The Planned Giving Blogger

The art and science of planned giving.

Archive for June 2009

When I’m 64.

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Apparently when I’m 64, I’ll feel like I’m only 54.  That’s according to a new Pew Research Center Social & Demographic Trends survey on “Growing Old In America” which has just been released.   Pew ChartBeginning in their fifties and continuing through their seventies, people generally feel ten years younger than they actually are.  This is not surprising to me because it’s pretty much how I feel–younger than I really am.

And this finding is consistent with information provided by Modern Maturity, the AARP publication, in their handbook on how to advertise to maturity.  Their advice:  ” Take off 15 years.  At least.  Talk to a person, not a birth date.  Enjoy their continued youth with them.  Show them young and behaving a good fifteen years younger than preceding generations did at the same age.  See them as they are.”  This seems like especially good advice for planned giving marketers.


p.s.  The full Pew study has other interesting information, too.  For a full read, click here.

p.p.s.  Kathy Swayze, of Impact Communications, will be speaking on this very topic–how to craft messages for a planned giving audience–at the upcoming Bridge to Integrated Marketing & Fundraising conference in DC, July 22 and 23rd.


Written by Phyllis Freedman

June 30, 2009 at 9:00 am

Stewardship done right. #3

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I recently received my Summer 2009 E-Newsletter from the Heifer Foundation, fundraising arm of the Heifer Project.  The main subject of the newsletter is a new collaborative fundraising program they’ve launched which I’ll write about later.  But the e-newsletter prompted me to browse the Foundation’s website.  In the navigation labeled “Resource Center” I found two documents that are downloadable:  a brochure about connecting donor assets with aspirations and a second publication titled “Heifer Foundation Investment Management.” 

The latter publication opens with this introduction:   “Investing is a subjective and complex endeavor—with numerous intervening influences. In a sense, the portfolio is a reflection of Heifer International Foundation (HIF) itself—the values of the organization are encapsulated therein. Social restrictions, for one, make a statement with regard to priorities we hold dear. Being socially conscious in a portfolio requires extra effort and commitment to integrating the portfolio with the mission of the organization. Heifer Foundation is happy to report that our Return on Investment for our asset allocation fund since our inception has been more than 13% while still upholding our values and donor intent.   We appreciate your interest in our fiduciary responsibility regarding the investment model and methods used to secure a maximum return for both donor and recipient. One of our main organizational priorities is investment integrity and perhaps one of the most important responsibilities of Heifer Foundation.”

This publication is a wonderful stewardship piece.  I hope the Foundation is using it more broadly than just buried here on their website.  Given recent negative publicity about the risks of charitable gift annuities, and, more importantly, given the importance to Boomers of knowing exactly how their money is being used (and invested), this publication can be a real asset to donor retention and upgrading.  Sending a copy to new Legacy Society members or to donors who have requested an annuity illustration are two uses that come immediately to mind.  Click here to download a copy of the document.


Written by Phyllis Freedman

June 23, 2009 at 11:50 pm

Part II: Tips for stress-testing and strengthening your gift annuity program.

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Today is the conclusion of a two-part post from Jonathan Gudema of Changing Our World about how to “stress test” your annuity program and what to do if you detect weaknesses.

According to Jonathan, “Wake up now.  Ask your provider for an updated “market value” report showing the current value of every annuity.  Create an excel spreadsheet calculating what happens to the principal of each annuity under different flat rate assumptions over the next 10 to 20 years. Here is my super-secret excel formula for doing this:  =(C1*$A1)+C1-$B1,  column A is the assumed rate of return, column B is the fixed annuity payment, column C is current principal, put the formula in column D and then drag it over the next 10 to 20 columns. The $ sign keeps rate of return and payment amount fixed – the rest changes column by column – year by year.  If you have trouble doing this, get someone from the finance department to help you.

You will start to see when CGAs are approaching negative.  Maybe you will see an exceptionally large CGA that not only might run out of funds in 4 or 5 years, but will literally eat up the rest of the pool should it exhaust.  It might be time to meet with that donor to see if he or she will take a lower income stream or would even give up all of the income.

New annuities are great for struggling pools as long as the pool isn’t so far depleted that news funds will only just push off the inevitable exhaustion of the whole pool – that really is more like a Ponzi scheme.

Perhaps it’s time to ask new CGA donors if they will take less than the ACGA rate – preserves a bigger remainder gift and bolsters the whole CGA program.

The biggest change though has to be your “remainder” policy.  Dig deep enough into the CGA concept and you will find that the CGA program rests on the theory that “you win some and you lose some.”  In other words, “profits” from annuitants dying before life expectancy should cover “losses” from those outliving their life expectancies.  But most organizations pull 100% of an annuity’s funds when an annuitant passes away leaving a pool that is filled only with the “losers,” those outliving their life expectancies.  Coupled with unexpected 25% investment losses in principal this past year and this is why we’ll soon start seeing CGA programs fail.

