ARTICLE
Asking For Stock Gifts Boosts Nonprofit Contributions
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Ready to have your mind blown?
There’s a super simple thing you can do to dramatically increase your contributions.
You can easily put this in place before the end of the calendar year — when most donors make their gifts.
Trust me. You’re going to want to read the rest of this article.
Because you’ll learn there’s one thing growing organizations have in common.
And it may surprise you.
Ready?
Growing Organizations Promote Stock Gifts
Let’s assume here you want to keep growing.
If not bigger, then deeper.
You either want to do more of what you’re doing, or do what you’re doing better. Or both.
Because if you stop growing, you wither and die.
Guess what strategy you’re likely not using enough that really works to facilitate organizational growth?
You’re likely not actively promoting the fact you accept – and warmly welcome – gifts from a donor’s assets.
Dr. Russell James J.D., Ph.D., CFP®, professor in the Department of Personal Financial Planning at Texas Tech University, recently completed a landmark study reporting on data from 1 million NPO e-filed tax returns from more than 200,000 nonprofit organizations. What it revealed in terms of total growth in fundraising contributions over a five-year period (2010-2015) from different types of charities was nothing short of amazing.
- Received only cash gifts = achieved 11% growth. Just barely kept up with inflation
- Received any kind of non-cash gift = achieved 50% growth. Included gifts of personal and real property and deferred gifts.
- Received securities non-cash gifts = achieved 66% growth. Massive difference from just this one strategy!
Organizations promoting and receiving stock gifts saw a positive 55% difference in growth from charities accepting just cash!
Your mind should be blown.
Why Asking for Stock Gifts Boosts Contributions
It’s partly due to the way the human brain works. There’s a psychological principal known as ‘framing.’ Framing can establish a reference point.
In the context of considering a gift from income vs. a gift from assets, often the suggested ask amount will be a significantly smaller percentage of a donor’s assets (Big Bucket wallet) than a donor’s disposable income (Small Bucket wallet).
- When a donor considers a $1,000 contribution against other expenses, the gift may seem too large a percentage of their spending money.
- When this same $1,000 is considered as a percentage of total wealth (all cash savings and non-cash assets, shares, personal property, real estate, etc.), the gift may seem a relatively small percentage of investments.
Researchers have found people don’t treat all their money as if they have one big pool of it. Rather, they have separate mental accounts. When they spend resources they keep track of that expenditure based on the mental account it came from.
Do you think most donors would rather consider their gift disproportionately large (too much from that account) or readily doable (easy peasy from a different account)?
Do you think most donors would rather consider their gift big, or small?
Most donors would love to make an outsize impact if they could. And if they have appreciated assets, they can.
Economics of Non-Cash Gifts
If you only ask for cash gifts, you’re missing out on a whole lot of potential.
Wealth is not held in cash, but in non-cash assets (primarily stocks, bonds and real estate). Per the Russel James study referenced above, cash comprises less than 10% of the collective assets and wealth owned by Americans.
If you only ask for cash gifts, you’re only dipping into the SMALL bucket.
You’re missing out on 90% of the potential philanthropy out there!
Not only are you missing out; your donors are also missing out.
Because you’re not helping them think broadly or see their own potential impact.
Your job, as a philanthropy facilitator, is to help donors be the best they can be. hey want to love themselves when they look in the mirror. They want to be heroes who give your nonprofit’s stories happy endings.They want to feel abundantly joyful about moving the needle in a manner that makes a demonstrable impact.
Donors can’t be their best selves if you only let them give you cash.
You need to show them they can dip into their assets and make a more generous gift.
Psychology of Non-Cash Gifts
People Who Feel Wealthy Spend More.
Let’s look deeper into Dr. Russell James research. He conducted an experiment where shoppers entering Broadway Market in Cambridge, Massachusetts were asked one of two questions. The question had a significant impact on how much they ultimately spent inside the store.
Group 1: “What’s in your wallet/purse? Cash? Credit cards?
Group 2: “Do you own stocks? Bonds? Certificates of deposit?
The second group, having been reminded of their wealth, behaved differently. They spent 36% more!
Satisfaction is often driven not by objective amounts but relative comparison.
When you ask for gifts from assets, not cash, you remind donors of their wealth. Most donors like that. Because they realize by contributing appreciated stock they can:
- Give more than they might otherwise have thought possible.
- Perhaps join a higher level giving society than they might otherwise have considered (reaping all the attendant benefits).
- Take an income tax charitable deduction (if they itemize).
- Avoid capital gains taxes because the stock is transferred without a sale, so no capital gain is triggered.
Asking for the same gift from assets (where it may represent a very small percentage of the resources in that bucket) will more likely yield a “Yes.”
People Who Give Non-Cash Assets Act More Charitably Over Time
Humans do a mental accounting. They attach labels to financial assets and then treat them differently.
Once you get a donor to make a first gift from non-cash assets, they now consider these assets as a source for potential future contributions. These assets are now labelled as “donation appropriate.”
Here’s why, per the research:
- People are more likely to spend irregular, unearned gains (i.e., their investments are appreciating while they sleep!) on luxury goods and philanthropy in particular (Reinstein & Reiner, 2012; Konow, 2010) than they are regular, earned work income.
- Framing a donation as an exceptional event removes it from comparison with regular disposable income budget items and increases giving (Sussman, Sharma & Alter, 2015).
BOTTOM LINE: If you learn to encourage gifts from appreciated assets you’ll get more generous gifts. Not just once, but repeatedly.
