If you’re like most fundraising professionals, you’re ignoring one high-potential giving option. Sadly, it could be costing your nonprofit organization a fortune.
I’m talking about gifts of appreciated securities (e.g., stocks).
Just days ago, the Dow broke through the 20,000 level to set a new record close. The NASDAQ and the S&P 500 are also in record territory. As stock values have continued their post-election rally, many more Americans now hold appreciated stocks.
In 2016, 52 percent of Americans said they owned stocks in some form, according to Gallup. While that’s down from the 65 percent who owned stocks prior to the Great Recession, a majority of Americans still hold stock, directly, in mutual funds, and in retirement accounts.
Given that most Americans own stock and many of those stocks have appreciated in value, the nonprofit sector has a tremendous opportunity.
Contributing appreciated stocks provides donors with some important benefits:
- It gives donors access to a pool of money with which to donate that would not otherwise be available to them for other purposes without negative tax consequences.
- Contributors who donate appreciated stocks may be able to avoid paying the capital gains tax on those securities.
- Donors may also be able to take a charitable-gift tax deduction based on the value of the stock donated.
Given the benefits for the donor and the nonprofit organization, I’m puzzled about why more charities aren’t stepping up to promote gifts of appreciated securities.
I know. I know. You’re organization’s website probably mentions this giving option in passing. For example, my alma mater Temple University promotes gifts of appreciated stock and mutual funds on its website. Unfortunately, it takes three clicks from the Home Page to find the 82-word statement buried on the vaguely named page “More Ways to Give.” I suppose that’s a bit better than the charities that don’t mention this giving option at all.
On the other hand, the American Civil Liberties Union does a better job of promoting stock gifts on its website. Furthermore, unlike Temple University, the ACLU site provides all of the information and instructions a donor will need in order to make a gift of stock.
To help donors understand the value of donating stock, The National Philanthropic Trust, which manages Donor Advised Funds, includes a hypothetical case study on its website to illustrate the value of donating appreciated stock.
Savvy donors, perhaps more donors than in recent years, are already benefitting by donating appreciated stocks.
For example, NPT saw an increase of stock gifts last year. Eileen Heisman, NPT’s President and CEO, reports:
Gifts of appreciated stock are a vital source of giving for us. In recent years, stock gifts to Donor Advised Funds we manage have exceeded 70 percent of overall gifts we have processed. While we’re still tabulating our results for 2016, I can tell you that we have seen significant growth in overall giving, in part due to an uptick in gifts of appreciated securities.”
Some financial planners have also found that many clients are more receptive to the idea of donating stock. Paul Stark, a wealth and estate-planning strategist at SunTrust Banks Inc., told The Wall Street Journal:
We’ve seen an uptick in charitable giving using appreciated stock.”
This is good news. Donors are showing that they are receptive to the idea of giving appreciated securities. But, that’s not the only good news. The stock market rally is expected to continue though there will likely be a correction at some point (a short-term dip in values) and the growth rate will likely slow a bit. The Trump Administration’s plans for business tax rates are expected to lead to greater corporate profits and, therefore, greater corporate valuations and stock prices.
Now, it’s up to charities to do more to educate supporters and to ask for contributions of appreciated stocks. Here are five things you should be doing:
1. If your organization does not already have a brokerage account, set one up so that the organization can receive stock gifts and quickly sell the stock. For most nonprofits, this will cost little or nothing. As an alternative, and while I have no direct knowledge of them, your organization can explore whether the service provider Stock Donator might be a better option for receiving and processing gifts of appreciated securities. In Canada, Canada Helps can receive and process stock gifts for charities.
2. Make sure your website powerfully promotes gifts of appreciated securities. This means: make it easy for supporters to find the information, describe the benefits of giving appreciated stock, provide the details necessary for the donor to complete a transaction, share a case study highlighting a contributor who has given stock, and provide your full contact information to make it easy for donors to contact you with questions. Don’t make it overly complicated, just complete.
3. Promote stock giving in your organization’s publications. For example, in your organization’s newsletter, tell a true story of a donor who gave stock. Provide an illustration that demonstrates the benefits to the donor and the organization.
4. When appealing to prospective donors, suggest they consider donating appreciated stocks and explain why this is beneficial to them as well as the organization.
5. When appealing to donors who have given appreciated stock in the past, ask them to do it again. On a personal note, not a single charity I’ve given stock to has ever asked me to do so again. Shameful! Do not make the same mistake.
In short, do not ignore promoting gifts of appreciated stock. If you do, you are losing money for your organization. On the other hand, by taking appropriate action, you’ll raise more money and have happier donors.
If your nonprofit organization is already doing all five of the things I’ve just outlined, let me know; I’d like to highlight your organization in a future post.
If your charity is not doing everything I’ve described, I encourage you to start. Then, let me know if you’re able to get more stock gifts.
Has your nonprofit seen a change in stock giving? What’s your organization’s biggest challenge when trying to get more stock gifts?
That’s what Michael Rosen says… What do you say?