The Changing Face of America's Donors

Tuesday, April 22, at 12 noon, U.S. Eastern time

John W. Jensen is a senior vice president and gift-planning consultant at the Sharpe Group, a fund-raising consulting firm in Arlington, Va.

James Chung is president of Reach Advisors, a New York marketing strategy and research firm that has many nonprofit clients. He has conducted research on community attitudes, generational shifts, wealth stratification, and the growing affluence of minorities and women - and on how those changes affect marketing and strategy.

A transcript of the chat follows.

Peter Panepento (Moderator):
    Welcome to today's online discussion about demographics and fund raising. There has been a lot of discussion in the nonprofit world about the upcoming wealth transfer. But there are a lot of misconceptions about how and when that transfer will occur. Today's talk will focus on what the numbers really show, the giving attitudes of donors in various age brackets, and how fund raisers and planned-giving officers can use demographic information to be more effective.

Peter Panepento (Moderator):
    We have two great experts on this topic with us today. So please take this opportunity to get your questions answered. Simply click on the "ask a question" link on this page to join the discussion.

John W. Jensen:
     Demographics are not destiny, but they certainly shape how successful fundraisers and charities relate to their donors. As our donors reach a new phase of their lives, how we approach them and communicate with them must also change.

As major donors get older, major gift staffers need to understand planned gift options and opportunities. Those who lack an understanding of how to structure gifts for seniors and meet changing needs will find it much more difficult to be successful.

This doesn’t mean that they will be full time gift planning specialists, but it does mean that they need to broaden their understanding of options and possibilities. Since we know that most bequests come from smaller donors, the aging demographics of the rest of our donor files also means big gifts from smaller donors.

As for the wealth transfer, it is inevitable and will occur. However, it will take a lot longer than the 1998 projections suggested, with only a small fraction of it arriving before the baby boomers start to die off in about 20 years.

The original wealth transfer projected $1,790 trillion by 2017. From 1998 to 2006, Giving USA reports only $173 billion in bequests. 2006 was $23 Billion and we expect about the same for 2007.

To meet the projection, this would require an average of $159 billion per year for each of the next 10 years. This is just not going to happen.

Question from Peter Panepento, Moderator:
    John, you offer some sobering statistics about the projected wealth transfer. With all of the hype surrounding that transfer, do you think fund-raisers and planned-giving officers have been expecting a spigot to open and the money to simply being pouring into their organizations? If so, what do they need to do to be more effective?

John W. Jensen:
    Good planned giving officers & other fundraisers have seen that the results are not matching the hype and the projections and adjusted accordingly. Boards & senior management often times do not see the same info. Some may be expecting money to come in regardless.

The most important thing to be more effective is to make sure that you know what the age breakdown of your donor file is. Go out & get an age overlay done to obtain month & year of birth of your donors. Once done, use this to see what portion of your donor file is age 70 & over & target those donors. Don’t focus planned giving marketing on donors younger than this, except for the small number gift arrangements that can are appropriate for younger donors.

Question from Mitchell J. Rappaport, Center For People With Disabilities, Galveston, Texas:
    I recently read of the passing of a Philanthropist who, despite her family's urgings, decided to donate her large fortune to her favorite charity and not to her children upon her death, which she did. Her children did not benefit, yet they are probably the ones who will be asked for donations by everyone else. What is the role of the Development person in such instances, and where does the respect to family members of deceased loved ones begin in such cases? Is the transference of wealth today impacting this positively in any way? Thank you.

John W. Jensen:
    The charity can & should make sure to acknowledge the gift publically (unless the family asks that this not be done) & to thank family members—even though this may be a sensitive issue. There is not much more that the charity can do here.

It is quite unusual that a donor will give all to charity & cut out family members entirely, unless they have otherwise provided for family members in other ways. If there are bad relations, this can occur, but this is the exception in my experience. I have also seen some cases where the parent felt that the kids were already in a strong financial position. Family should always come first—and usually does.

Ideally, the development staffer should encourage donors to discuss their plans with family members in advance of death. Long term, this is the best approach. In cases where the children are aware in advance, they tend to be more respectful of the parent’s decision.

Wealth transfer does involve gifts to charity, but most will go to family.

