Latest Stelter Report Flawed but Still Insightful

Earlier this month, The Stelter Company presented the findings of its latest research project at the Partnership for Philanthropic Planning’s 2012 National Conference on Philanthropic Planning. What Makes Them Give: 2012 Stelter Donor Insight Report is the Company’s third study of planned giving in the United States.

As a nerd and as the winner of the 2011 Association of Fundraising Professionals/Skystone Partners Prize for Research in Fundraising and Philanthropy, I enjoyed reading the report. And, I thank The Stelter Company for adding to the nonprofit sector’s base of knowledge.

While flawed, the report does offer some interesting tidbits. This post will examine some of the useful tidbits and problematic flaws. Some of the insights are new while others will confirm what experienced gift planners have long known or suspected.

Many Planned Givers Are NOT Loyal Donors

Perhaps the most interesting finding is that 21 percent of those who have made a planned gift “never donated to the charity before putting a planned gift in place.” An additional 20 percent did give to the charity prior to making a planned gift, but did so for less than five years.

The conventional wisdom has been that loyal donors make the best planned giving prospects. However, the report shows that 41 percent of planned gift donors are outside of the loyal-donor model. This underscores the importance of making planned gift messaging ubiquitous.

Planned Givers Are NOT Always Large Current Donors

Among those who have made a planned gift and who have also made an annual giving donation to the charity, 40 percent gave less than $500. Only 16 percent have given $5,000 or more. While the old donor pyramid, where small donors become major donors and then become planned gift donors, may be true for many, the vast majority of planned gift donors have not first been major donors.

This means that, when looking for prospective planned gift donors, development professionals must consider the organization’s entire database. This includes large donors, medium donors, small donors, and even non-donors.

Bequest Giving is the Most Popular Planned Gift

The study found that “a bequest is the most popular vehicle for planned giving.” The report confirms what has been a long-held belief among gift planners and a fact that I included in my book, Donor-Centered Planned Gift Marketing.

This is good news for all nonprofit organizations. Virtually all nonprofits can easily and inexpensively promote bequest giving. For those organizations with a bit more expertise and resources, a bequest conversation or a bequest commitment may provide a gateway for a conversation with the donor about more complex giving vehicles. If the market finds a bequest to be the most popular form of planned giving, savvy planned gift marketers will take notice and market accordingly. On the other hand, bequest giving may be the most popular vehicle because it is the one that is already most widely promoted by the nonprofit sector; perhaps this should be examined in a future study.

Many Planned Givers Are Reluctant to Tell the Charity

Among those who have made a planned gift, 49 percent say that they have not told the charity. This raises an important question not asked as part of this study: Why haven’t you told the charity?

I suspect that many donors simply consider their estate planning a private matter and, therefore, choose not to disclose a planned gift provision to the charity that will benefit. I also suspect that others do not want recognition from the charity that they suspect will lead to more pressure to give more either to that charity or another nonprofit organization that takes notice. But, the biggest reason for nondisclosure may simply be that donors do not understand the value of disclosure to themselves and to the organization. Development professionals need to do a better job of articulating the benefits of disclosure to encourage more donors to do it.

Planned Givers and Prospects Use Social Media

A majority of planned gift donors and prospects surveyed use at least one of five social media networks tested:

–Facebook, 39 percent

–Google Plus, 19 percent

–LinkedIn, 17 percent

–Twitter, 6 percent

–MyLife, 1 percent

The report found, “Almost one-fourth of major donors, current planned givers and best prospects in their 40s would like to connect with nonprofits on Facebook.” Donors and prospects are using social media. Smart development professionals will meet donors and prospects where they are. This means including social media in the marketing mix.

Few People Are Asked for a Planned Gift

Only 26 percent of planned gift donors and best prospects — “people who say they will definitely or probably make a planned gift in the future” — say they have received a letter or email about planned giving. Only 17 percent say they have been asked directly for a planned gift.

