Major gifts: 5 steps to identify new stock donors

Stock donors are some of your most important prospects. Research by planned giving expert Dr. Russell James shows that no matter your nonprofit’s size or sector, stock donations can increase your fundraising growth six times faster than cash donations.

While not every person who gives stock will make a major donation, the average stock donation is worth more than $5,000. Most nonprofits consider this to be in major gift territory. Put simply, your major donors likely own stock, and your stock donors have the potential to become major donors.

Plus, many of your existing supporters probably already own stock. In fact, 80% of affluent and high net-worth donors own appreciated assets, but only 21% of those donors have given these to charity. By knowing how to spot these potential donors and educate them on the benefits of stock giving, you can bring in even more major gifts.

Follow these five tips to start identifying and reaching out to your stock donor prospects:

1. Conduct prospect research by surveying your supporters.

Prospect research is a technique used by many nonprofits to find potential donors by either surveying or collecting information on their existing supporters. Who you survey will depend on the size of your organization, and whether you’re new to major or stock giving.  

For those with a more developed major giving department, you’ll want to survey existing major donors and top prospects. If you’re in the early stages of building out a major giving program, you’ll want to survey your entire donor base to ensure that you’re not missing any potential prospects. You may need to collaborate with your development team to make sure you’re not missing any high-profile donors or volunteers.

When it comes to major or stock gifts, you should aim to learn more about their personal backgrounds, demographics, giving history, wealth, and charitability. These factors will reveal both a prospect’s capacity to make a larger gift, and their desire to do so.

To find qualified stock prospects, you’ll want to concentrate on three areas: philanthropic indicators, wealth indicators, and demographic markers.

Philanthropic indicators

Philanthropic indicators will tell you if a person is likely to give to your organization. It makes sense that a donor who has given in the past, has been involved with your mission recently and/or frequently, or has donated large sums over time will be more inclined to make a major gift of stock in the future.

Nonprofit involvement as a trustee or director

Wealth screening platform, DonorSearch, has found that when a prospect participates in a nonprofit at a high level (that of a trustee, board member, or director), they’re more likely to make a gift to your organization. That’s because the people in these positions have already expressed a high affinity for your organization, and they typically have a high net worth. This means they’re some of your best prospects for major gifts, especially gifts of stock.

Additionally, they may have wealthy peers who are involved in philanthropy. They can refer you to other potential major stock donors in their social and professional circles.

Political giving

Your ideal stock donor wants to make a larger impact at your organization. Political giving demonstrates a proven interest in supporting their beliefs with their money, making it a very useful philanthropic marker for your research.

Donors who have made contributions to political campaigns will most likely be open to supporting other causes they care about as well. And prospects who give $15,000 or more to political campaigns have an equal likelihood to donate major gifts to other nonprofits.

Wealth indicators

Wealth screening looks at things like real estate ownership, business affiliations, net worth, and stock ownership in order to determine who has the capacity to make major stock gifts.

Additionally, certain wealth markers, like a supporter’s employer, can alert you to prospects who may be well-connected. If you cultivate these relationships, they may introduce you to their wealthy peers. This can open up your pool of potential prospects even further.

High net worth individuals

The latest available government data, via the Federal Reserve from 2016, shows that for households with a net worth of over $200,000, about 70% held shares of stock. This number climbs even higher for households with a net worth above $1.1 million — almost 90% own stock. They may not know that they can save significantly on their taxes when donating assets instead of cash. Educating them on the benefits of stock giving can encourage them to make major gifts of stock to your organization.

Stock ownership

In order to make a major gift of stock, a donor must own appreciated stock. So you’ll want to seek out donors who have held stock for at least one year. That way they can avoid capital gains taxes and take a charitable deduction.

Also, make sure to pay special attention to younger donors. While their assets may not be worth much now, they will likely go up in value over time. For example, let’s say that one of your survey respondents is a 25-year-old donor who owns shares of stock worth $1,000. By the time that donor is 35, those shares could be worth much more, and potentially enter major gift territory.

By educating younger donors about stock gifts early in their adult lives, you can encourage them to donate after their assets have appreciated, and continue donating stock over their lifetime.

Past giving

Reference your donor records to see who has made a cash gift to your organization before that was more than $5,000. Gifts of this size mean that these donors have a higher capacity to give than your average supporter. If they had given stock instead, those gifts could have also been worth significantly more. Plus, these donors would have been able to benefit from the tax savings of donating non-cash assets like stock.

As an added bonus, your major givers have the potential to become recurring donors. In fact, those who have given between $5,000 and $10,000 to a nonprofit in the past are five times more likely to make major gifts in the future.

Business affiliations

You’ll want to pay attention to your prospect’s employer, professional title, or any professional organizations they’re members of. High-ranking, or C-level executives have a larger capacity to give and are more likely to own appreciated assets because of their level of income. They may also own private stock in their company or others. Similar to other types of stock donations, private stock can also be donated to charity, as long as it’s first appraised by a broker.