Question from Meighan Corbett, Windward School:
    I,for one, do not believe in this huge intergenerational transfer in a few ways. One, I think most of this country is in serious financial territory, not having saved enough for retirement or for ordinary expenses and that too few people have wills, or for that matter have will that have charitable provisions in them. Those that inherit from their parents in the next 20 years will use the money to shore up their personal finances, pay for college or afford to retire. They may increase their charitable giving slightly but except for the wealthiest, who already have such provisions, I don't think charities are going to see huge increased gifts.

John W. Jensen:
    You are correct in identifying a number of issues that will reduce any wealth transfer. However, we know that 92-92% of Americans will not make a charitable bequest. We also know that planned giving has been the fastest growing sound of charitable gifts over the past 45 years. The huge increases will come when the baby boomer start passing away, but this is a good 20 years off. It is clear that the hype of the wealth transfer was not correct.

Question from Peter Panepento, Moderator:
    There is a lot of information that younger donors who give small amounts regularly to an organization are more likely to make planned gifts later. How much effort should planned giving folks give to reaching these donors at a younger age?

John W. Jensen:
    In my judgment, the great bulk of the effort should be focused on those age 70 and up. If budget allows, some will drop down to donors age 65. Below this age, I would do broad brush, low cost marketing, such as ads in your newsletter or magazine, with perhaps an occasional mailing. 90% of your effort should be focused on older donors who have made the most frequent gifts. The amount of those gifts is irrelevent.

Question from Sugey Cruz-Everts, The Tommy Foundation (small nonprofit):
    What advice would you give a brand new non-profit about how they can reach the largest amount of donors? Are there particular events or forms of literature they can hand out that would work the best?

James Chung:
    Hi Sugey, The quick answer is the obvious one: It's not just events or forms of literature. It's building the network. One non-profit for which I serve on their board has done a fantastic job at cultivating volunteers...then creating events to turn them into donors. What I find particularly interesting about them is that they are one of the few I've seen generating new donors among younger audiences than the typical non-profit organization.

Question from Elizabeth Schwinn, Chronicle of Philanthropy:
    You say that it will take 20 years before the wealth transfer materializes. Do you see any sign that any of the wealth transfer is occurring now?

John W. Jensen:
    There will always be some level of wealth transfer every year as people pass on. However, we are not seeing any significant increase in bequest revenue overall and have not seen much of an increase since 1999.

The number of deaths in 2003 was lower than in 2002 and the number of deaths in 2004 was lower than in 2003. The Census Bureau reports that the 50,000 decline in deaths between 2003 and 2004 was the sharpest decline in 70 years. While we don’t see this continuing in a major way, neither do we see any significant increases. This statistic is very telling.

Question from Elizabeth Schwinn, Chronicle of Philanthropy:
    Also, I've heard some financial experts say that the wealth transfer is unlikely to happen as expected, given that my baby boomers haven't saved enough for their retirement and are living longer. What do both of you make of this theory?

John W. Jensen:
    As with every other type of fund raising, you need to segment out those who are most apt to respond and those who are not. Baby Boomers are doing some things well and some things not so well. Those who don't save much will not make many bequests. We do know that there is a huge source of money in 401(k), IRA's, etc. that are expected to grow over time.

I'm convinced that bequest revenue will grow as the number of people reach their "actuarial inevitability." The problem is that there are not as many people passing on right now.

Peter Panepento (Moderator):
    A reminder to our audience that it is easy to join the discussion. Click on the "ask a question" link to submit your query or comment. We'd love to hear from you.

Question from Sarah Sasman Jacoby, Make-A-Wish Foundation of America:
    What can be said for gender differences in giving patterns through planned giving vehicles? Should Gift Officers take different approaches?

John W. Jensen:
    We don't see as clear a pattern by sex as much as we see that women simply live longer & make most of the final decisions. I would not focus on gender as much as other characteristics, such as age, frequency of gifts, absence of children, etc. If I had to make a decision, I'd focus on the women just because they will live longer and make more gift decisions.

Question from Peter Panepento:
    James: What can you tell us about some of the traits and values of potential donors who are now reaching the age where they are planning their estates? What do these traits mean to those who work for charities?

