Finding Your Middle Class Millionaires

Every nonprofit has Middle Class Millionaires actively involved in and supporting the organization. Do you know who they are?

Harold Pinkham recently joined us for a webinar in which he showed us how to leverage your board and volunteers to help you find, motivate, and inspire these “under the radar” prospects.

In case you missed it, you can watch the full replay here:

Full Transcript:

Steven: Great my clock struck 1:00. Do you want to go ahead and get started?

Harold: Sounds great.

Ron: Sounds good.

Steven: All right, let’s do it. Well good afternoon everyone if you’re on the East Coast, and good morning if you’re on the West Coast or somewhere in between. Thanks for being here for today’s Bloomerang Webinar, Finding Your Middle Class Millionaires. Who are they and how can you reach them? Thanks so much for being here. My name is Steven Shattuck, as always, I’m the VP of Marketing here at Bloomerang and I’ll be moderating today’s discussion.

And just some housekeeping items before we begin. I wanted to let everyone know that we are recording this presentation and I’ll be sending out a link to the recording a little later on this afternoon. So if you have to leave early or you want to perhaps review the content a little later on or share it with a coworker or friend, you’ll be able to do that. Just look for an email from me later on this afternoon. I’ll also send out the slides just in case anyone happened to miss them this morning. And I want to encourage everyone listening along to today to please chat in any questions that you have for our two guest speakers. We’re going to do a formal Q&A session towards the end of the hour long session here and we’d love for you to contribute. Ask any questions along the way. Maybe if you want something clarified or explained further, please do that and we’ll try to get to just as many questions as we can before the 2:00 hour.

And just in case this is your first Bloomerang Webinar with us, welcome. If that’s the case, we do these webinars every Thursday. This is actually our last webinar of the year. It’s kind of hard to believe but we’ve got a great schedule of webinars coming up in 2015. So you can check that out. We also, in addition to offering these webinars, we have a great donor management software platform. So if you’re in the market for that or you’re thinking about switching vendors, please check us out. You can look at all of our features, you can get a video demo, right there on our website.

So now I want to introduce our two guests. They are Harold Pinkham and Ron Ware. Hey there gents. How you doing?

Harold: Hey Steve.

Ron: Hi Steve.

Steven: Thank you so much for being here. This is a great way to wrap up the year. So grateful for you to share all your knowledge with us and I’m really excited for everyone to listen along. I even notice some Bob Dylan slides coming up here in a little bit. So I’m excited to see those. Just in case you guys aren’t familiar with Harold or Ron, Harold is actually a principal and he’s the co-founder of Activate Legacy. He has an extensive background in nonprofit leadership, fundraising and board development and program implementation. He built that through a 20-year career with the Boy Scouts of America. So Harold, great for you to be here.

Harold’s partner in crime is also joining us, Ron Ware. He’s the founder of and president of Wealth Impact Partners. He is also a principal and co-founder of Activate Legacy. And he’s been in the business for over 20 years. He’s helped numerous families discover and articulate a personal definition of legacy and stewardship and then help them to work to fulfill that. So guys thanks so much for being here. I’m not going to take up anymore of your time. So why don’t you take it away for us.

Harold: Great. Thank you Steve. Thank you all for joining the call today. I know as we near the end of the year, you guys have a tremendous amount of pressure on you with your year-end fundraising. Personally, we’ve all got Christmas shopping and Hanukkah shopping and things to do at the end of year so thank you for taking a little bit of time to join us in this presentation. Hopefully, we will deliver some thought provoking and inspiring information that can allow you to think different about your planned giving efforts.

Just very quickly about Activate Legacy. We’re a fundraising consulting firm that has a specialized focus in helping nonprofits with planned giving. The core of what we are is built around three principles. First, we believe that every organization that has a segment of their donor population, we call the “middle-class millionaires,” would love to do more for their beloved charities that they support but are afraid to do so out of fear or lack of understanding of their true financial potential. Secondly, we passionately believe that when they are provided with this information are guided through a thoughtful life and legacy process, they can begin to think more differently about their wealth. And thirdly, we believe that every nonprofit has a number of dedicated volunteers who actively support the organization and are connected in the financial industry can serve as a valuable resource in helping to empower those middle-class millionaire donors to think differently about their wealth and inspire them to do more to matter. During the course of the presentation we will really focus on those three things. Here we go.

As Steve kind of alluded to, I’m a passionate Bob Dylan fan, don’t hop off the phone though for those of you that aren’t into him. Anyways, I kind of start this presentation with this advertisement from Apple, actually back in the late ’90s. But I really thought it captured the message that we want you folks to walk away with today. We want you to think different about your planned giving, our gift planning efforts. And we want you to think differently about that under utilized segment of your donor population. Those B level donors that, many of them you may discover, could be diamonds in the rough, A level prospects, those hidden middle-class millionaires.

And secondly, we want you to realize that you have a tremendous asset of resources in your midst in your volunteers. Maybe they’re maybe on your board, maybe it’s your donors, that can be a tremendous resource due to the financial professionals that are involved in your organization, one way or another, that can help you out. And we want you to think different and I think this picture captures it. Certainly Bob Dylan thought different about popular music and whether you’re into him or not, he totally changed the scope of how music was presented from that point on. And certainly we all know the power that Apple has had and how it’s affected it our lives. Clearly they are a company and there was an individual that really thought different.