Cash = Anti-Social; Gifts of Assets = Pro-Social
Sociological research suggests gifts of cash are seen as more anti-social and as placing emphasis on money (emphasizing market-based exchange norms) rather than inter-personal bonds (emphasizing communal norms).
Maybe it’s because assets are seen as ‘extra’ and not essential in the way one’s paycheck is. If a donor gives from assets, it’s not going to change the way they live their lives. They’ll still be able to pay for food, shelter, clothing, medicine and all their monthly bills.
Whatever the reason, we’re somehow wired to think gifts of property are more acceptable. For example, when you’re invited to someone’s home for dinner, you bring a gift of wine or candles (not $20).
So… you may as well tap into this psychology.
And… there’s more!
Appreciated Asset Gifts Cost Donors Less
A $10K gift from securities can be more valuable to the donor than the same gift from cash due to the tax benefits they’ll receive. Again, people spend unearned gains differently than hard-earned income. They can give more at the same net cost. This can drive long-term increases in giving.
- A cash gift brings an income tax deduction.
- An appreciated asset gift brings the same income tax deduction PLUS avoidance of capital gains taxes on the appreciation. And this benefit extends even to folks who don’t itemize.
In addition, with the new tax law which went into effect in 2018, donors who previously deducted capital gains taxes on their state income tax returns (80% of states) will no longer be able to do so. So savings from not having to pay these gains taxes have increased significantly.
It’s up to you to guide a donor in this direction.
And… there’s more!
Donors Who Love Their Stocks Need Not Change Their Portfolio
I love to share this strategy with donors who tell me they love all their stocks so much they can’t think of any they’re ready to give away.
Tell your donors they can give $10K in stock to your charity and use the $10K in cash (that they would otherwise have donated) to re-purchase the stock – thereby wiping out all their appreciation/capital gains liability and increasing their cost basis from this day moving forward.
So when they ultimately do sell the stock, they’ll pay less taxes.
This is a way to be super helpful to your donor, while at the same time generating a significant gift.
And… there’s more!
Use the Power of Social Norms
One great technique is simply to showcase other donors making gifts of appreciated assets. This triggers the psychological principle of social proof. People ask: “Do people like me do things like this?”
Well, in fact, they do!
Especially when they are following in the footsteps of others who appear to be receiving a benefit
Dr. Russell James conducted an experiment where donors were presented with two different scenarios:
Group 1: “This is how Sara benefited from establishing a Charitable Gift Annuity”
Group 2: “This is how you might benefit from a Charitable Gift Annuity”
The folks in the first group made larger gifts. They were swayed by ‘social proof’ that this was a beneficial thing to do. In fact, if you can age-match the example (Sara’s age compared with donor’s age) responses will increase.
The more you show folks people like them think this is an advantageous strategy, the more likely they are to follow suit.
What Steps Should You Take to Secure Stock Gifts?
1. Set up a Brokerage Account
Often you can find a broker willing to offer discounted fees for nonprofits. When donors let you know they’re willing to make a stock gift, simply send them instructions that tell them precisely what to do:
- Decide which stock and the number of shares you wish to transfer to (provide your organization’s legal name).
- Provide written instructions to your broker to deliver those shares to the following account that has been established for (provide your organization’s legal name). [Include account number; direct transfer number; broker name and company; phone, FAX and email].
- Copy your letter of instruction to [Name and contact information for someone at your organization].
Also let donors know if they prefer to use their own broker you are willing to set up an account with their preferred brokerage. Be sure to let them know, however, you use the broker you do because they give you a preferred rate.
2. Include a Sub-Menu on Your Home Page (under Donate)
When website visitors click on or hover over your “donate” menu tab they should see “appreciated securities” as one of the “ways to give” options. Remember, you’re the one that needs to plant this idea. If donors see this on other charity websites, and not on yours, they’ll assume you don’t accept stock gifts.
Here are some charities who rock this online:
- Save the Children. They include a chart summarizing the differences between simply selling $5,000 of stock in order to make a cash gift, making an outright $5,000 cash gift, or making a $5,000 appreciated stock gift. The after-tax benefits show the clear winner to be the direct stock gift.
- Amnesty International. They make it an easy two-step process.
- Boys and Girls Club of America. They spell out the different outcomes in narrative form.
- American Red Cross. They use a simple three-step online form.
3. Give fundraisers extra tools and rewards to raise gifts of assets
This makes good economic sense.
According to the landmark Russell James study, organizations that received non-cash gifts grew 50 – 66% in the last 5 years; nonprofits that accepted only cash grew only 11%. And this was true across the board, regardless of size.
Even small organizations experienced massive increases in contributions when they accepted non-cash gifts, especially securities. In fact, the smaller you are the more difference it makes!
So devoting some resources to promote bequests is likely to yield a high return on investment.
Donors may never have considered giving from wealth rather than from spare income. Knowing this is not only possible, but easy, gives them freedom to be generous.
Conclusion
If you’ve been shying away from a ‘planned giving program’ because you don’t have expertise on your staff, all you need to learn is how to promote and accept gifts of stock. And this isn’t difficult at all.
Plus, if you don’t even want to accept stock gifts directly, there are Donor Advised Fund programs at community foundations and financial institutions where you can send your donors. Your supporters make a tax-deductible gift there, reap all the benefits of making a gift of appreciated assets, and then recommend a distribution to your charity.
So, no excuses.
You need to begin actively promoting acceptance of gifts of appreciated assets.
If you’re set up to accept appreciated assets you’re making giving more beneficial. It’s a bit more hassle for your charity, but… if you want to walk the talk of donor centricity this is something you should seriously consider. If you don’t do it, another nonprofit will.
Appreciated assets are a blessing many donors are willing to share.
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Jason