James Chung:
    The challenge with understanding the traits and values of potential donors now reaching the age where they are planning their estates is that we're entering a big generational shift. The Baby Boomers have throughout their lives behaved differently than the generation ahead of them, for just about everything. And there's no difference now.

First off, online communications has become significantly more important. We see a big divide in online communications with roughly 65-70 years of age as the point where online usage behaviors start to shift quite significantly.

Second, there's a big shift in wealth generation, where there's a broader audience that earned more money among those between 50-60 years old compared to any prior or succeeding age cohort.

Third, that younger generation is less about civic duty than the prior generation that viewed civic sacrifice as a duty (e.g., rebuilding after the Great Depression, WWII, establishing America's dominance as the superpower). Instead, it's more about personal appeal.

Tons more on these differences, so feel free to ask more specifics as I get to other questions.

Question from Felicia, Non-profit hospital:
    Do you think that small family foundations should be handled as you would a person? And how would you rekindle a "giving" relationship with a new foundation manager after the original donor has passed?

John W. Jensen:
    Family foundations are not my specialty, but since most tend to be simply a separate family pocked to make gifts from, I'd treat the foundation trustees much like other donors & try to establish a personal relationship when possible. We know that people who create such foundations also tend to make other types of gifts, such as bequest gifts.

How to rekindle the relationship when a donor passes away will depend on the situation, but tie is back to the original purpose & donor relationship.

Question from Leif, large non-profit:
    I am wondering how the current poor US economy and increased awareness of global climate change may be impacting the wealth transfer, if it all. Thank you.

John W. Jensen:
    The poor economy will help Charitable Gift Annuity gifts, help charitable lead trusts (this is a perfect time for CLT gifts), hurt CRTs and have no impact on bequests. In about 2 years, BIG BEQUEST gifts will be hurt by today's weak economy, but the smaller ones will not be impacted in a big way.

Question from Elizabeth Schwinn, Chronicle of Philanthropy:
    Also, I've heard some financial experts say that the wealth transfer is unlikely to happen as expected, given that my baby boomers haven't saved enough for their retirement and are living longer. What do both of you make of this theory?

James Chung:
    Elizabeth, When the concept of the intergenerational transfer of wealth started to emerge, lots of organizations started licking their chops, from non-profits to luxury cruise lines to the resort real estate developers. But very few players in those fields are seeing anything that was supposed to start to unfold by now. A few key factors:

1) These kinds of macroeconomic projections are very difficult to get right. The financial assumptions for the staggering amount of transfer included assumptions that underestimated how long these people would keep living as progress in health has continued to increase, and overestimated average annual financial returns. On that last point, the markets have become more volatile since the time of those projections, throwing off average annual return expectations, and even folks like Warren Buffet have been warning the public that even his future average returns at Berkshire Hathaway simply won't match past average returns.

2) People have a lot more ways to spend wealth than in the past, hence, there's less cash getting transferred.

3) It appears that more major personal grant-making is happening while the donors are living rather than waiting until death, so there is some good news amidst the so-far-unfulfilled expectations from this intergenerational transfer of wealth. While it quite frankly was overhyped, the fundamental core is correct...in the long term. After all, the American population grew by almost 30% when the GIs came back from WWII, so it's inevitable that a few decades down the road, there will be more people to transfer wealth. We just aren't going to see the massive shift as soon as some people thought.

Question from Laura, mid-sized museum:
    What are the best forms of marketing to age 65 and older? Newsletters, postcards, website, personal letters, or all of the above?

James Chung:
    Hi Laura, A few things on the 65+ audience: First, they still read. So newsletters, postcards, personal letters matter in ways they won't for most other audiences.

Second, we just presented a major research study of visitors of outdoor history museums and found that older men are actually a rather critical audience for many museums, much more so than many museums assume. And...it's all about authenticity of the museum so those types of museums need to signal authenticity at every point possible. If this topic is something of interest, just get in touch since we're sharing this information at next week's AAM conference, and releasing a good chunk of this via our newsletter and blog (reachadvisors.typepad.com).

Question from Peter Panepento, Moderator:
    John: What types of messages and values appeal most to the current donors who are most likely to be making bequests? Do they have specific values or tendencies that set them apart from donors from other generations?