If nonprofit organizations want more planned gifts, they need to ask more people, more often, and in the right way. With so few people receiving direct planned giving communications, there is not a high-degree of competition. On the other hand, this means tremendous potential.

While What Makes Them Give contains some useful and valuable information, I have some issues with other elements of the report:

Best Prospects Are Younger, Maybe Not

The “best prospects” for future planned gifts are those 40 to 54 years of age, according to the report. However, I suspect that the data is driven by the structure of the question. If a 70 year old is asked if she ever intends to make a planned gift, her planning horizon might be a few years or a decade or so. By contrast, a 40 year old who is asked the same question has a planning horizon of several decades and, therefore, might more easily imagine a time in the distant future when he might make a planned gift if circumstances allow. I think it would have been more meaningful if the survey asked: Do you plan to make a planned gift within the next five years? That would have leveled the playing field and provided some context for the responder.

Also, just because a 40 year old might be more likely to make a planned gift than a 70 year old, it does not mean that the younger person is a better prospect. Nonprofit organizations certainly need to consider propensity to give when developing a prospect list. However, organizations need to ensure a reasonable return on investment within a reasonable timeframe. An organization might be willing to accept a lower response rate to its appeals in order to have gifts actually realized sooner. A planned gift commitment from a 40 year old might not be realized for several decades while a commitment from a 75 year old might very well be realized in less than one decade. In other words, factors beyond propensity need to be factored in when prioritizing who is or is not the “best prospect.”

Best Prospects Are Single, Maybe Not

“Singles rise to prominence, however, among best prospects (23 percent, compared to 13 percent of current planned givers),” states the report. Without cross-tabulating this data with age, it is difficult to draw any real conclusions. The survey included many individuals in their 40s. “Singles” could be single because the individual is young and has yet to marry. In that case, age, not marital status, would be the more important factor.

The report also states that 65 percent of planned givers are married, 13 percent are widowed, and nine percent are divorced. So, if the vast majority of planned givers are or were married, why would the report assert that singles make the best prospects?

Recognition Groups Unwanted, Maybe Not

“Just 14 percent of planned givers and best prospects are currently members of a recognition club,” states the report. This number is artificially low and meaningless. I would be interested to know the percentage of planned givers who are part of a special recognition club. However, adding prospects to the data simply waters down the number. Someone who is a prospect — by definition, someone who has not made a planned gift — is not going to be included in a planned gift recognition club.

“Of those not part of a major donor or planned giving recognition club, only three percent want to be,” asserts the report. This statistic is also problematic. The research firm, Selzer & Company. did not take into account social bias. Many people might not be likely to say that they want something in exchange for a charitable contribution. That would not be the socially acceptable position.

In addition, if only 14 percent of respondents say they are part of a recognition club, that means that the vast majority that are not might not know what they are saying no to. This is a point even acknowledged by the report itself: “Very few express interest in becoming part of a community of donors for a nonprofit. Perhaps, however, they have a limited vision of what that could mean.” The study even finds that 40 percent of respondents believe that “giving to a charity is a good way to become part of a community of like-minded people;” that’s one of the functions of a recognition club; this statistic seems to contradict the earlier stat.

Without taking into account social bias and the likelihood that many survey respondents don’t understand the benefits of a recognition club, the data presented in this section of the report have little, if any, value.

Tax Avoidance is Not a Motivator, Maybe Not

The study found that 17 percent of respondents stated that “giving to charities is a good way to pay less in taxes.” As mentioned previously, the researcher did not take into account social bias. So, it is difficult to really know the true degree to which donors are motivated by a desire to avoid taxes. Also, while the majority of planned gift donors might not be interested in tax avoidance, those who make the largest planned gifts might be. Unfortunately, the study does not explore that possibility.

While the study does not really shed any light on the importance of tax avoidance as a motivating factor for why one might make a planned gift, we do know that it has little bearing on what organization will be given support. That’s because a donor can almost always receive the same tax benefits regardless of where the gift is made. So, when communicating with prospects, it will usually be wiser to focus on other motivating factors.

