Fundraising, part 4: Bequest pledging seen as opportunity

By Todd Cohen

While charities in the U.S. need to do a much better job in their fundraising, including development of bequest pledges, they also have created a strong culture of philanthropy by engaging their boards in fundraising and setting the stage for major gifts and planned giving.

That is the view of Adrian Sargeant, the Robert F. Hartsook Professor of Fundraising at the Center on Philanthropy at Indiana University.

Nonprofits do a “dismal” job developing bequest pledges, Sargeant says.

While over 80 percent of individuals give during their lifetimes, only five percent or so of those who die leave a bequest to charity, a percentage that has remained virtually unchanged for 100 years, Sargeant says.

That is partly because nonprofits treat bequest pledging as part of planned giving, which traditionally has focused on wealthy individuals and helping them with their estate planning, Sargeant says.

While living individuals accounted for 75 percent of overall giving in the U.S. in 2008, bequests accounted for only seven percent, or $22.66 billion.

Bequest fundraising should be “ubiquitous,” he says. “Everybody should be making that gift.”

So nonprofits should be communicating all the time, in every communication to constituents, about providing for the charity in their wills.

Research into bequest pledging , including the type of language that should be used in talking about bequests, also has been inadequate, Sargeant says.

Overall, he says, nonprofits are “too hung up on the mechanism” of fundraising and not enough on why people give.

“Donors are interested in solving problems and making a difference,” yet nonprofits talk to donors by using terms like “annual fund” and “capital campaign,” he says.

“We need to organize fundraising programs,” he says, “around the things that matter to donors.”

Fundraising strengths

Sargeant does see strengths in charitable fundraising.

Nonprofits in the U.S., for example, do a good job integrating board members into fundraising, he says.

“There generally is a cultural expectation that if you join a board, you’re going to give and get other people to give,” he says.

Nonprofits historically also have done a good job organizing “networks to raise gifts from high-value individuals,” Sargeant says. “Major gift fundraising is one of the things that is done incredibly well in the U.S.”

The U.S. has “much more of a cultural expectation that you’re going to participate in giving here than you’d find in most European counties,” he says. “It’s less about convincing them why giving is important than convincing them of the cause.”

And while it tends to overlook bequest pledging, he says, planned giving in the U.S. is “pretty well developed” and offers a “good range of financial vehicles which make it easier for people to give that makes sense for them financially.”

Fundraising in the U.S. also has placed a greater focus on donors and is one of the first countries to have developed a donor bill of rights.

Impact of recession

The recession is likely to reduce individual giving by roughly four percent this year, based on giving patterns in past recessions, Sargeant says, while foundation giving likely will drop by 0.1 percent, although that decline likely will be bigger in 2010 because of a lag in the impact on foundation endowments from the decline in the capital markets.

Ultimately, the challenge for nonprofits is to focus their fundraising on current givers.

“The tough thing in a recession is acquiring new donors because nobody wants to expand their [charitable] portfolios because they’re feeling less wealthy,” he says. “In a recession, the key thing to focus on is retention. That’s an easier ask in terms of recession, compared to trying to ask new people to give.”

And retaining donors can have a huge impact on long-term revenue, he says.

“Increasing loyalty by 10 percent can increase the lifetime value of the fundraising database by up to 200 percent,” he says. “Even a small improvement in loyalty can make a big difference to the lifetime performance of the lifetime database.”

Next: Time always ripe to ask for bequest gifts

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