Prospects Are Not Feeling Their “Wealth”

Seventy percent of people with investible assets of $1 million or more do NOT consider themselves “wealthy.”

That stunning news comes from The UBS Investor Watch for the third quarter of 2013. For the report, UBS surveyed 4,000 investors in the US.

The report also found that four out of five survey respondents are either supporting adult children or elderly parents to some degree.

The current edition of The UBS Investor Watch has significant implications for Poor Little Rich Girlnonprofit organizations and their fundraising programs, especially planned giving efforts.

This is particularly true if we take a moment to consider what other studies have revealed about perception of wealth and giving. Research projects have shown that many donors think that planned giving, even bequest commitments, are something that only wealthy people do.

For example, in one focus group study, The George Washington University learned that some alumni held the mistaken belief that bequests involve very large financial commitments from those who are very wealthy. As I describe in my book, Donor-Centered Planned Gift Marketing, three problems arise from this thinking:

First, prospects believe that bequest giving is simply not for them, but rather the wealthy—many who are truly wealthy do not perceive themselves as such and, instead, think of themselves as merely ‘comfortable.’ Second, while some prospects might be willing to give through a bequest, they might not actually do so because they feel their gift would be too insignificant to matter. Third, some prospects expressed embarrassment over the notion of giving a modest bequest gift while the perceived norm is much larger.”

As the UBS study shows, a great number of wealthy individuals do not consider themselves wealthy. As other studies have shown, many people think planned giving is something that only the wealthy do. This means that many people with significant assets will fail to make a planned gift believing it is not something for them.

So, how can nonprofits overcome this perception?

Charities do not need to convince people that they are truly wealthy when they do not think that to be the case. That would certainly be an awkward and unproductive conversation. Instead, nonprofit organizations must do a better job of educating prospects so that they understand that the organization needs and appreciates all planned gifts, assuming that’s the case.

As I share in my book:

To promote the point that bequest giving is for everyone, the Arizona State University School of Nursing and Health Innovation did an article in its alumni magazine that focused on an average nurse, an alumna who made a generous but not particularly dramatic bequest commitment. The message was a simple one: All bequest gifts are greatly appreciated, and people just like you are making such gifts.”

If organizations only celebrate mega-gifts, prospective donors will think that is all the organization wants. People will also assume, as many currently do, that such gifts come only from extremely wealthy individuals.

By celebrating gifts of all sizes from people from all walks of life, as ASU does, organizations can help prospects understand that planned gifts are not just for the mega-wealthy. In other words, charities can help prospects visualize themselves as planned giving donors.

For our part, the nonprofit sector must understand that prospects, even those we consider wealthy, find themselves under enormous emotional and financial pressure. When four out of five investors with assets over $1 million report that they support adult children or elderly parents in some way, we know that family will continue to come first for these individuals.

If we can show prospective donors how a planned gift can help the person’s favorite charity without hurting or, perhaps, even benefitting the person’s family, we will more easily secure a donation.

John Kendrick, Senior Executive Director of Development, Planned Giving at The George Washington University, told me a story about his time on the staff at The Smithsonian Institution. An elderly man had made an inquiry about setting up a $10,000 Charitable Gift Annuity. As John got to know this man better, he discovered that he had serious concerns about the financial future of his wife and adult son. John showed the prospect how the Smithsonian could structure CGAs to provide an income to the man’s wife and son.

The outcome? The $10,000 inquiry turned into $3.5 million worth of CGAs. The Smithsonian secured this generous support as a direct result of John’s willingness to ask questions and listen before showing the prospect how a planned giving would help the donor’s family.

Here are the important take-away points:

1. Many people who you might consider wealthy do not consider themselves wealthy.

2. Many people think planned giving is just for the wealthy. So, we need to educate them otherwise.

3. Many wealthy people are financially assisting their children or elderly parents. So, we need to explain how planned giving may not negatively affect their heirs and how it might even benefit their family members.

We need to understand and respect how our prospects and donors perceive themselves. We need to understand what motivates them and what de-motivates them. And we need to be careful to avoid making faulty assumptions based on stereotypes.

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

5 Responses to “Prospects Are Not Feeling Their “Wealth””

  1. How could the Smithsonian structure the man’s CGAs to provide an income to the his wife and son?

    • Carina, thank you for your question. Because I was not part of the Smithsonian’s effort to secure the CGA gifts, I reached out to John Kendrick for a first-hand response. Here is what he stated:

      “Let me give you the actual answer. But let me also share a theoretical answer that also might have worked.

      “The actual answer is that the gentleman set up three $500,000 immediate gift annuities for his wife over a period of about two years between 2005 and 2007, and he also made a provision in his will for a testamentary gift annuity for his son. Upon his death (and, unfortunately, he did die shortly after I left the Smithsonian), funds from his estate established the CGA for his son.

      “These gifts met the donor’s needs perfectly. He first took care of his wife with three CGAs, ensuring she would always have a steady income. (The wife also had a substantial amount of other assets and good health insurance.) He then took care of his son via the testamentary CGA. I asked the donor, who was in his mid-90s but still extremely sharp mentally (quite unusual!), why he didn’t go ahead and set up the CGA for his son during his lifetime. Well, the donor enjoyed investing and wanted to continue to oversee investments and give guidance to his son; he wanted to do this as long as possible – until his dying day! But he didn’t trust the son to manage money on his own, and thus the CGA was a good fit.

      “The theoretical answer is that he could have set up a two-life CGA for the wife and son. If I recall correctly, the son was old enough to meet the Smithsonian’s minimum age for a CGA. The wife could have received the annuity income for the rest of her life, followed by the annuity income going to the son for his lifetime. This assumes, of course, that the donor would not have wanted any income in his own name. And it assumes the donor would have been satisfied with the much lower rate the wife would have received if the son were also an annuitant. The donor would have had to analyze gift and estate tax implications, which might have been vexing in the mid 2000s given the changing estate tax exclusion amounts codified in the 2001 tax act (EGTRRA). Some of these tax ramifications could have been addressed or at least partially addressed, however, by using a clause giving the donor the right to revoke in his will the income interest of the son. And finally, if appreciated stock had been used as the funding source, payment of capital gains taxes could have been a significant an issue.”

      Carina, the CGA contract designates who receives the income from the CGA. By setting up separate CGAs, the donor was able to provide his wife with an immediate income and, with the testamentary CGA, his son with an income after the father died. I hope this has helped. However, I recognize that this can all be a bit confusing. So, if you have any remaining questions, please let me know.

      Finally, I want to thank John for providing us with some additional insight. It’s much appreciated!

      • What an amazing and helpful response. Thank you, Michael, for doing extra research for me. I’m going to read a bit more about CGA structure, because, clearly, my knowledge is lacking. This was so informative. I truly can’t believe you did so much work simply to answer my question. Thank you.

      • Carina, you’re very welcome! This blog site exists for you and readers like you. Reader comments and questions add value for everyone.


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