The report is worth reading. If you take the time to look at it, just do so with a critical eye. And, be sure to tell me what you think of the findings.

That’s what Michael Rosen says… What do you say?

 

UPDATE (Oct. 24, 2012): On Monday, I received a telephone call from Bev Hutney, Director of Innovation & Research at The Stelter Company. We had a friendly conversation. I was impressed with her willingness to collegially discuss Stelter’s research.

Hutney provided some additional information about responses to the question about recognition clubs. “Almost an equal proportion of current planned givers (17 percent) and prospects (13 percent) say they are members of a recognition group. Of those who are not, 3 percent of each group — current donors and prospects — say they would like to be invited to join one,” writes Hutney.

Despite the response to the question about recognition clubs, Hutney does not suggest that legacy societies are worthless. She writes, “Were respondents in our latest survey reacting negatively to the term ‘recognition club’? Did they truly understand what the term meant? Were they saying ‘no’ to the invitation aspect of Question 17B? We’ll never know. But this data, combined with our firsthand experience sending thousands of direct mail campaigns and millions of emails on behalf of nonprofits each year, has got us thinking. We’re not knocking Legacy Societies by any stretch but, in our practicable experience, we see that a fraction of donors get really fired up about them. There appears to be an opportunity to refresh our approach.”

I agree with Hutney. The nonprofit sector needs to change its approach to recognition clubs, and it needs to better communicate with donors why those recognition clubs are important. Because this is such an important topic, I will devote a full post to it within the next few weeks.

Finally, Hutney has generously shared the demographic breakdown of the survey participant list and the questionnaire that was used. I thank her for allowing me to share this material here.

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23 Responses to “Latest Stelter Report Flawed but Still Insightful”

  1. FYI. -this is the author of the PG book on marketing I have and I am glad he did this analysis because when I read the report I was concerned about some of the results. His article here is worth the read.

    Jan Kupecz Canadian National Christian Foundation (CNCF) Connecting God’s Money with God’s Work

    ADVISORS with Purpose Helping God’s People Manage God’s Assets

    89 Auriga Drive Ottawa, ON K2E 7Z2 1-866-580-9319 ext 101 | Fax and Direct line 613-800-4712

    http://www.advisorswithpurpose.ca | http://www.cncf.ca

  2. Great post, Michael. I would be pleased to see a follow up post expanding on this point: “donors do not understand the value of disclosure to themselves and to the organization. Development professionals need to do a better job of articulating the benefits of disclosure to encourage more donors to do it.”

    As a fundraiser new to planned giving, I’d be keen to know more about how to frame these conversations!

  3. There is much in the Stelter study that resonates with my own experience over the years. While the conventional wisdom says that loyal donors make the best planned giving prospects, I think that is particularly true when trying to visit your donors, the more loyal are usually the less reluctant they are to see you. I think the whole donor pyramid has been shot out of the water; it doesn’t hold true anymore.

    It has also been my observation that many large current donors do all their giving while they are living because of their capacity and they get to experience the fruit of their giving. Younger bequest donors require long-term stewardship to ensure that they remain bequest donors when the final estate plan is complete. It has been my experience that by the time a donor reaches 80 his final decision has been made and will not want to be bothered. If you are not in by then; you are not going to be.

    Why would the report assert that singles make the best prospects? Perhaps because surviving spouses might have other interests and passions so they will alter or change plans.

    • Mark, thank you for taking the time to share your insights. Regarding the issue of age, older prospects might be less likely than younger folks to make a bequest commitment, but development professionals need to remember that older folks are better prospects for other planned giving vehicles such as Charitable Gift Annuities. It would have been interesting if the survey had looked at age relative to gift planning vehicle and not just provide an overall look.