Additionally, knowing your prospect’s business affiliations can alert you to whether they are eligible for matching gifts through their employer.

Demographics

Age

Baby Boomers and Millennials are about to become your largest stock donors ever. Over the next 25 years, an estimated $68 trillion will be passed on as the large and wealthy Baby Boomer generation passes away. This will be the largest wealth transfer in human history and a once-in-a-lifetime opportunity for gifts of non-cash assets.

Many Boomers may donate these assets before they pass away, and if they don’t, Millennials will generally be the generation inheriting them. In 2020, Millennials accounted for nearly 20% of stock market trades, up almost 5% from 2019, making them ideal prospects for major gifts of stock. Even if not right away, they could donate in the near future, when those assets have appreciated.

Gender

Although men have traditionally owned more non-cash assets than women, the Great Wealth Transfer is posed to favor women significantly. An unprecedented amount of assets will shift into the hands of US women over the next three to five years, representing a $30 trillion opportunity by the end of the decade.

Education level

When conducting your prospect research, you’ll want to ask questions about your donor’s completed education levels. According to a Gallup poll, those with post-graduate or college degrees are almost three times more likely to own stock than individuals without a college degree.

2. Create an ideal stock donor profile.

When you’ve completed your prospect research, you should summarize your findings to create an ideal stock donor profile. A donor profile is a description of the type of person that is most likely to make a specific type of gift to your organization. It can also help you to more quickly identify new donors as potential stock prospects.

The ideal stock prospect for your organization doesn’t have to have every philanthropic, wealth, or demographic marker, but you should be able to find some patterns from your research.

Narrow down your profile to three to five characteristics. When in doubt, keep in mind that the biggest indicators of a donor’s capacity to give major gifts of stock are:

1. Stock ownership, and
2. High net worth

Once you’ve created a profile, you should organize your CRM so that you’re able to easily build prospect lists for stock giving outreach.

3. Organize your donor CRM.

A donor CRM, or a donor management system, will help you organize your current contacts to see who fits your stock donor profile. It will also help you keep track of giving history, and outreach you’ve sent to specific donors. With an organized CRM, you will be much more capable of qualifying new donors as potential stock prospects.

If your organization already uses a donor CRM, you know that they can become large and disorganized. When cleaning up your data, you’ll want to focus on three key steps in order to be more successful in identifying prospects:

• Reach out to inactive donors. Depending on the CRM you use, you should be able to search donor records based on a specific date range, or even the date of the last gift received. Consider sending an email to those who haven’t donated to your nonprofit in over three years. This can restart engagement with a dormant donor, or solidify your decision to remove them from the list if they don’t respond.
  

• Update addresses and phone numbers. In your prospect research survey, ask for your donor’s updated address and phone numbers, and make sure they haven’t changed. If you’re unsure, you can use the National Change of Address (NCOA) program to stay on top of changes. Many CRMs have separate add-on services that will scan your list and compare it to the NCOA listings automatically, multiple times throughout the year.
  

• Consolidate duplicate information. Make sure you don’t have two separate records for the same individual. For example, check to see that you don’t have both their household and work address or their maiden and married names listed as separate profiles. The most popular CRMs have features that allow you to scan your list automatically for duplicates, or that will alert you to potential duplicate profiles when you upload new contact lists. If you’re still unsure about a prospect, search their name and see if multiple records show up.

4. Segment your donors and create a list of potential stock prospects.

Donor segmentation is the process of separating your donors into smaller groups in which members share similar qualities. Once you’ve organized your CRM, you can place your existing stock donor prospects, as well as any new donors you’ve discovered in your research, into separate lists.

You should use the characteristics you defined in your stock donor profiles to separate these donors into potential prospects.

From there, you can set up one-on-one meetings, and include them in outreach that educates them on the tax benefits of stock donations, as well as the different types of stock they can give. As with any type of giving, maintaining consistent communication and building relationships is key to cultivating those donors.

You’ll also want to make it easy for your prospects to make a stock donation by providing clear instructions on your website. Or, you can use an online tool, like the FreeWill Stock Gifts Tool, to make giving shares of stock especially fast and simple.

5. Ask existing major donors for referrals.

The next step in identifying new stock donors is to ask your existing, most-engaged major donors for referrals or to reach out to their peers. Referrals matter for two main reasons:  

1. People with a large capacity to give tend to know other people with the same capacity. Your major donors likely work with, live near, and socialize with others who have the financial ability to make major gifts of stock.
   
2. People with the capacity to give major gifts are approached by many nonprofits each year. If you are introduced to a new prospect by someone they trust, you jump to the head of the line. This can give you a huge head start in the cultivation process, and will enable you to move to an ask much earlier than if you had not received an introduction.

Ask your board members or high-profile donors for referrals to peers who may be interested in making a gift of non-cash assets to your organization. Plus, asking for referrals from your board or other major donors doubles as a form of stewardship, and they will feel like they’re making an even bigger impact.

You can set up one-on-one conversations, or pass out a referral form at your next board meeting to get the names of potential prospects that aren’t already aligned with your nonprofit.