So I kind of want to begin with my story. As Steve alluded to, I had been working in the nonprofit sector for 20-years and one of my last assignments was as a development director, and I was focusing on getting a planned giving program off the ground. What really inspired us and what really got this process going and the genesis of that giving legacy is built around this story of Bob. And Bob was a board member who was actively involved in the organization for 30 years, served on the board for about 10, had a tremendous passion for the organization. His children greatly benefitted from the organization.

Bob was a program guy, not a fundraiser. Annually he gave a gift of about $200. But he wasn’t somebody I could go to and say hey Bob, can you bring a foursome to the golf tournament or fill a table at our dinner and so forth. He was a great valuable worker. He was not on anybody’s radar for a major gift. What was interesting is he was about to retire and we were offering a series of estate planning workshop as kind of a give back to our volunteers. In fact, my colleague, Ron, ran those for us at the time when I was working for the Boy Scouts. I was smart enough to bring him in and help to do some of these educational presentations. Bob was inspired enough by the presentation to want to follow-up, but him and his wife met with Ron because quite frankly they were concerned that they didn’t have enough to retire. They were both in their early 60’s and, again, very near retirement.

What you need to understand is that going into that meeting, Bob had assets of about $3.5 million. Here he has going into this meeting, do I have enough? Well, during the course of the wealth legacy journey with Ron, not only did they discover that they had excess wealth that the didn’t plan to spend or necessarily want to give entirely to their children, and they soon discovered through the course with Ron, that they could do more for an organization that they cared passionately about. And lo and behold, a few months later, it was announced to us that they were planning to leave a gift for a million dollars for our organization. So, needless to say, as a development officer, we said how did this happen? And more importantly, how do we do it again?

So this kind of begins, we’re going to provide you the next several slides are built around landmark books written by Thomas Stanley and William Danko called The Millionaire Next Door. It was written in the late ’90s. If you don’t have this book, in my mind it’s a must own for anyone in the development world. And again, as you can allude to, it really focuses on the characteristics of the middle-class millionaires. And Danko and Stanley are hired by a couple of large investment banks. I don’t know if it was Goldman-Sachs or Morgan Stanley or one of those folks, and they were a couple of college professors. I think one was with Harvard, that was asked to come in and create, through a series of interviews and group meetings, develop a list of characteristics that made up the middle-class and that made up millionaires. And then they in turn were going to use that information, obviously market and try to get more people to this business.

Well what Danko and Stanley discovered was that when these folks started coming in for these group meetings and the one-on-one meetings, they didn’t look, dress, eat or act anything like they expected millionaires to be. In fact, one of the more humorous parts, at the beginning of the book, that they talked about was when they first had this big group meeting, they did this big spread with all sorts of “millionaire type of food.” The high end champagne, the caviar and so forth. And the clients came in and they looked at the stuff and they wanted nothing to do with it. They were looking for hot dogs or chicken marsala or what have you. That was not who these folks were.

What they soon discovered, and what you should equate to the same as your organization, is the millionaire at your organization, two-thirds are self-employed, only one in five is currently retired. Their average age is 57 years, they have three children. Their spouse is equally or more frugal than the other spouse is. And as a combined unit, they are serious, serious, budgeters. They typically, 97%, are homeowners, 50% have lived in that same home for 20 years or more. So you can imagine, in most cases, they have some significant equity. Most live in middle-class neighborhoods, you won’t find these folks living in gated communities or building the mansion in the middle-class. And their home values, at the time this book was written in the late ’90s, was around $320,000. And I put that equating to a house somewhere between $450,000 and $500,000 today. I guess all depending on where you’re living and so forth.

Their spending habits, as you can see from the slide here, they are very frugal people. Again, I say frugal, frugal, frugal, but they could quite frankly use the word cheap, cheap, cheap. Fifty percent would never spend more than $350 on a suit, or $140 on a watch and most use Visa or Mastercard instead of American Express for the very simple reason, American Express charges fees, where simply Visas and Mastercards don’t. They don’t want to pay the fee.

As you can see from their automobiles, 81% will purchase their vehicle outright. Almost 60% will spend under $35,000. Only 23% buy their cars new. Again, they realize that the moment you buy, as we all know, the moment we buy a car, if we bought a new one today and we drove it off the lot and we drove it around the block and returned it, you would be facing a depreciation of somewhere 10%, 15%, maybe 20%. Our middle-class millionaires are aware of that. They don’t want to take the depreciation. They want to have it happen before they buy the car. Therefore, they’re cars are typically four years old or longer and as a rule, will own something like an F-150 or an Explorer. Why? Because it’s practical. They can use it for their business. Many of them are entrepreneurs and they can use it for family purposes. Transporting their kid’s hockey equipment and so forth.

A large majority make up less than 20% of the work force, but account of 66% of all millionaires. Many of these businesses fall under what we call the dull, normal category. Maybe farming, welding contractors, plumbers, HVAC, etcetera, dentists, accountants, even pest controllers. Generally, they will see themselves as cash poor because much of their realized income is either going right back into something highly appreciable, such as their home, their retirement accounts or right back into their business. Again, I’d emphasize they are generally self-employed. Seventy-five percent are entrepreneurs while others are professionals, such as CPAs, lawyers, doctors, etcetera.