  4. As always, excellent analysis especially your thoughts on best age for donor prospects. With regard to recognition groups and social bias, I could not find any link to the actual questions in the study. Selzer and Company might have accounted for this by using indirect questioning, which is a recognized technique to address this. Although the Association of Donor Relations Professionals do an excellent job of outlining best practices for donor recognition programs and I recommend their Best Practices in Donor Recognition report, my experience has been these are applied inconsistently. I think you were correct in pointing out that the low response rate might be attributed to donor (and prospect) confusion about these programs.

    • Gene, thank you for commenting. Like you, I have not seen the list of questions used in the survey conducted by Selzer & Company. However, I can provide some additional insight regarding the issue of social bias. At the National Conference on Philanthropic Planning, Nathan Stelter and Ann Selzer presented the study findings in their session, “Planned Giving Triggers: Scientific Findings on the Factors that Yield Gifts.” During the session, Selzer was specifically asked about social bias. Her initial response can best be described as dismissive. The person who had asked the question then identified himself as an economist and researcher at Texas Tech. Selzer then shifted from dismissive to defensive. The survey did not in anyway account for social bias because Selzer thought it unnecessary. The Texas Tech economist/researcher disagrees, and so do I.

      For those interested in reading about the Association of Donor Relations Professionals stand on best practices, referenced by Gene, visit: http://www.adrp.net/adrpaasp-best-practices.

  5. Thanks for sharing your thoughts on the report. I think you’re spot on.
    What especially jumps out for me is the fact that we don’t ask enough. I’ll often ask a group of board members who’ve asked me to come speak with them about building a legacy program: “How many of you have made provision in your estate plans for this organization?” It’s astounding how few have usually done so. No one asked them. Or they thought only really rich people were prospects for a legacy gift. There are a lot of misconceptions out there to overcome.

    • Claire, thank you for sharing your insights. One of the things that makes me crazy when it comes to planned giving is when people express that they think it is something just for rich folks or celebrities. In large part, nonprofit organizations are responsible for this misconception. Whenever nonprofits use fancy terms like legacy giving, bequest, philanthropic planning, etc., they are setting an elite rather than inclusive tone. Whenever nonprofits publish articles about their most generous planned gift donors while virtually igonoring modest planned gift donors, they are also being elitist rather than inclusive. As a sector, we need to do a far better job of helping the public better understand planned giving. The Stelter report really underscores the need for this.

  6. Like you, Michael, I was surprised that “surprise” planned gifts were as high as 21%. But otherwise, there was little “new news” that caught my attention. Keep in mind that this research was based on 15 minute conversations with only 401 people of 40+ years. I’d love to see something with broader reach.

    • Lorri, thank you for your comment. I’m fairly comfortable with the size of the survey pool. Reasonably accurate survey results can be obtained with stunningly small participant pools. Most major polling firms use participant pools of 2,000 or fewer. While I’m not concerned about the size of the pool, I would be interested to learn more about how the pool was selected and how the questions were phrased. The phrasing of questions could have a huge impact on results.

      Like you, I didn’t find too much new in this report. However, it’s always nice to get confirmation of long-held beliefs.

  7. Keep in mind… this is just one poll. Look at how many polls have been taken for the Presidential election. And the results of those polls vary widely.

    While the results are indeed useful, one should be careful because one small poll can only supply “directional” findings for making strategic marketing decisions.

    • Greg, thank you for sharing your thoughts. Surveys that ask people to predict their future behavior, particularly at some distant point in the future, are often inaccurate. So, readers should be especially skeptical about responses to predictive questions. Without seeing the questions used and knowing more about how the respondent pool was selected, it would be foolish to put too much weight on this one report. On the other hand, you and I agree that the report does provide some useful information.

  8. Thanks for your thoughts on this. Our organization’s ‘suprise’ bequests are right around the 20% benchmark stated in this survey, if not higher, but I suspect it may be because our formal planned giving program is really just a few years old. Prior to that, we just weren’t encouraging people to tell us, nor did we do a lot of asking. So of course bequests that were drafted 7-10 years ago, and are now maturing, were not known to us.

