03/11/2013Lawrence Henze | Target Analytics 1 EXPLORING THE TOP OF THE GIFT PYRAMID: PRINCIPAL GIVING PROSPECT ATTRIBUTES Presented By: Lawrence C. Henze, J.D. Principal Consultant Founder

03/11/2013Lawrence Henze | Target Analytics 2 PRINCIPAL GIVING – APEX OF YOUR PYRAMID Annual Major Mid Principal / Lead $250K-$1M+

03/11/2013Lawrence Henze | Target Analytics 3 Principal Lead Transformational Inspirational Ultimate High-End Planned Giving? DIFFERENT TERMS, SAME CONCEPT OF GIVING

03/11/2013Lawrence Henze | Target Analytics 4 BRANDING AND TERMINOLOGY Caption: ‘Killer Whale’ is horrible branding. From now on people will call you “Happy Silly Fun Fish.”

03/11/2013Lawrence Henze | Target Analytics 5 WHAT SHAPE IS YOUR PYRAMID? THIS IS A WORTHWHILE EXERCISE

03/11/2013Lawrence Henze | Target Analytics 6 TRADITIONAL DONOR PYRAMID

03/11/2013Lawrence Henze | Target Analytics 7 TODAY’S DONOR PYRAMID

03/11/2013Lawrence Henze | Target Analytics 8 WHERE DO YOUR PRINCIPAL GIVING PROSPECTS BEGIN THEIR JOURNEY? ? ? ? ? ? ? ? ?

03/11/2013Lawrence Henze | Target Analytics 9 IDENTIFYING PRINCIPAL GIFT PROSPECTS: BEST PRACTICES Past Behavior Predictive Modeling Wealth Screening Research Field Qualification

03/11/2013Lawrence Henze | Target Analytics 10 PRINCIPAL GIVING RESEARCH – MODELING AND WEALTH ANALYSIS Your Database Wealth Analysis Analysis of hard assets for complete assessment of donors and prospects Wealth Analysis Analysis of hard assets for complete assessment of donors and prospects Propriety Models for Inclination and Capacity Developed by examining over 150 organizations and 100M gift transactions Propriety Models for Inclination and Capacity Developed by examining over 150 organizations and 100M gift transactions Giving History Analysis Examination of the trends and patterns of giving in your house file Giving History Analysis Examination of the trends and patterns of giving in your house file Principal Giving Pool $250K prospect Naming opportunity $1M+ prospect

03/11/2013Lawrence Henze | Target Analytics 11 TARGET ANALYTICS PRINCIPAL GIVING RESEARCH - OUR FINDINGS (CURRENT GIFTS) 360 Donor View Giving history is trending positively Confirmed patterns of philanthropic donations Well educated and affluent Live in areas with higher quality of life index Benchmarked against peers giving principal and lead gifts Higher incomes and known public assets Purchase expensive homes and vehicles Do not rely on credit to make purchases High real estate valuation Inclination Wealth Indicators Capacity Asset Valuation

03/11/2013Lawrence Henze | Target Analytics 12 EXPLORING HIGH NET WORTH PHILANTHROPY

03/11/2013Lawrence Henze | Target Analytics 13 THE PARADIGM SHIFT IN GIVING The Old Paradigm Emerging Trends  Moral Obligation  Duty  Institution Centered  Institutions are to be Trusted  Institutions are Autonomous  Budgets are Need-Driven  Financial Focus is Insular  Giving is a Contribution  Fundraising is Raising Money  Incomes Sources are Limited  The Gift as an End to Philanthropy  Different from Business  Donor Cultivation  Connection  Donor Centered  Institutional Trust must be Earned  Donors are Collaborative Partners  Giving is Value-Driven  Financial Focus is Global  Giving is Creating Change  Fundraising is Nurturing Generosity  Income Sources are Diverse  The Gift as a Means to Philanthropy  Embraces Business Principles & Practices

03/11/2013Lawrence Henze | Target Analytics 14 “Of the nearly $300 billion donated [in 2011] more than 70 percent was given by individuals, of which roughly half was given by the wealthiest 3 percent of American households.” Page #14 © 2006 Blackbaud Bank of America Merrill Lynch/ Center on Philanthropy at Indiana University Center for Philanthropy ; accessed on 11/5/12

03/11/2013Lawrence Henze | Target Analytics 15 Financial industry term used to group individuals and families with investible assets are $30 million or more Major giving capacity for this population is at least $1.5 million On average they own 8 cars, 4 homes and over three-fourths of this group own a plane and/or a yacht ULTRA HIGH NET WORTH INDIVIDUALS