Typically, they’ve begun the business on their own. Ninety-one percent have never received as much as dollar to start their business. And interestingly, less than 20% plan to turn that business over for one reason or another. The millionaire entrepreneur, most are going to require some type of financial planning. Only 3% have put plans in place. I think we’d probably all agree, few are prospected by nonprofits. However, they are the core business of many financial advisors.

Millionaire’s net worth in the country. There is roughly 8.5 million, millionaire families in the United States. Only 6% have net assets over $10 million. And lets face it, those seem to be the families that we all seem to gravitate towards. That top 6% and we can pretty much be assured that those folks are being inundated by requests to support the various causes that they’re connected to. They overlooked segment, and the vast majority of our millionaires out there fall under that category. And as you can see, the average millionaire in the country is about $3.7 million. And the typical, or medium, the largest block of our middle-class millionaire population is at $1.5 million.

Real interesting, in that, we just came out over the past few weeks, by UBS Wealth Management, they did a study and asked a simple question to the families that had assets between $1 million to $5 million, and they asked do you feel wealthy? And 72%, even though in the 7% to 5% segment of the most affluent people in our country. Even more interesting is that people that had assets of over $5 million, 40% said that they didn’t feel wealthy. So why is it? What is the concern? What are those things that’s keeping them up at night from feeling secure with what they’ve earned.

And as you can see from this slide, running out of money, by far, in a lot of cases it doesn’t matter how much wealth you may have, is a huge concern. Rising medical costs, Medicare, assisted living, living longer, these are huge issues with our middle-class millionaires. In fact, this other slide, by Princeton Associates, focuses even a little more on that. And it’s pretty much the same theme that you see running into this. A few other things like kids’ and grandkids’ education, these are pressing concerns with this segment. And as you see at the bottom there, those gifts to charity at 27%, that doesn’t mean that these folks don’t care or don’t want to give to your organization. They just feel paralyzed to do something meaningful because they have all these other challenges and other issues.

So in summary here, there are over 8.4 millionaires in the country. Over 13 million have, there’s also, I threw this bullet in, there’s also an additional 13 million who have assets between a half a million and a million dollars that could be key when giving prospects for your organization. Most don’t think they’re wealthy and few have done little, if any, type of financial planning. So as an organization, what can you do about this? At this point, I’m going to turn this over to Ron to talk a little bit about a new approach. Ron?

Ron: Thanks Harold. Great information there. It’s a real honor to be with you all today. Obviously in the context of the time frame today, we have limited amount of time obviously to go through some of this subject matter that we’re doing. Harold, I’m going to turn it back over to him in just a few minutes and at the end of today’s presentation I’ll give you some information on how you can go a little bit deeper with some of these ideas we’re sharing, if in fact you have interest in doing so.

So what I’d like to talk about now, as Hal mentioned, is what we refer to as the excess wealth conversation. As Harold mentioned at the beginning of the presentation, this is something that we really are, it’s an overused word, but we really are passionate about it. We really believe in it. Yes, I’ve been practicing for about 20 years but it was about 10 years ago that I, as a financial professional, I’m an attorney and financial planner by background, stepped off of several boards that I was involved in for charitable organizations, because I was frustrated that my contribution wasn’t being as valuable as I thought it could be.

And after stepping off and reflecting on how I could give in a more tangible, more substantial, more valuable way, more personal way as well, I decided that the thing I could do, maybe better than anyone else within that particular organization’s network would have really productive conversations. Empowering, inspiring conversations with people who had financial means and often financial means beyond what they realized. Over the years, the last ten years, we have been very blessed, to say the least, to be catalyst in releasing millions of dollars, both in major and planned gifts, into a whole variety of organizations here in our local community and beyond, in other states across the country as well. And so what we’re sharing with you here isn’t just an idea. It’s a proven technique.

So let me talk about what is this excess wealth conversation? And really, it’s rooted in the fact that every gift, whether it be major or planned gift, almost always, this is the surprise planned gifts that show up, that come in from someone that may have been completely off your radar, but most of the substantial gifts that a charitable organization would see, begin with a conversation. As Harold had said, going through the middle-class millionaire sort of attributes, what we want you to realize is that there are more people than you currently can appreciate that love your organization and they love the work that you’re doing. And the fact is these people they would do more. They would do more exponential giving both during their lifetime and after death, if only they knew and if only they confidently believed that they could do so.

And when I say that, what I mean is, they need to know. They need to just confidently believe and understand that they can do more giving without negatively affecting their own financial independence, without negatively impacting their family legacy objectives. And if you can strategically and effectively, as an organization, be the source, the relationship, the catalyst in their life to help them to discover this and acknowledge this, that they have excess wealth, as we call it, beyond what they need for themselves and their family, then you will succeed in empowering and inspiring just beyond what you can imagine. And I can tell you this with great confidence. Again, we’ve done it for nearly ten years.

Now we’ve heard a lot about donor-centric development approaches. And really at the core, that’s what we’re talking about here. When you’re talking about middle-class millionaires, you can’t rely upon the same old conversation that Harold is rather creatively and with a fun spirit is showing us, with Dylan and with Apple, is that we’re constantly, all of us if we’re honest, we’re constantly looking for new, more innovative, more creative ways to do what we’re trying to do. And at the end of the day, with middle-class millionaires, that’s more important than ever.

