RESPONDING TO DONOR DEMAND-DIVERSIFYING YOUR FUND RAISING STRATEGIES. LSA 2018 CEO Academy Michelle L. Janssen, CFRE January 2018

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1 RESPONDING TO DONOR DEMAND-DIVERSIFYING YOUR FUND RAISING STRATEGIES LSA 2018 CEO Academy Michelle L. Janssen, CFRE January 2018

2 Agenda for the Session 2018 Landscape and Trends Fund Raising and Donors Quick Tax Law and Charitable Giving Update New Frontiers and Best Practice Research Harnessing Data Gift Officer Metrics Portfolio Management The Changing Face of the 21 st Century Donor

3 2018 Landscape and Trends Fund Raising and Donors

4 2018 Landscape and Trends Economic Gains at top brackets of income bring increased opportunities M 1 in 17 U.S. households were clarified as millionaires M 1 in 12 U.S. households were clarified as millionaires

5 2018 Landscape and Trends Burgeoning Charitable Sector , , , ,237,094 Fighting for Wealthy Donors Dollars out of 8 nonprofits in or planning for a campaign of 2 nonprofits in or planning for a campaign National Center for Charitable Statistics

6 Why Campaigns?

7 2018 Landscape and Trends Tax Law Changes and Charitable Giving

8 New Provisions Standard Deduction nearly doubles, personal deduction eliminated. Previously $6,500 single, $13,000 couple Changed to $12,000 single, $24,000 couple State and local tax deduction capped at $10,000. Mortgage interest deduction interest deduction will be limited for new mortgages no more than $750,000. Charitable donations are still eligible as a deduction, however, less people will itemize under new framework and therefore may perceive less benefit from their charitable donations. Effective 2018 tax year tax returns due in April 2019.

9 Will Giving Change Because Fewer Will Itemize? Most charitable giving is not motivated by tax treatment. Most households at $100,000 income or more will continue to itemize. No change for lower income donors who do not currently itemize. At risk donations from households less than $100,000 income (20% of itemized gifts equates to 16% of all gifts). Average amount itemized from at risk population was $3,000 calculates to $750 in lost tax savings under new law. Total Itemized Deductions by Income 8% 12% 50% 30% Above $200,000 $100,000 - $199,999 $50,000 -$99,000 Below $50,000 Source: Sharpe Group, The Impact of the Tax Cuts and Jobs Act of 2017 on Charitable Giving, Dec. 17, 2017

10 No Change - Appreciated Property and IRA Rollover No change for tax treatment of appreciated assets (stock, real estate, business interests). If donors are concerned about loss of income tax deduction, giving appreciated assets may be more attractive. They do not have to use any income to make the gift and they will not owe capital gains tax. Irrevocable gifts (Charitable Gift Annuities, Charitable Remainder Trusts) may be more attractive: immediate income tax benefit, increased income. No change in IRA Rollover (aka Qualified Charitable Distribution) IRA rollover has the same tax effect as itemization. 70 ½ years of age, direct transfer from IRA.

11 Donor Advised Funds More individuals may use Donor Advised Funds (DAFs). Example Donor transfers $25,000 in Year 1 to DAF and receives $25,000 income tax deduction in Year 1, which pushes Donor over itemization threshold. Donor requests DAF distribute $5,000 a year to charity for each of the next 5 years. Charity recognizes Donor each year for gift. Individuals may request this treatment outside of DAFs. Exploring whether Wabash should create restricted internal DAF. New development: IRS will permit DAFs to pay a donor s pledge to a charity, whether legally-binding or not.

12 Estate Tax Federal Estate Tax exemption doubled to $11.2 million individual, $22.4 million couple. Only.1% of estates will be subject to tax. Little reason to doubt majority of existing campaign pledges will be fulfilled regardless of whether estate is subject to Estate Tax. Wealthy individuals may actually increase charitable commitments without Estate Tax. Health care and Social Security changes may pose bigger threat to charitable giving than Estate Tax.

13 Takeaways The bill was moderated from its initial form. Some impact on itemization, but requires specific advice from tax-advisor. Many will still be able to itemize or if 70 ½ use IRA Rollover. Most people will have more discretionary income. Charitable contributions from higher income individuals may actually be more favorably treated under new law. Will likely see more use of DAFs. No change in strategies for gifting appreciated assets or the IRA Rollover. Charitable Gift Annuities or Charitable Remainder Trusts may be more appealing.