03/11/2013Lawrence Henze | Target Analytics 16 Estimate there are currently 103,000 Ultra HNWI worldwide -Population grew by 10.2% in 2010 and wealth grew by 11.5% -Ultra HNWI in the U.S. have a combined wealth of $6.4 trillion dollars Most banks, financial institutions and luxury brands have divisions dedicated solely to this population ULTRA HIGH NET WORTH INDIVIDUALS

03/11/2013Lawrence Henze | Target Analytics 17 Annual household income of $200,000+ and/or household net worth of $1 million+ (excluding the value of primary residence) 95.4% gave to non-profit organizations in Compares to 65% of the entire US Population Donate an average of 8.4% and a median of 3.1% of household income -This is less than 2007 and 2009 responses -Over the next 3-5 years, about half plan to keep their contributions the same and about a quarter plan to increase contribution levels Correlation between volunteering and giving -The more an individual volunteered, the more they gave Nearly 50% make philanthropic decisions with their spouse/partner and 33% involve children in their giving HIGH NET WORTH INDIVIDUALS

03/11/2013Lawrence Henze | Target Analytics 18 A LOOK BACK - PORTRAIT OF A MILLIONAIRE Most (97 percent) are homeowners. Live in homes currently valued at an average of $320,000. About half have occupied the same home for more than twenty years. Most enjoy significant increases in the value of their homes. Have more than six and one-half times the level of wealth of our non-millionaire neighbors, but, non-millionaires outnumber these households morr than three to one. Stanley, Thomas J. and William D. Danko, The Millionaire Next Door, MJF Books, New York, 1996, p

03/11/2013Lawrence Henze | Target Analytics 19 A bequest is a provision in your will or trust to pass money to a charitable organization upon your death. -Typical clauses include an outright amount, a percentage of the assets, or the residual of the estate Wills are often the first estate planning tool Charitable bequests are easy to talk about and understand Two primary age groups: late 40s to late 50s, and mid 60s to late 70s About 75% of wills are never changed -Only 1%-3% of charitable bequests are ever revoked More than two-thirds of planned gift donors also make current annual gifts -Research confirms planned gift donors are significantly more philanthropic than non-planned gift donors PRIMER ON PLANNED GIFT VEHICLES – BEQUESTS

03/11/2013Lawrence Henze | Target Analytics 20 Over the past two decades, our research has determined the common characteristics that create a specific predictive giving profile. Bequest donors: -Are past givers to your organization -Are mid-age and older (generally 50+) -Live in 1 or 2 person households with moderate to high HH income -Have long-established credit but keep their credit balances relatively low or pay off their accounts each month -May have recently moved to a different home (younger prospects) or to a different area (older prospects, down-sizing, retirement) -Live in areas with high home market values and where neighborhoods have many people employed in Professional, Scientific and Technical Services fields (younger prospects) BEQUEST PROFILE

03/11/2013Lawrence Henze | Target Analytics 21 Bequests -Established home ownership -Children in college or evidence of college-related debt -Charitable gifts to other organizations (lower gift amounts) -Volunteerism -Other types of loyalty factors Membership Ticket buying Monthly contributor Board, committee participation Long-term event participation RESEARCH COMPONENTS

03/11/2013Lawrence Henze | Target Analytics 22 PRIMER ON PLANNED GIFT VEHICLES - CGAS A charitable gift annuity (CGA) is a contract between one or two donors and your organization. In exchange for making a gift to your organization, you promise to pay the donor(s) a fixed amount regularly for life -Although part of the annuity payments are taxable, the donor(s) also receives an upfront charitable income tax deduction for the amount of the original gift that is estimated to remain at the donor’s/donors’ death 5%-6% of all planned gifts are CGAs -Next most common planned gift vehicle in U.S. Primary age group is mid 70s and older Annuities can range from a little as $5,000 to over $1,000,000 Over 4 in 5 annuitants learned about gift annuities through the organization’s own marketing and promotion Many, if not most gift annuitants do multiple annuities

03/11/2013Lawrence Henze | Target Analytics 23 Over the past two decades our research has determined the common characteristics that create a specific predictive giving profile. Annuity donors: -Tend be some of our oldest planned gift donors (70+) -Exhibit consistent giving behavior to your organization -May have recently moved to a different home or to a different area (high value senior living communities for example) -Continue to enjoy high incomes (better off than they believe) -Are fiscally conservative individuals who are afraid to carry ongoing debt -Use credit for convenience and pay off the debt immediately ANNUITANT PROFILE