So what are these middle-class millionaire donors looking for? Well, as Harold alluded to, they’re looking for financial clarity; they’re looking for confidence for the future. With all due respect, Harold showed you the list; you aren’t at the top of their list. Charitable giving, increasing their philanthropy and their social impact, it’s not at the top of their list. And if we’re honest, all of us are human beings, just like your donors. It’s not at the top of our list either because it can’t be. It’s not responsible to have it at the top of our list so we have to respect that fact and we have to understand that the vast majority of these folks in the middle-class millionaire donor demographic. Harold said only 3% of written down their plans. What he’s talking about is plans for some type of charitable gift through their estate plan.

The vast majority of them, from the data and from my anecdotal experience, have done some formal planning. When they start in to an event that we might be assisting in producing, or conversation that we may be having with the donor, almost all of them have done, at some point in their lives, estate planning of some sort, financial planning. Obviously, they’ve got accountants or attorneys or financial professionals in their lives. These are not folks that have fallen off the apple cart yesterday. But yet, they don’t have the financial clarity and confidence that they need to be releasing the kind of gifts that they could be and the kind of gifts that you would hope that they would be.

In addition, they’re very private. They need to know that if they’re going to talk about this stuff, with whoever they’re going to talk about it with, that it’s absolutely confidential and protected information. And so, a very, very important aspect of these conversations, is privacy. And what is often missed, is that they need to be inspired. They need to be, in addition to being inspired, they need to be empowered. Okay? They don’t need to be educated and they don’t need to be given technical jargon and strategy talk and tactical CRTs, and donor advice funds and do you have all the appreciated assets and how about a charitable gift annuity. Yeah, all of that stuff is obviously important at some point in the conversation. But we make the mistake, too many of us, in leading with tactics at a premature time in the conversation. I had one mentor of mine, years ago, tell me that when you use the “C” word, and the “C” word being Charity, prematurely in any of these conversations, it’s like dropping a four letter F-bomb on the table. It’s awkward, it’s uncomfortable and it can completely sour what could have been just an incredible opportunity. And so we have to lead with the donor. These are the things that they want, and these are the things that they need.

So if we look at what is a donor-centric conversation? As I said, it has to start at the foundation with them. Their own financial well being, their own financial freedom and independence. Because until they feel that they have taken care of themselves, as a husband and wife or as a family, whatever the needs of that family may be, from a financial income and financial independence standpoint. They can’t even think about, in my experience, they can’t even think about their estate planning very effectively for their children because they don’t even know if they’re going to have enough. And I’m not talking about folks with, just scraping a few pennies together who are justified to be wondering if they’re going to have enough. I’m talking about millionaires. I’m talking about $5 million in net worth, $10 million in net worth and even up. Because it’s all relative.

Financial independence, I don’t care if you get $5 million, $10 million or $50 million, the lifestyle that is being sustained on an annual basis is often a relative concept and people don’t always feel, particularly in the wake of 2008, that they’re secure and that they can afford giving more money to your and your organization and to your great work. It’s only after we can get them confident about financial independence can we move up this pyramid that you see before you in the family legacy concept. When we get there it’s about why do you want to leave money to your kids? Of course you want to leave money to your family, your kids and grandkids. And there’s things that you want to accomplish but the question that often gets missed is why do you want to leave money?

If we can get folks talking about their family and their concerns and their hopes relative to the kids and grandkids and what they’re trying to achieve, why they want to leave an inheritance? We can help them to be more thoughtful about how much that would cost and how much is enough? How much is too much? And in the course of that, we can continue to move up the pyramid, after they take care of themselves and their family to this social capital portion. Excess wealth as we call it. And when we get folks to this point, what we help them to understand, and universally they agree with, there’s only two things you can do with excess wealth. And I’ve thought a lot about this for about 20 years now and I think you guys will agree when you hear it. It’s pretty self apparent when you hear it but there’s only two things you can do with excess wealth. You can live more or you can give more. They’re both really fun, they’re both really enjoyable and meaningful, but they’re also very different. And the best plan provides the financial wherewithal to do both. Okay?

So this is what a donor-centric conversation, this excess wealth conversation, as we call it, looks like. As I’ve said a few times, it’s also designed, not with an education focus or information as the trust, but understanding what motivates them, what concerns them, what drives them? And really connecting to those areas of conversations in a way that will inspire and empower. It’s holistic, it’s comprehensive. It’s personal. You get people to really open up and be authentic and honest about what their hopes and their fears and their dreams are. What their story is. What they really care about. And ultimately either to share with you the things that they already care about philanthropically or charitably. In some cases, to really help them discover what that is that they care about. Many of them don’t often have a clear sense of that when they first start talking with us or with any professional about this kind of stuff.

