Traditional Gift Capacity Metrics are Being Replaced, Permanently
The following blog is presented by Windfall Data.
This is part of our “Top 5 Nonprofit Data & Machine Learning Trends for 2021” post. To see the full list of trends, visit our website.
Organizations that continue to rely on traditional metrics, such as home values and prior giving, to influence gift capacity will find it harder than ever to identify constituents if they don’t adopt more robust strategies for evaluating gift capacity.
We still hear from industry veterans that historical giving is the largest indicator of measuring gift capacity. However, this data is becoming increasingly challenging to find given the rise of Donor Advised Funds (“DAFs”).
These same veterans come to Windfall and regularly ask: can you help us find individuals who contribute through a DAF? How much did they give?
In 2019, almost 13% of individual contributions were made to DAFs, according to the National Philanthropic Trust. The assets held by these funds continue to grow at a dramatic rate making it difficult to rely on historical sources of data. There are three issues associated with DAFs for data-driven nonprofit professionals: (1) you do not know if an individual is philanthropic and (2) it’s hard to determine what causes they contribute to, assuming they do, and (3) it’s unclear how to identify individuals that have a DAF.
Good news for nonprofits: The assets held in DAFs are starting to be deployed at higher rates. In 2020, the floodgates of grants from DAFs opened in response to the tremendous suffering caused by the pandemic. The first six months of 2020 saw a 29.8% increase in DAF grants to charitable organizations compared to the same period in 2019. If you only look at the volume of individual grants from DAFs, there was a 37.4% increase for the same period.
If historical gifts aren’t reliable predictors of future giving (or not readily available), what about other wealth indicators like home value? There are many issues with this approach as well:
Geographic implications: Are you considering regional differences? Median home prices in San Francisco will be different than Santa Fe; even within a state Albany, NY looks different than NYC
Property data: Do you have the right property valuation? Is it up to date? Keeping up with the fluctuations in every market for multi-property owners is really hard
Equity vs. debt: If you live in a $2MM property, does that mean you have a significant amount of wealth? Well, that depends on how much debt is on the property, when you purchased it, etc.
When organizations first approach us, they always ask us if we can reduce the reliance on real estate for the issues we listed out above. Windfall provides precise net worth estimates versus traditional gift capacity metrics. Thus, we actually take into consideration all of the issues that development professionals face and refresh the data weekly to keep records up to date. Major Gift Officers are constantly asking: how do we make sure HNW prospects don’t fall through the cracks? Given this focus and the maturation of wealth data, data-driven development professionals will replace traditional gift capacity metrics, permanently.
Want to learn more? Register for our upcoming webinar with Nonprofit Learning Lab, Identifying Potential Major Donors: Why Wealth Data is Really Hard on July 3 at 10:00 am PT | 1:00 pm ET.
Request a demo of Windfall to learn how your organization can utilize precise net worth estimates to better identify, segment, and engage with your best prospects.