You should consider developing a policy to leave something from every annuity in your CGA reserve account – look at it as a rainy day fund.  One large charity I know actually leaves all of the “liability” portions of each matured annuity in its reserve – creating an unrestricted endowment within their CGA reserve account.  Even after years of offering even higher than ACGA rates, this past year’s market losses didn’t have a material impact on their program.

And, in dealing with a fund currently in danger of exhaustion – or one a few years away, one solution after adding the proper reserves that the New York State Department of Insurance requires (and not a bad idea for non-New York licensed issuers either) is to leave 100% of new matured annuities in the fund until the pool has recovered.  I know that your donor’s wishes may be delayed a bit, but you also have to make sure your program and organization is solvent.

Eventually, with careful supervision and understanding that CGA programs don’t run on autopilot, your program can be back on track for providing long-term financial resources for your institution.”

Such great advice!  Thanks, Jonathan.


P.S.  If you’d like to communicate with Jonathan, post your comment here and he’ll be happy to respond or you can reach him directly at

Written by Phyllis Freedman

June 16, 2009 at 11:50 pm

Part I: Gift annuities. Is the sky falling?

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“I was wondering if I am crazy or not.  Was I the only one in the planned giving world ringing the alarm, calling out to whoever would listen, that many gift annuity programs might be in big trouble?  When you are an alone alarmist, you have to start wondering.”  So begins an e-mail I received from Jonathan Gudema, Esq., of Changing Our World.   One of the questions gift planners are grappling with right now is whether it makes sense to continue to market gift annuities.  I’ll tackle that question from the donor’s point of view in a future post.  But, in the meantime, Jonathan’s e-mail about assessing your financial soundness to offer gift annuities was so smart I decided to reproduce it in its entirety in today’s blog and concluding tomorrow.  It’s lengthy, but worth the read.

Jonathan went on to say, “At Planned Giving Day in NY a few weeks ago, I presented various “doomsday” projections about exhausting CGAs but the response was quiet – too quiet, like maybe people didn’t want to hear the message or maybe I was wrong.  There was of course the misleading article in the Wall Street Journal, hardly backup for my theory that CGA programs in general could be in trouble.

Finally, Frank Minton on PGCalc’s latest webinar on Advanced Gift Annuities dedicated the first twenty minutes of his presentation, billed as a discussion on advanced and new gift annuity techniques, to “risk control.”  And, listening to Frank’s presentation and seeing that he used similar projection models to mine, I know I am not crazy.

Here is the bottom line I found with the NEW (February 2009) ACGA rate tables.  If your program returns 4% a year constant returns, I feel comfortable saying that your program will never experience (or very rarely) exhausting CGAs.  Great news if you think 4% is attainable on a consistent basis.  The problem is what are we to do with older annuities?  Under the same analysis on ACGA rates a few years ago, I figured out that you need to return 5% a year consistent returns, to be generally safe from gift exhaustion.  Less than that, not always safe.

But the problem gets even stickier.  I know from experience that even the biggest and best gift annuity investment/administration providers have seen the CGA pools on their watch drop more than 25% in principal value since January 1, 2008.  That is on the conservative side.  I am sure many have lost more.  And, as CGA payments don’t change, the rate of diminishing principal speeds up even if you return to “normal” investment returns.  What I mean is that your program may seem ok but really it’s not.  One big annuity that runs out of money could bring the rest of your pool underwater with it.  You don’t want to be hoping that your donors don’t live into their 90s because their annuity principals will be gone and perhaps eating up the rest of your pool.

In the midst of working through sticky situations for clients, I finally started feeling a ray of hope.  Not that all will be well with every annuity out there.  Certainly not, as many are paying the price now for offering rates higher than recommended by the ACGA,  or for sloppy oversight, or for uncontrolled gift acceptance policies, or for small organizations taking on CGAs when they shouldn’t have, or taking on CGAs much too large for certain organizations.

The point is that proceeding carefully from this point forward can rescue your CGA program from “doom” that might be coming.”

Tomorrow:  Jonathan’s prescription for how to assess the financial soundness of your program, how to remedy financial challenges you may be facing and how to protect yourself going forward.


Written by Phyllis Freedman

June 15, 2009 at 11:50 pm

Do not go quiet . . .

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I’ve written already about the challenges that organizational silos present to our ability to fundraise most effectively and, most of all, to be donor-centered. Another example is the issue of what Robert Sharpe calls the “quiet period” between the time the donor stops annual giving (and perhaps communication altogether) and the time of the donor’s death.  The idea is that communication is especially important during this final period of a donor’s life yet all too often this is the very time the annual fund or direct marketing team is either ending communication altogether, or, worse, sending pieces that represent the antithesis of the kind of messages we want to be sent.

Sometimes it’s lapsed donor mailings that ask “why haven’t you given in a while?”  Sometimes it’s putting a donor in an acquisition mail stream which means that the message donor receives is as if she has never heard of you before.  Sometimes it’s not mailing the donor at all, because judged by direct mail/annual fund metrics, mailing the donor is no longer cost-effective.