So it’s a strategic approach to assessing, and more importantly helping them assess, as donors, their financial capacity and then also their philanthropic intent and what they hope to accomplish, what they care about. And it’s really ultimately an invitation to plan at another whole level, another whole plane. I like to say, as I’ve said, folks that are in this demographic, they haven’t fallen off the apple cart yesterday; however as a big football fan, I use a lot of football metaphors. They’ve brought the football all the way down the field, but yet they’re often sitting in what we call that Red Zone. That area from the goal line to the 20 yard line. Where they’re almost into the end zone, they’re almost accomplishing that goal of scoring the touchdown but they haven’t quite brought it across the goal line and done that yet.

They’ve done a lot, they’ve done a lot. And they’ll all tell us, by the way, and they’ll tell you. I’m all set, I’ve done all that already, I’ve got people helping me with that, I’m really well managed on all that. The reality is, if you ask them if they’ve built in any kind of charity within their estate plan, almost universally, as Harold told you, more than 95% or so have not. And many of these folks are sitting on your boards; they’re all throughout your donor constituency. And it’s not because they don’t care. It’s not because they’re not really jacked and excited and emotionally attached to what you’re doing and the mission or your organization, the work and the service that you’re providing. It’s just because they don’t think they can.

Okay, so I told you what it is, that’s the excess wealth conversation in a nutshell. Again, big picture, if you want to do a deeper dive there, we’re actually doing a program on January 23rd that Harold will share with you, that’s focused exclusively on the excess wealth conversation. But I want to quickly cover in my last few minutes what it is not. Because it’s very important, you’ve all heard the story that to recognize what an authentic dollar bill is and what a counterfeit gift, what the affected one looks like and then you study counterfeit, right? So I want to kind of do that here. I’ve told you what it is.

Let’s not fall into the trap of doing some of this that you see on the slide. It is not focused on your organization or your organization’s needs. The opposite of donor-centric is organization centric. And that is by and large, everything else you’re doing in your development efforts. Which is still important, absolutely needs to be part of the whole repertoire. But when you’re in this domain, and you’re trying to facilitate this level of conversation, it’s not at all what should be going on. It’s not an ask for a gift.

See the difference here is, we want to empower donors to discover their full capacity so they can proactively say to you and to maybe some other organizations, “I have a whole bunch of financial capacity I just discovered I have. I want to have some fun with it. I want to realize some meaning and purpose by really getting in the game more with this new found financial capacity that I found.” You don’t start with the ask. You start with empowering them to the discovery and then bringing them to the table. Again, exponentially greater gift is the result most often.

It is a bit controversial and it’s not guided by, or conducted by, a card carrying staff member. Remember what I said. Privacy is huge here. They’re not going to open their kimono fully when they know that you actually are serving, first and foremost, the organization and not them. So we need to figure out, how do we create that kind of safety, that kind of privacy that they’ll feel comfortable doing this and it’s usually going to require something else added to the already existing professional team. We’re going to talk to you, in just a minute I’m going to turn it back over to Harold. I want to talk very briefly about this whole council idea. But that’s the way that we recommend and a sustainable way that he can do this without having to have you or a card carrying staff member carrying that water.

It’s also not focused on tactics as I mentioned. We have to be very careful who we invite into this philanthropic advisory counsel group that we’re going to talk about in a minute, who might be facilitating these conversations because it cannot be about that advisor. Just like it can’t be about your organization, it can’t be about him or her either. We don’t want anybody who’s interested in selling product or soliciting in any way. It has to be about the donor, genuinely. And then out of that, it will evolve to becoming about you and your organization. It just will.

Essentially, when you’re the source of this discovery and the catalyst of this very empowering discovery. And exponentially, I’ve never worked with a donor that was introduced to me through a particular charity and they discovered this capacity and this excess wealth and didn’t include that particular charity. At least there’s one of the charitable benefactors that they were going to include. That’s just my own experience, not to say it might not happen. But that’s also really, really important.

So I don’t have a current time here but I will quickly just run through “The man who couldn’t pronounce Philanthropy” and this is a very successful family. I wrote down a couple of quick notes for you. They were clearly in this middle-class millionaire demographic. Estimated net worth somewhere between $4 million and $5 million depending on the value of their various business enterprises. They owned a family heating oil business for many years. A number of real estate investment properties, so they had a real estate investment business as well, with good strong income coming in from both of those business. And then and as a little bit of an attempt to diversify, they opened a car dealership that was also very successful. They had very strong income and they had been very effective over the years at saving as well.

And they were connected to several local charities, all of whom were serving children and families that were at risk; lower income children and families. But yet, even though they had this financial success, they weren’t college educated, they were blue collar wealthy in the truest sense. They were involved with some local charities. The gentleman and his wife, I met them through an event that we were co-producing on behalf of a local YMCA with a member that they brought in, the YMCA into the philanthropic advisory counsel group and we team taught an event that we call “Enhancing the Wealth of your Life.” And so at the end of this, the goal is to continue the dialogue and to get folks who attended to continue the conversation personally and that’s what these folks were coming up to let us know they wanted to do.

And the first thing out of his mouth was can I ask you a question. I said yes and he says what in the heck is “philanthopy” he couldn’t even pronounce the word. It was almost endearing because here’s this really successful guy, great heart and he genuinely didn’t know what philanthropy was or for that matter how to pronounce it. The best part of this is, again time is limiting here, is we were able to take him through an initial set of conversations, ultimately proceeded to them engaging with some existing professionals and then I came alongside with another member of the philanthropic advisory council and we assisted the whole team and the whole process to take this estate plan to another level. And through that, they ultimately realized how sound and secure they were for themselves and they were able to articulate what they wanted to accomplish for their kids, which was a million dollar gift per child.