03/11/2013Lawrence Henze | Target Analytics 24 RESEARCH COMPONENTS Charitable Gift Annuities -Evidence of retired status -Marital Status: single, widowed or divorced -Annual giving at the $100 level or less Ticket buying Membership Connection to your organization -Charitably inclined Giving to multiple organizations (member of legacy society) -Evidence of stock holdings, retirement plans or commercial annuities Current or former business ownership -No evidence of children or grandchildren The fewer children and grandchildren, higher average gift

03/11/2013Lawrence Henze | Target Analytics 25 PRIMER ON PLANNED GIFT VEHICLES - CRTS A charitable remainder trust is an irrevocable financial holding set up to move liquid or illiquid assets out of an individual’s possession into a giving vehicle with charitable intent. The trust pays a specified annual amount to one or more people for a fixed number of years, or for the life of the individual(s) who benefit from the trust’s distributions -At the end of the term, the remaining trust property is distributed to your organization and any other specified charities 1%-2% of all planned gifts are CRTs -Third most common planned gift vehicle in the U.S. Primary age group is mid 50s through early 70s CRTs are useful for changing real estate, business assets and other relatively illiquid assets Many CRT holders make charitable bequests as well

03/11/2013Lawrence Henze | Target Analytics 26 Over the past two decades, our research has determined the common characteristics that create a specific predictive giving profile. CRT donors: -Are committed donors to your organization with consecutive year gifts -Are approaching or just passed retirement age (ages 55-70) -Enjoy high incomes and keep their credit account balances at low or modest levels -Many are actually retired; those still working tend to cluster in high income or entrepreneurial occupations such as Management, Professional Technical and Sales positions These prospects are likely to have one spouse that is retired or does not work outside the home CHARITABLE REMAINDER TRUST PROFILE

03/11/2013Lawrence Henze | Target Analytics 27 RESEARCH COMPONENTS Charitable Remainder Trusts -Evidence of wealth -Evidence of major giving -Multiple property ownership -Charitably inclined Board membership -Evidence of stock holdings, retirement plans Former business ownership

03/11/2013Lawrence Henze | Target Analytics 28 REAL ESTATE VALUES AND CRT GIVING Wealth and asset data, such as real estate, can be used to better understand specific groups of donors

03/11/2013Lawrence Henze | Target Analytics 29 Additional Note: The most common motivations for stopping support are an organization soliciting the donor too frequently or asking for an inappropriate amount. BIGGEST MOTIVATIONS FOR GIVING Bank of America Merrill Lynch/ Center on Philanthropy at Indiana University Center for Philanthropy ; accessed on 11/5/12

03/11/2013Lawrence Henze | Target Analytics 30 IN THE WORDS OF PRINCIPAL GIFT DONORS, PHILANTHROPY IS: ENGAGEMENT Giving a person an opportunity to support a good cause Matching the right person to the right projects About building relationships, not about the money About fundraising, friend-raising and matchmaking

03/11/2013Lawrence Henze | Target Analytics 31 POSITIONING YOUR ORGANIZATION FOR SUCCESS IDENTIFICATION

03/11/2013Lawrence Henze | Target Analytics 32 IDENTIFYING PROSPECTS: THE SWEET SPOT A prospect may appear to have capacity and appear to have an interest in or a connection to your organization What are the prospect’s interests? What area of your program does that best align with? A prospect may be appear to have capacity but may appear to have no interest in giving to your organization What is the motivating factor to pay attention to this prospect? Do you think your organization can build a relationship to foster a gift? Capacity AND Inclination are both Key!

03/11/2013Lawrence Henze | Target Analytics 33 OBSTACLES TO PROSPECT DEVELOPMENT: THE SILO APPROACH Annual giving Donor relations CRM Shadow database Membership Special events Major giving Planned giving Prospect Research Prospects

03/11/2013Lawrence Henze | Target Analytics 34 Contact me: Lawrence Henze, J.D., Principal Consultant Based in Walnut Creek, CA _______________________________________________________ Target Analytics, a division of Blackbaud, Inc Robin Ridge Court Walnut Creek, CA Blackbaud cell: White Papers: QUESTIONS

03/11/2013Lawrence Henze | Target Analytics 35 WHY I PREFER ‘LAWRENCE ’