon where they house is. Should they receive an Annual Fund appeal for $10,000 yes to first two groups, $2500-$5,000 level for $500K; $1000 for $250K Need more information if we re talking about whether they are major gift prospects of $100K or more

12 Research using Free Resources Next step: obtain additional information to aid in determining capacity to give (biographical, career, philanthropy, income, assets, salary, inherited wealth) Utilize Internet search engine. Choose the one that works best for you; today I will be focusing on Google. Determine whether you need a comprehensive search (you know very little) or whether you need just a few key pieces of data to round out what you already know (the surgical approach) Go to Advanced Search page of Google and use exact phrase

13 Research using Free Resources Search using different variations of the person s name to make sure you are capturing all possible ways they may be referenced. Full Name: Professional name: Original name: Nickname: Occupation: Career: Former Job Geographic Debra Johnson Darling Debra J Darling Debra Jean Johnson Deb Darling Darling AND washington and lee Darling AND prospect research Darling AND bentz whaley flessner deb* darling AND virginia

14 Research using Free Resources Specific surgical searches. Gifts to others: Wedding: Obituary: Boards: Occupation: Names of family : Deb* Darling AND [give OR gift OR gave] Deb* Darling AND [charitable OR foundation] Debra J* Darling AND [wed* or engage* or marr*] Debra J* Darling AND [obit* or died or death] Darling AND obituary AND lexington virginia Deb* Darling AND [director OR trustee OR board] Darling AND washington and lee Son of Debra J Darling OR Daughter of Debra J Darling

15 Research using Free Resources Other tips: For females, search using their middle name (Jean) and their maiden name (Johnson) as their middle name and initial. Looking for gifts by your donor to a specific nonprofit: Utilize search engine on the nonprofit s website, OR Perform advanced search on Google and enter web address of the nonprofit in the site address field and then the name of your donor in the exact word or phrase box so that Google is only searching that website for your donor s name.

16 Research using Free Resources Do you have enough yet? If not: Test for corporate boards/stock holdings of publicly-held companies YahooFinance.com (free) Edgar J3SG (fee-based but minimal cost) Gives you more information. Provides upfront summary of all stocks (past and present) including past sales, as well as stock options. Provides alert feature on individual names, not stocks. Note: Forbes and others do summarize some of this data including directors fees and compensation.

17 Research using Free Resources Check proxy statements for corporate executive s compensation or director s who may own a lot of stock (Edgar, YahooFinance, or the company s website) Stock holdings review footnotes to determine whether stock owned indirectly can be attributed to your donor s net worth or not Director s compensation check # of meetings held, which committees on and # of those meetings, in order to calculate total compensation plus check stock & stock options. Executive s Compensation beyond table of compensation, check details of exercised and unexercised stock options, information about retirement or non-compete clause, other perks afforded to that person that frees up income

18 Research using Free Resources After each search, stop and analyze what you have found. You may have new information that allows you to search in new ways or point you to different areas for information. For investment advisers, go to SEC Investment Adviser Search database: Search by individual name or by company name Look for assets under management, fee structure, # of partners, and # of employees. 2/20% rule

19 Research using Free Resources Recent articles indicate the 2/20% compensation rule is on its way out. Still can use to estimate a range. Per experts, the best hedge funds charge 2% annually of aum.and 20% of any positive performance. if you do that math, that's their gross revenue...expenses will be mostly employees and rarely more than 25% of gross revenues...and the balance gets divided among the ptrs...not necessarily equally, but that's a reasonable assumption Example: Person (who is one of five partners) for a firm that manages $900 million in assets: 2% of $900M = $18,000,000 20% of $90M = $18,000,000 (10% gain that year) Total Gross Revenue: $36,000, % of Gross Revenue: $27,000,000 Per Partner (5) share: $5,400,000

20 Research using Free Resources Final piece of the puzzle still using free resources: Income Salary.com by profession and region, adjust by time in profession AmLaw.com subscription-based but try your local library (has salaries for Top 200 law firms; can extrapolate from there) Google search of industry they are in and salary, i.e. executive search firm AND [income or salary or compensation and choose dates within the last 12 months. Industry-specific websites for professionals like AMA, ABA, APRA, etc. that do salary surveys for their members US Government website has salary scales for military, etc.

21 Additional Resources (Fee-based) Aggregator resources like WealthEngine, DonorSearch, ResearchPoint, and others search large numbers of databases at once to provide all the data in one quick easy search. Fee-based resources give you greater flexibility in search features. You can search by name and state to look for second homes when you don t know the address. DataQuick is a favorite stand-alone source that often covers properties that other databases don t. Additional data include: Purchase details such as mortgage company, type of mortgage, and amount of mortgage Additional mortgages Ownership names to include trusts, spouses, etc.