    We also have good brand recognition and visibility among ‘non-donors’ so that even if they haven’t donated, they likely know who we are, so we may have a slightly higher rate of bequests from people who have never given a single gift.

    Recognizing that resources often dictate early stage planned gift programs, we market to younger donors/prospects (40-60 ish) but focus our personal visits and gift officer resources on those older donors 65+ (or slightly younger, but interested in documenting a large planned gift, often with recognition opportunities) in order to balance the use of our limited dollars with marketing and outreach.

    • Nicole, thank you for commenting and sharing your strategy. It is always a challenge to determine how to deploy limited resources in the most effective way. As your experience proves, some broad marketing efforts to create awareness can certainly payoff in a significant way, though we might not always know in advance.

  9. Michael, you write Development professionals need to do a better job of articulating the benefits of disclosure to encourage more donors to do it. Aside from recognition, what other benefits do you see in encouraging donors to disclose they’ve remembered a nonprofit in their estate? It doesn’t seem the Legacy Society or whatever name, annual meeting/luncheon, etc., is a big motivator.

    • Scott, thank you for commenting. It’s always great hearing from you. Your question is a good one. However, I’m going to hold-off with a response. The question deserves its own blog post. In the coming weeks, I’ll write a post that addresses the issue of legacy societies and donor disclosure that were touched upon in this post. Meantime, don’t be so sure that legacy societies hold little interest for donors.

  10. Some fund raising survey work is helpful in planned giving; I have always opined that the traditional f-r pyramid is hogwash based on my experience of start-up planned giving programs in Los Angeles; in some century planned giving may be perceived as the most highly individualized area of philanthropy — fertile ground for an extraordinary array of cultivation activities.

  11. Thank you, Michael, for both sharing this report and for your comments. From my experience, a formulaic approach to planned giving – such as trying to “sell” various gift vehicles or membership in some legacy society – that is advanced so frequently in the charitable world has been woefully inadequate. This survey, along with your critical observations, seem to confirm this.

    First, until the gift planning profession dramatically improves its ability to articulate how gifts of accumulated wealth can be used to finance their organization for the long term, and rely less on describing all the various intricacies of a split-interest gift, this trend of mediocrity will continue.

    Second, nonprofits need to improve their fiduciary ability to manage legacy-type gifts. I’d be interested if the survey attempted to explore the levels of trust – or lack thereof – that donors had in a charity’s ability to effectively manage a large estate gift. Or, if they fear that the organization will burn through that gift just like an irresponsible child might do.

    Finally, I would attribute many of these survey findings to a general reluctance by organizations to truly invest in charitable gift planning. When the average tenure of a gift planning officer is about 18 months, and the average time it takes to cultivate and close a planned gift is about two years, statistically the average gift planner will never experience a completed gift from inception to execution. For a committed long term donor, consider how many staff people might have come and gone. Is that a message of stability? Couple that with the fear that as soon as they tell of a planned gift, that same organization intrudes on their privacy and starts listing names in annual reports, donor walls, etc. No wonder new or unknown donors seem to be more likely to make a planned gift than those more familiar with the organization!

    I don’t mean to sound über-critical of charities, but this survey – while modestly flawed – should begin serving as a wake up call to the entire industry.

    • Mick, thank you for commenting. You’re certainly correct when you write that selling gift vehicles is not the best way to promote gift planning. Having a donor-centered, holistic approach to development will yield the strongest results. And, as you suggested, deserving trust is important as well. While this study did not look at the impact of trust on planned giving, a study by Independent Sector and another study by Adrian Sargeant looked at the impact of degree of trust on size of gift. While neither study focused on planned giving, they do provide good insight that I feel is nevertheless relevant. The higher the degree of trust a donor has in the nonprofit, the more likely s/he is to make a gift. And, the greater the degree of trust, the larger that gift is likely to be. Since planned gifts usually involve large donations, we can expect that they will be made only when the donor has a very high level of trust in the organization.

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