What to do about it?  Meet with your annual fund/direct marketing team to talk about these special donors and how they might be able to be treated differently.  And if the funds to continue to mail them, even just two or three top mailings a year, is outside the budget of the annual fund/dm team, maybe you can pay for it out of planned giving marketing funds.


P.S.  Back in 2007, Cathy Finney of MINDset direct wrote a piece on this subject that appeared in the Non-Profit Times Instant Fundraising online newsletter.  What Cathy wrote is still valid today.  You can read her article by clicking on the link.

Written by Phyllis Freedman

June 8, 2009 at 11:54 pm

Stewardship done right: #2

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An interesting package came in the mail to me last week from the University of Texas at Austin that sets the bar, again, for stewardship done right.  First a little background.  Penelope Burk of Cygnus Applied Research spoke at the recent Planned Giving Days in DC on “Donor Centered Fundraising.”  One of her main points was that the reason donors remain indefinitely loyal to an organization and increase their giving over time is because the nonprofit meets a very few, very basic donor needs:  (1) prompt acknowledgement of the gift, (2) an acknowledgement that is meaningful in the sense that it reports back to the donor how the gift was used and as specifically as possible, and (3) a report of measurable results achieved with the help of the gift, ideally before the second request for a donation. 

In my post of May 5th, I talked a bit about my experience as a legacy donor to the UT School of Architecture and I complimented the School on their stewardship of me.  Then I received this most recent communication from the University that could have been pulled directly from Penelope’s playbook.  The outer envelope, in large type, proclaims “Get the facts,” with a sub-title “Fast Facts 2009 Brochure Enclosed.”  The cover letter, signed by the Chancellor, says, in part, “Fast Facts is an annual publication that provides an at-a-glance overview of the UT System as a whole.  The numbers for 2008 are undeniably impressive . . .  Your past gifts have enabled the UT System to achieve these remarkable results.  And, with your continued trust and support I know we will achieve much more.”

The cornerstone of the mailing is a saddle-stitched, 2-color booklet printed on plain paper (nothing fancy)that includes lots of statistics along with several pages describing the University’s “groundbreaking initiatives.”  The booklet also has information about the financials of the system.  All in all, a really well done package that respects the fact that I don’t have alot of time (the name Fast Facts helps signal this) but also respects my need for reassurance as to how my gifts are having an impact. Here it is.
UT Booklet Cover
Not a slick annual report, the booklet offers, in easily digestable portions, information about how the University, with my help, is making a difference.


P.S.  I get asked alot about how to manage the communication with a donor when there is more than one entity on the receiving end of the gift, such as a college within a university system or a chapter or affiliate of a national organization.  First of all, I don’t think you can ever thank a donor too often so I’m not all that worried about thank yous coming from both places.  And, I don’t worry much, either, about donor confusion.  This mailing is a great example of how that kind of communication can be handled effectively.  The letter mentions that the booklet is about the UT System as a whole.  Without having to acknowledge that my passion is the School of Architecture, or apologize for not focusing on it, they bring me thanks, news and measurable impact from the parent.

Written by Phyllis Freedman

June 2, 2009 at 11:50 pm

Family comes first.

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I’ve always wondered why so many gift planners are reluctant or downright refuse to include information in their marketing materials about residual or contingent bequests.  Their reasoning usually goes that a specific or percentage bequest is essentially guaranteed (insofar as bequests are guaranteed) while residual and contingent bequests may result in zero to the nonprofit because there may be nothing leftover or the stated beneficiary or primary provisions of the will may be met.  I always thought the more choices for the donor, the better.  And, the revenue potential with a contingent or residual bequest could be so much larger than a specific or percentage bequest.

Now comes some interesting research reported by Third Sector in the UK (my thanks to Martin Goetzinger of Blackbaud for forwarding it to me).  According to the survey, nearly nine out of ten people would be “proud and pleased” to see their parents leave money to charity in their wills after they have looked after their family.

The survey by legacy consortium Remember a Charity found that 89 per cent of those polled would support the move. Only 7 per cent of the public would regard such a decision as “eccentric”.  Stephen George, chair of Remember a Charity and head of legacies at the NSPCC, said the research “flips the issue of charity-giving in wills on its head. Despite what many parents think, it seems many of us are very happy to see a proportion of our parent’s estates go to charity. “This perception gap may be why only 7 per cent of the UK’s population have included charitable gifts in their wills.” 

And may explain why the percentage of Americans leaving a bequest to charity isn’t higher. It’s interesting to read this in light of recent research by The Stelter Company and Legacy Leaders both of which indicate that childless individuals are much more likely to make bequests.  Maybe that’s because we’ve failed to educate donors with children about ways to take care of their family and leave a legacy.


Written by Phyllis Freedman

June 1, 2009 at 11:49 pm