John W. Jensen:
    Values that seem to make the most impact (within the constraints of the charitable purpose of your group) are those that focus on the future, the next generation, leaving the world a bit better for having been here, and anything dealing with children, as the hope for the future.

We are just now starting to enter into the period where the GI generation is about gone, with 6-8 more years of mostly women from that generation still alive.

We are moving into a 20 year period where we will be dealing with the Silent Generation. Here are 2 quotes that speak loudly to this group:

“The Silent Generation grew up as the suffocated children of war and depression. They came of age just too late to be war heroes and just too early to be youthful free spirits. Instead, this early-marrying Lonely Crowd became the risk-averse technicians and professionals—and the sensitive rock n’ rollers and civil rights advocates—of a post-crisis era in which conformity seemed to be a sure ticket to success.

Mid-life was an anxious “passage” for a generation torn between stolid elders and passionate juniors. Their surge to power coincided with fragmenting families, cultural diversity, institutional complexity and prolific litigation. They are entering elderhood with unprecedented affluence, a “hip” style, and a reputation for indecision.” From: http://www.fourthturning.com

"Members of the Silent Generation are considered cautious, unadventurous, unimaginative, withdrawn, and silent. The Silents felt they were a generation without a cause. Remembering World War II from their childhood, many Silents were looking for a cause. Some found the Peace Corps, founded by John Kennedy, as a way of achieving a generation bond.

The vast majority of this generation wanted job security offered by big corporations. Only two percent took the risk to be self-employed. Born mostly during an era of depression and war the Silent generation knew hardship and knew how to struggle through tough times. The Silent generation was the earliest marrying group in American history. Men married at an average age of 23 and women at 20.

Ninety four percent of women became mothers and stayed at home raising an average of 3.3 children. The start of the "divorce epidemic" as men and women born between 1930s and 1940s showed the biggest age bracket jump in divorce rate. No fault divorce laws jumped from zero to forty-five as the Silent generation was rushing to get divorces." Source: library.thinkquest.org

This is the group that planned giving programs will be looking to for the next 20 years of bequests.

Question from Sugey Cruz-Everts, The Tommy Foundation:
    Okay, so I have a follow-up question then. I have a team of 30-40 younger volunteers and interns that work with us in a given year. What specific events worked for the non-profit you referred to earlier? We work with the cause of autism and we have had symposiums with national figures, festivals with the community and a concert (because it was a younger crowd). The concert was not very effective and neither really was a previous silent auction.

On a separate issue, how do you get older donors--like the age bracket you were suggesting--to care about a new issue that in their time was not as big a concern as it is now?

Thank you!

James Chung:
    Sugey, Let's pick apart the different age groups: - For cultivating younger donors, one of the things I've seen work is targeting specific industries that are generating the kinds of incomes that allow younger adults to be donors. Then making the events the place for them and their peer set.

- For cultivating older donors around your issue, it's all about the grandparents. And we're already seeing strong indication that the relationship between grandparents and their grandchildren will jump significantly as the Baby Boomers hit their peak grandparenting years. So if you're getting their children as they have children, that's one way to bring them into the fold.

Peter Panepento (Moderator):
    We have time for a few more questions before our hour is up. Please feel free to add yours to the discussion by clicking on the "ask a question" link.

Question from hsien hong lin, Kent State University:
    Fund raising is complex, so does the understanding of different generations' charity transfer. My question is how to last the actual value of charity generation by generation and how to let majority of each generation consider this value plus charity in action in their living time?

John W. Jensen:
    I think that the value of a specific charity or issue will differ. A group like USO might not do as well with the Baby Boomers or Silents because they didn't relate as well. They may do much better with the current generation fighting wars when their time comes. Environmental groups may have a different appeal today than was the case 40 years ago.

I think that the value of charity will continue to be strong in each generation, but the approach and which types of charities will do best will vary. I think that that the bottom line is that if people support a charity during lifetime, they will also support it by bequest--if asked and approached properly.

Question from Joyce, community activist:
    Do you see any benefit in helping non-traditional populations develop estate planning tools even when possible gifts will likely be very small?