14 New Frontiers Gift Officer Metrics Prospect and Donor Portfolio Management

15 Wealthy Prospects are Easier to find than Ever!

16 Data Increasingly Critical to Advancement In College and University Advancement Operations 86% use wealth rating tools and services 68% use propensity or affinity ratings

17 Wealth Screening Age Employment (position, title, and progression) Income Property and Real Estate Holdings Stock Holdings Philanthropic Giving (outright and/or deferred; political and charitable) Past Giving (amount and years of giving) Spouse or Family Wealth

18 Impact Grade Affinity Score Wabash College Every Constituent Receives an Engagement Score and an Impact Grade. These combine to form an Affinity Score. Engagement Score on a scale of 10 (highest) and 1 (lowest) Impact Grade on a scale of A (highest) and F (lowest) Affinity Score Levels A B High Affinity C D Low Affinity F Engagement Score

19 BUT, BUT, BUT. There has been such a proliferation of data and a decrease in its cost that we don t need more data. We need our gift officers to see the people the data has identified. Senior VP for Advancement

20 Gift Officer Metrics and Portfolio Management

21 Traditional Menu of Metrics 150 Assigned Prospects Focus on Moves Management Proportional credit awarded to the following activities: Discovery, Cultivation, Solicitation, Stewardship ROI MGO can raise 3X Salary and Benefits

22 Emerging Practice Move from Production To Outcomes Gift Officer goals expanded from visits and dollars raised to a suite of strategic yearly outcomes. Increasing awareness of the role of the CEO and other senior members of the leadership team. Longer time horizon for return on investment.

23 Popular Metrics Used to Track Fundraising Performance Number of solicitations Number of visits Total amount closed Number of commitments (closed gifts) Total solicited amount "Assists"/shared credit Percent unique/repeat visits Close rate Percent of ask amount closed Amount raised for designated purposes Internal meetings or strategy discussions Number of moves within/between stages 14% 12% 14% 22% 22% 20% 32% 30% 36% 36% 34% 38% 38% 48% 54% 66% 70% 82% 82% 74% 92% 86% 82% 94% Used to track and monitor progress Used in gift officer performance review

24 Multiple Levers Strengthen Fund Raising Fund Raising success relies on a constant assessment and adjustment of the many levers and inputs into creating high productivity and successful outcomes. Managing and Making Most of the Prospect Pool Prospect Cultivation and Solicitation Focus on Top 25 Robust Prospect Engagement Strategies Right Roles and Time Allocation Metrics and Reports Driving Productivity Staff and Budget Investments Strong Fund Raising Leveraging Institutional and Advancement Resources

25 Securing gifts requires consistent and calibrated moves. Typical Cultivation Timeline Qualify Cultivate (educate, interests, introduce) Engage in Leadership Solicit 1 st Qtr 2 nd Qtr 3 rd Qtr 4 th Qtr 1 st Qtr 2 nd Qtr 3 rd Qtr 4 th Qtr 7/2012 Visit 1 4/2013 Visit 2 9/2013 Visit 3 3/2014 Visit Letter Letter Letter Letter Phone Call Phone Call Phone Call Phone Call Phone Call 18.1 touches over 1-2 years 25

26 Questions to Ask Your CAO Portfolio Management What are Your Strategies for Increasing Prospect Coverage? Is more than 40% of your MGOs portfolio in cultivation? Do your MGOs feel cold calling is overly difficult or burdensome? How are You Accelerating Portfolio Churn? Do 40% or more of the assigned prospects in portfolios lack an intended ask date? Are most MGOs making fewer than 20 asks annually? Scaling Personalized Cultivation Is less than 40% of your high end potential prospect base currently assigned? Do MGOs struggle to secure visits because prospects are cold?

27 Prioritize high impact activities. There are a range of activities that go into a comprehensive fundraising program, however, certain activities have a significantly greater impact. Greatest Impact Frontline Fundraising the direct cultivation and solicitation of prospects, including high-level cultivation events Annual Giving writing, scheduling, managing the annual giving appeals and solicitations through mail, phone, Web, or other vehicle Leadership Volunteer and Board Management managing volunteers, meetings, projects, communications, and organization Stewardship Activities individual stewardship and stewardship events, communications, and programs Strategic Planning and Program Management strategic and operational planning for the unit fundraising program Staff Management managing, directing, and evaluating development staff Smallest Impact Communications and Events producing communications and events that are not development related

28 2018 Landscape and Trends The Changing Face of the 21 st Century Donor

29 The Populations We All Serve are more Diverse African American % 17.9% Asian % 11.7% Hispanic % 28%

30 Fund Raising Like it is 1990 Our Donor Demographics Today Look Like America Did When George W. Bush was still President Caucasian 73% of all donors African American 9% of all donors Asian 5% of all donors Hispanic 11% of all donors

31 If We Don t Engage Them Someone Else Will Courting Hispanic Donors Multi-Media Efforts Ran a series of television commercials in Spanish language Included more children from Spanish-speaking countries in images Ran Commercials on Univision and other Spanish media outlets

32 Tried and True No Longer Works Status Quo Engagement and Solicitation Techniques Country Club Hosted gala dinner Standard web-based donor portal Nonspecific text-to-give campaign Generic agency or site visit

33 Changing Face of the 21 st Century Donor Pressure from All Sides! Tyranny of the Tried and True Yearly Goals Campaign Launch Board Priorities Accreditation Issues Diverse Donor Investments Time Investment Consistent Focus Effort Walking the Walk: Diverse donors may need an extra couple of years of cultivation and sometimes longer. While once aligned with your organization they have likely moved on and will need to understand why you need them on board.