And out of the process, they could see that on a projected basis, they had north of $3 million of money left over after they paid for their own retirement, all the way out life expectancy and beyond, after they left a million dollars, indexed for inflation, to the three kids, each. They had north of $3 million, on a projected basis, leftover. And it was beyond what you could imagine in terms of their level of excitement when they could leave more than $3 million to a planned gift, a little bit north of a million dollars each to three different organizations, including the YMCA group that introduced us.

There was a whole array of things that we did for them including some new trusts and some updates to their existing trusts and some guaranteed retirement income investment vehicles that we, with their existing financial professionals, were able to support and help recommend. They had a large retirement plan for the husband that we partially converted to a Roth IRA. And we did some current giving of some of their other investment assets to a donor advice fund to create an offsetting deduction, so that they could do that Roth conversion without any federal income tax. And then we did donor advice fund which is where they do their current giving in to. That allowed the family to also do some increases, pretty nice increases I would add, by way of annual gifts to these various three organizations that they cared most about.

So it was really an ultimately, just a classic, win-win-win in many ways. And here it is and there’s a whole bunch of these folks right within your own donor constituency who don’t think they have the financial capacity, just like these folks didn’t. So at this point I want to turn it over to Harold to start a little bit, the wind down process. He’s going to take us through a little bit of an introduction into this Philanthropic Advisory Council that I’ve been alluding to. Back to you Harold.

Harold: Great, thanks Ron. Yeah, in the few minutes we’ve got left here, let’s talk a little bit about what your organization can do to connect with this segment of your population that’s probably being overlooked. As Ron alluded to, first I think we all need to think about what is the donor’s concerns? And truly, the donor-centric. You can do this and a tremendous resource would be what we call a Philanthropic Advisory Council to help your donors begin the philanthropic conversation. You can use your pack to provide valuable educational resources that addresses these concerns. And this is truly going to demonstrate leadership and show them that you care about their concerns, about their issues.

So, where do you begin? Well, how do we create your plan giving dream team? Well, let’s think about your volunteers that are involved in your organization. Our finding has been if you look at the segment of your board, your executive board, your auxiliary board. If you look at your donor base, if you look at your membership constituents. Even if you look at people that are sort of on the side, connected with your organization in the community, you’ll probably discover that you’ve got somewhere between 25% to 40% of these supporters that are involved in the financial industry. They’re your local attorneys, accountants, financial planners, insurance professionals, bankers, investment bankers, so forth. You want to pull these folks and recruit and train them.

A typical pack that we see can work pretty effectively anywhere between five to six people. When you get up to about a dozen, that’s maybe when it gets a little bit cumbersome but somewhere in between that 5 and 12 , that’s a powerful combination of people of various industries and the financial world that can help you. You want to have them provide educational events or materials that educate and inspires those middle-class millionaire donors. You want to use them to help create a true gift planning culture within your organization.

What can you do? Well you want to leverage their expertise to address donor’s concerns. You could offer, perhaps, estate planning workshops. Small business exit strategy. You know 70% of small business owners out there, don’t have an exit strategy for retirement and getting out of that business and being able to live the rest of their life with what they’ve earned from that business or what they can get when they sell that business. And there are attorneys out there that focus on nothing but that that you probably maybe one way or another, have connected to your organization that could be a valuable workshop to offer to your donor base.

Elderly law. Personally, I had both of my parents go into assisted living within the past year. I sure wish as we were going on this journey of getting them there, that I had learned more about elderly law and VA benefits and all those sort of things that could have helped my parents transition and provide some income for them that could have helped them with their move. You could build a workshop to provide information that could help address those concerns. As a result, you’re going to generate appreciation and trust. They’re going to feel valued and understood by the organization. It’s going to allow for some significant follow-up conversation on one level or another. And it’s going to plant a seed in an interest in gift planning strategy.

As Ron said, it really is a win-win-win scenario for everyone involved. If I haven’t convinced you to get your financial professionals involved, the next couple of slides here involve some studies that I came across and some growing trends. In this particular slide by Bank of America, it talks about how nonprofit staff involvement in helping donors make charitable decisions, back in 2006, the nonprofit staff was involved in about 41% of the time. Today that number has dropped down to around 30%. More and more donors are consulting with their legal professionals first.

Another growing trend, another study, percentage of donors who learned about giving or philanthropic options from their financial advisors first, back in 1994 it was a meager 4%, today it’s near 30%. Another study, who did a client or donor go to first to seek out charitable advice? Well, in almost 70% of the time, it was their local accountant or their attorney or a financial planner were heavily involved. Again, more and more folks are seeking their financial professionals.

However, before you reach out to folks, you need to understand that there’s a few studies that point out some trends that aren’t necessarily great and just means that if you create a Philanthropic Advisory Council, you need to train those folks involved with it because this next slide, again by Bank of America, Merrill-Lynch, who initiated the charitable gift conversation? And sadly, it only was brought up by their financial professional roughly 6% of the time and the vast majority, 94% it was brought up by the donor or the client. How did the donor or client feel? Well, they weren’t necessarily happy. In fact, only 21% said they were satisfied with their advisors. Why? Well, donors were frustrated that it was they that had to bring up the idea of a philanthropic conversation.