James Chung:
    Joyce, I guess my first question is which non-traditional populations are you referring to?

But making some assumptions here, I wouldn't worry so much about small non-traditional populations likely to provide small gifts. But there are some non-traditional populations that do have the capacity to generate large gifts.

For example, while non-parents in the gay and lesbian population in general tend to be less concerned with building assets they hand down, I've seen many that have made serious money well beyond what they can spend. You just need to be the place of preference for them to leave their legacy.

If non-traditional populations for you include minorities, that's a big untapped arena. In our recent survey of the core outdoor history museum audience, 97% were white. That's in a world where 1/3 of America isn't. Yet, there are some ethnicities that out-earn the Caucasian population, on average. And others where deeper participation can have major impact on improving the lives of others from their same cultures, even if their gifts aren't huge. But I guess that gets back to your initial question...yes, there probably is potential to cultivate non-traditional populations with impact.

Question from Cassandra, Public Broadcasting:
    Speaking as a member of Generation X and a fundraiser, I have designated gifts for my alma maters, but what does my gift planning mean to those universities? Do they need to know my plans now? I have never been asked in any appeals.

James Chung:
    Hi Cassandra, I assume those universities don't think that many people our age are designating gifts yet. As you know, Generation X hasn't hit peak years of charitable donations yet. But I would think those universities would want to know simply so they can start building momentum with your peer set, and as appropriate, sharing that others in that class are starting that process. As for you, depending on the school, it may be worth notifying them simply because some schools do a fantastic job at the care and feeding of their more significant donors!

Question from Peter Panepento, Moderator:
    We've established the massive wealth transfer is likely to happen later than many in the field have been led to believe. Knowing that, what can charities do to prepare themselves for when it actually does occur?

John W. Jensen:
    I suggest several things. First, establish and maintain good relations with your donors already age 70 and older. Take good care of them and gently (and appropriately), ask them to remember you in their estate plans. Too many groups ignore them and get cut out of wills that they could otherwise be in. Secondly, establish and maintain a consistent planned giving effort that is steady and consistent. Target the right group. Beyond this, make sure that you have age data on your file and every year or two, make some projections for your donor file by age. Watch what is going on and respond appropriately. Focus not just on upgrading donors, but also on managing the dowmgrade as they get older and may not feel as comfortable with the same level of current giving.

Question from hsien hong lin, Kent State University:
    hi, Drs. JOHN AND James, my question is cultural differences influence the changing faces of charity transfer, is it true or not?

John W. Jensen:
    We do not have a great deal of data on this, but my sense is that if people are willing to give to your organization during lifetime, they will also give via their estate plans if asked properly. It is the same motivation, just a different vehicle and stage of life.

Question from hsien hong lin, Kent State University:
    hi, Drs. JOHN AND James, my question is cultural differences influence the changing faces of charity transfer, is it true or not?

James Chung:
    Hsien, I'm going to make some assumptions from your name and share some quick comments. As you know, there's not a huge philanthropic culture in China. But for those who have emigrated and done well, there's a great opportunity to cultivate their donations given that on average, they are generating higher incomes than the Caucasian population.

One example I can think of comes from a non-profit where I serve on the board. Part of that organization's mission is to cultivate the next generation of volunteers and donors. One of their significant gifts (six-figures I believe?) was a restricted gift to launch a program in China to help cultivate volunteerism there. So this kind of immigration has generated a lot of wealth, some that can be deployed well in non profits.

John W. Jensen:
    Q: hi, Drs. JOHN AND James, my question is cultural differences influence the changing faces of charity transfer, is it true or not? -- I spoke too soon on this one. We do know that gays and lesbians are much more apt to make charitable bequests & do other planned gifts to a wide variety of causes they believe in. One recent study suggested that the rating of bequests for these groups will be close to that of "Miss" donors.

Peter Panepento (Moderator):
    This has been a very interesting conversation -- and one I hope is useful for those in fund raising and planned giving. Thank you to our guests, James Chung and John W. Jensen, for their time and insight. And thank you to everyone who took the time to join us today. Next week we will discuss another important topic -- faith-based charities. Please join us at noon Eastern time next Tuesday to check it out.