22 Additional Resources (Fee-based) FoundationSearchOnline (fee-based) Allows you to search by individual names to look for individuals who have a personal foundation or serve on a board, or look for foundations that may be prospective donors to your organization. Includes full 990s, current and past to look at all grants over timel JG3 (fee-based) for stock holdings see earlier slide. And many, many more but we have been very successful prospecting in our current $500M campaign utilizing only the resources mentioned in this presentation.

23 How to put it all together Step back and take a look at the data that was found Take a deep breath this isn t rocket science (though it feels like it!) List known assets and key factors that impact wealth positively or negatively. Pick the time-tested formula that best fits the data you have and adjust based on what you know. Remember this is a preliminary rating we re not trying to determine how much the final ask will be. All we re trying to do at this point is put them in the right ball park, i.e. Assign to major gift officer for discovery Place in leadership AF pool Add to bequestor mailing, etc.

24 Example when you only have home value Consider the area in which the home is located, i.e. cost-of-living factor. For example, a $1 million home in Westchester County, NY (3 bedroom, 3 bath) is relatively modest compared to a $1 million home in Charlotte, NC (5 bed, 5.5 bath on a 2-acre lot). Description vacant land, mineral rights, agricultural. How much was borrowed? Multiple mortgages? Borrowed 80%, 50% or 0%? If no mortgage, significant. However, 80% financed doesn t always indicate illiquidity. Many high-networth individuals take the maximum mortgage because the interest rate to borrow is much lower than what they can earn on that money while they invest it. This is where it is important to know the other factors around your prospect to know how to interpret the data. Low value home but known high salary/other assets.

25 Example when you know more Look at all known assets/income and adjust up/down based upon known factors: Age # of Children/others dependent upon them Career path long climb or star out of the gate Inherited wealth Medical Issues Other philanthropic priorities

26 Estimating capacity: Look at all known assets/income Initial Rating EXAMPLE: A prospective donor own 2 properties valued at $4,000,000 (1 in Charlottesville, 1 in Manhattan) and is a director for a publicly-held company with stock valued as below): Wealth Indicator Multiplier Assets Total Real Estate > $2 million 25% to 20% (note: W&L is using 20% to 15% currently due to current devaluing of property not yet reflected in assessment values). $4,000,000 Total Real Estate <=$2 million 10% Insider Stock (direct) 100% $625,000 Insider Stock (indirect) 33% to 25% $2,500,000 Private Company Sales Private Company Value/Equity Worth 1% (adjust to ownership/industry) 10% (adjust to ownership/industry) Total Charitable Contributions 100% (W&L plus others) $1,000,000 Total Verifiable Assets $8,125,000

27 Estimating capacity: Adjust up/down based upon known factors: Adjust Formulas Up (increases ability to give) Adjust formulas down (decreases ability to give) 65+ years of age longer time to accumulate wealth Younger age less time to save money; typically highspending time: mortgage, children s education, parent s health, etc. No children or dependents High-paying jobs throughout his/her career Family/inherited wealth Frugal lifestyle Philanthropic Passionate believer in W&L, its mission, and programs Economic climate (in industry doing well) Long ascent to high paying job (started at bottom and worked way to the top) Not strongly motivated to give Distant or weak relationship with W&L Large number of children in private schools/college Spending lifestyle all money goes toward accumulating assets or maintaining lifestyle Large medical expenses Economic climate (in industry not doing well) Multiple sources of wealth

28 Same assets, different ratings Case 1: all we know is what is presented don t know age, occupation, family situation, etc. Initial rating=$1+ million Case 2: 65 years old, married, no children, works for hedge fund earning $15+ million/year (for at least 20 years), very philanthropic, LOVES your organization. Capacity rating=$10+ million Case 3: 40 years old, married, 3 children ages 8-18 in private school, works for hedge fund earning $15M/year, your organization is one of 5 top philanthropic priorities. Capacity rating: $500K. Case 4: 50 years old; never married, doesn t work; no signs of giving anywhere. Capacity Rating: $1+ million (capacity is capacity, likelihood may be zero, but capacity is still $1 million+) Remember: We don t have to be perfect at this stage just in the right ball park.

29 Final suggestions Learn industries in which the majority of your constituency is employed Learn the values of real estate/property in key areas where majority live Become expert in specialty areas if applicable like oil & gas leases, book royalties, etc. Learn cost of living factors Read the Wall Street Journal and regional business magazines

30 Questions? Debra Johnson Darling (540)