In fact, one study here, as I pointed out, that if the financial professional talked about it first, 34% of the time, the donors would seriously consider the idea. If the financial professional brought up their philanthropic intent first, that number jumped to 43%. Donors get turned off by the tax bleed. They don’t want to hear that it’s all about saving taxes. In fact, when this question was posed, what was most important to their donors or to their clients, 46% of the time, saving on taxes is what the advisor said. When that same question was posed to the donor, they said only 10% of the time it was important. As you can see, there’s a disconnect here. And as Ron alluded to, they focus way too much on the technical and not enough on the personal or social side.

This slide kind of alludes to that. Eighty percent of the time is spent on the tactical. Only 20% of the time it’s on the dreams or vision. As a result, most are not taking action. So as we really wind down here on the last couple of slides, I want to give you one last thing to think about. And that is, if this great transfer of wealth is still happening. I’m sure many of you have heard about the Boston College Center on Wealth and Philanthropy, in fact, the study was just revised this spring and it is now projected that over the next 50 years over $50 trillion is going to transfer from one generation to the next. And when that transfer of wealth takes place, it is expected that $6.3 trillion is going to go to charity through bequests or planned giving. So you need to be in the game if you’re not.

And last slide here on that point is who currently has the wealth in this country? Between the silent and greatest generation of the baby boomers, it’s roughly 90%. So again, the transfer of wealth is still happening and are you ready? Steve I guess I turn it back to you and see if there’s any questions out there.

Steven: Yeah, absolutely. Thanks guys that was really wonderful. Harold all that data you shared, I had never seen any of that before. That was very interesting. I was just kind of sitting here pretty tuned into everything you were saying so thanks for that. And Ron, thanks again for sharing your thoughts as well.

We do have probably about six minutes for questions. So I would encourage anyone listening in to send in any questions our way. Looks like a few are coming in now. Harold I think this question from Jackie was perhaps while you were talking initially. “Could you repeat the three core beliefs?” It looks like they missed number two. I think she’s referring to the three core beliefs that you spoke about very early on.

Harold: Yeah, sure Steve. Our three core beliefs as a firm is that we believe that every organization has a segment of their donor population, those B or C level donors, that we call the middle-class millionaires that are in your organization in one capacity or another. We believe that with the correct information, they can discover that they can do more. And then finally, we believe as we’ve demonstrated to you, hopefully, that you have a team of financial professionals out there, most likely connected to your organization that can help.

Steven: Here’s one from Rohe. Rohe is wondering how can small local organizations demonstrate their impacts to the millionaires within their city? So maybe they’re struggling, because they’re small, to get some of the word out. What advice would you have to those small organizations who want to do all the things you talked about?

Harold: Ron do you have any thoughts on that one? Do you want me to take that?

Ron: I’m sorry, I got muted inadvertently. Steve could you repeat that question?

Steven: Yeah, Rohe here was wondering how can small local organizations demonstrate their impact to the millionaires within their city?

Ron: Yeah, that’s I guess the million dollar question. Right? I think it’s a critical part of the equation. I think at the end of the day, it’s finding the real life stories. The human beings, the flesh and blood stories that have impacted. To the extent that you can capture a testimony from someone who has been impacted by your organization, sharing a personal testimony about how it changed their life, how it impacted. I think it’s also critical, a lot of people overlook this, a lot of us charity leaders often overlook this but groups like Charity Navigator and others have emphasized, and I think it’s something that clearly donors in my experience are looking at, the importance of demonstrating how much of an annual budget dollar is allocated to services, to end user services as opposed to administration and development costs.

So those are a couple of things that I think you can do to create that kind of donor confidence. But communications from your board, sharing strategic plans, I think is a huge miss that organizations often miss. Because it’s not just about the good work you’re doing currently, which is obviously critical. But it’s also about where is the future of the organization going? And is it something that in addition to the work you’re doing now, is that something that also inspires? So those are just a few thoughts in response to that question Steve.

Harold: Yeah, and just to add to that. It’s being transparent and tell your story. Particularly online, electronically, as much as you can. I know in talking with some of the clients that Ron has worked with. A lot of these middle-class millionaires, these people that have set up these plans to give, in a lot of cases, they haven’t necessarily identified the charity that they plan to give to. They may have created the donor advice fund that’s sitting with a large sum of money, but they have not yet gone through the process necessarily of determining who they’re planning to give it to.

So they’re researching. And they’re savvy enough now to go online and be connected to the story about organizations that they know something about. And the better you can tell your story through social media, as well as when you’re talking to people in person, it’s going to help connect.

Steven: Well, here’s one from Katie, and a couple of people seconded and thirded the question so I guess I better ask it. Katie’s wondering “Do you have any recommendations for how to put the informational sessions out there?” So they’re an environmental nonprofit and they feel a little bit of a disconnect in putting out a financial planning presentation. What advice would you have for Katie who maybe wants to get that financial planning kind of off the ground and running?

Harold: So there’s two primary ways that you can do it. You know, with Katie I can understand the disconnect you’re feeling there. The reality is your donor is just like you and I are, real people. And so to the extent that they fall into this middle-class millionaire demographic, these are real issues that they’re wrestling with. Quite frankly, I say this coming from the advisory community, the majority of my brethren, my peers, in the marketplace, are not helping them figure this out. This isn’t just traditional financial planning, this is what we refer to, in our practice, is life and legacy planning. It’s about so much more than just money, it’s about so much more than retirement or taxes. I think too many advisors make it about all these things that, yeah, they’re important, but at the same they’re not the big motivation, the big aspirational type things that we’re talking about in this context.

And so I think that perceived disconnect is reasonable, but I think you need to get past that a little bit by remembering, these are just real people. And if you’re bringing a public service, in the form of a gift pack, to an event that you’re sponsoring at a really nice restaurant. You’re bringing in a guest speaker to speak on something that’s compelling in and of itself. It doesn’t matter what organization you are. People are going to come. And so what we can do offline, is we can equip you with the whole model. What is the invitation system look like, what does the room need to be set up like? How does this presentation go? I think it’s best, again, most sustainable, if you can find a handful of people within your organization that would have the confidence and the competence to be able to deliver a talk. I will often come in and team teach the first few to try to get it off the ground if that’s an interest.

In addition to event, the simplest way to walk before you run is we can help script some phone scripts for you as to how to talk to these folks and request just one to one conversations over lunch or coffee or breakfast and begin these conversations in more of a personal one-to-one fashion. And so those are the two primary ways that you do it. And we could talk again more as clients. It’s a little bit of a bigger question that we can answer here today.

Steven: Yeah, we’ll definitely say your contact info. And real quick before we go. I want to address Lori’s question. Lori here asked a couple of times. Harold I know much of the stats and data you share pertain to the American middle class, but Lori was wondering how much of that maybe translates into the Canadian landscape. Do you have any sense of what that looks like to our friends in the north? Similar, maybe a little bit different? What do you think?

Ron: Harold if you don’t mind, I’ll jump in on that one because I have a whole bunch of really close friends in Toronto. I don’t know how that represents, by way of Canada at large, but these are folks just like myself that are advisors working with charitable organizations in Toronto. And they have had almost verbatim the exact same experience as I have. Someone mentioned housing, maybe we’re kind of under the level of what an average home costs up there. That would certainly be reasonable. I can relate with that by the way, because Boston is definitely higher than that, in that stratosphere either, we’re much higher. But the reality is that a lot of those same hopes and fears and concerns and things that drive people, those same attributes of the middle-class millionaire do exist there as they do here.

Steven: Cool. So I’m glad we were able to get that. I don’t want to ignore our friends to the north at all there. Well guys, it’s about two minutes till. I know there’s a couple more questions in the chat room but I don’t want to keep people too long, especially if they haven’t gotten to their lunch. Fair to say that you’ll be willing to take some questions offline as well?

Harold: Absolutely.

Ron: Sure.

Steven: I thought you would say yes. Well, I’ll give you guys the final word to talk about a little bit more of how we can get in touch with you and some of the offers that you’ve got going on over there at Activate Legacy.

Harold: Great. Thanks Steve. Just very briefly here, we have created what we call the Grow Legacy Gift System. It’s a seven step system in tools that support that system to help create a planned giving culture. Our gift planning culture in the organization, I won’t go through the seven steps here but I encourage you to check out our website and take a look there. How we, as it’s resources that we could offer as a firm, we offer, several times during the course of the year, some free webinars on various topics. In fact, I’m going to allude to one here on the very last slide about an upcoming one that we have. And we also do some webinar series workshops that we provide during the course of the year as well.

We have a half-day and a full-day training workshop. If you wanted to have us come in and help get your board on board with planned giving and get them going. If planned giving has not really been a major focus for your organization and if you got to that point of creating your Philanthropic Advisory Council, and you wanted some help with training your team, we provide that service as well. We have some donor presentations that have been very successful in getting those middle-class millionaires inspired to have a follow-up conversation. And we have some materials and schools and coaching services that we offer.

And finally, for those of you who might be interested. If you want to have a much deeper dive in the excess wealth conversation, the art of unlocking the exponential gift from the middle-class millionaire, we’re offering a free webinar on January 28th at 2:00 and you can go to our website and register if you’re interested. That’s all I’ve got on my end, Ron anything real quick on yours?

Ron: No, that’s it. My time is perfectly right on cue there. Isn’t it?

Steven: Yeah, I’m not surprised at all. You guys are great. Thanks so much for sharing all that info. It’s nice to hear some New England accents just as a personal side as well. So, thanks for being here.

Ron: We’re going to go park the car.

Steven: This is a lot of fun and thanks to everyone who hung out with us for an hour. I know this is a busy time of the year. Thanks for taking an hour out of your day. We’ve got some great webinars coming up in 2015 so check out our resources page. I’m going to take the next two weeks off, if no one minds. But we’re going to be back in 2015 with some awesome webinars. We’ve got some of the resources on our website that you can check out. But we’ll end it there.

Thanks so much for joining us. I’ll be sending out the recording and the slides here in just a couple of hours so look for an email from me. And we hope to see you next year. Have a great weekend, Happy Holidays and we will talk to you again soon. Bye now.