Wealth Data: 5 Ways to Learn More About Your Prospect’s Capacity to Give

By Jill McCarville, VP Marketing, iWave

Mo’ money, Mo’ problems major gifts. Some of the most important information you will find on your prospective major gift donors is with regards to their wealth. Follow along with this scenario: your promising new prospect lives in a 7-bedroom house in Texas, has a beach condo in Malibu, annually gives gifts of at least $50,000 to Human Services causes and sits on two boards. This is great, but there may still be wealth indicators that you do not know. What do you know about their securities ownership? Do they have other assets? What is their annual income? These are a few of the questions that researching your prospect’s wealth portfolio can answer.

Wealth data is a primary driver behind your prospect’s ability to give, which makes it a critical component in prospect research. However, nonprofits tend to fall into two camps with regards to their opinion on the importance of wealth data.

Regardless of what camp your organization falls into, all fundraising professionals should be slightly wary of wealth information. You can only find out as much about a prospect’s wealth as is publicly available. And the wealthier an individual is, the more likely they are to find creative ways to disperse their wealth, through financial instruments like LLCs and trusts. As Helen Brown explains in this post, “Evidence suggests that for some prospects publicly-identifiable wealth only comprises a tiny fraction of net worth since so much of their wealth is private. For others, identifiable wealth well over-inflates net worth since it ignores the liabilities on a household’s balance sheet.”

So, wealth data isn’t the be-all and end-all, but it is an excellent baseline indicator that your prospect may have the capacity to donate a major gift. So how do you determine just how wealthy your prospect or donor is? We put together five expert research tips to help you get started.

1. Look for their stock holdings and transactions through SEC Filings

SEC Filings provide excellent insight into your prospect’s liquidity and thus allow you to make more timely asks. They are publicly available through the US Securities and Exchange Commission in the US or SEDAR in Canada, and detail insider transactions and security ownership. If your prospect research tool, like iWave, provides a database like Thomson Reuters for scanning SEC filings, you can use it to quickly search insider transactions and security ownership by individuals, companies, or alumni. You may even be able to set alerts that will notify you of your prospect’s wealth-creating events such as acquiring and disposing of stock.

2. Look for evidences of wealth

As mentioned above, wealthy individuals may have tactful ways of distributing their wealth. However, there are some wealth indicators that are typically associated with high net worth individuals:

• Does the individual work in a profession typically associated with high net worth? For example: a C-level executive, doctor, lawyer, pilot, real estate investor, etc.
• Does the individual have a certain level of liquid assets? For example: stocks and marketable securities, government bonds, mutual funds, etc.
• Does the individual own certain assets associated with wealth? For example: yachts, aircrafts, luxury cars, etc.
• Is the person a specialized investor? For example: an accredited investor or an angel investor.

There are multiple ways to find this information but the fastest way is through a specialized database such as Prospects of Wealth from Larkspur Data.

3. Look for wealth acquired through financial compensation

Going back to basics, you can look for wealth that is acquired through employment or a board membership with a wealthy company. This information can often be found with some skilled digging online, or databases such as Thomson Reuters or DatabaseUSA will compile it for you in one place. Specialized databases like Larkspurs Data’s Prospect of Wealth may also assign individuals a wealth score based on their title, length of employment, company revenue, cash compensation, or stock information, if they are employed at a publicly-traded company.

4. Determine an individual’s baseline capacity rating

The primary reason a researcher or major gift officer tries to gain insight into a prospect’s wealth is so they can use that to determine an ask amount or an estimated capacity range. Listed below are a few industry standards for using wealth data points to determine a capacity rating.

• Capacity as a percentage of estimated net worth: Estimated net worth x 5%
• Annual income represents 10% of net worth: Annual income x 10%
• Real estate represents 20-25% of an individual’s net worth: Value of primary residence + value of additional properties/20-25% x 5%. More here.
• Stock holdings represent 30-35% of an individual’s net worth: Current estimated holdings/30-35% x 5%

5. Look at their real estate holdings, charitable giving information, and foundation affiliations

Let’s talk about what are arguably the most important wealth indicators; real estate holdings, philanthropic information, and foundation affiliations. Without these three sources of information, a prospect’s wealth picture will never be complete.

• Real estate holdings, especially additional properties, indicate an individual’s wealth and help determine capacity.
• Charitable gift size helps determine if the individual has a history of donating major gifts.
• Foundation Affiliations are often overlooked in their importance of finding wealth capacity. If someone sits on multiple foundation boards, they may have wealth to give. This is especially true if the individual sits on the board of a family foundation. If this is the case, not only do they likely have wealth, they have also set up a way for them to distribute that wealth to certain causes.

Now that you have some tips on what to look for to understand the capacity and lifestyle of your prospective donors, you may be thinking; how? Wealth screening is an incredible way to get to know a large number of your donors, almost instantly. Screening enables development departments to segment hundreds or thousands of individuals into a prioritized list of prospects, sorted by greatest capacity and inclination to donate a major gift to your organization.

There you have it. Wealth insights are very important to understanding full picture of your prospective donors. These 5 tips along with the right wealth screening tool should help you start determining whether your prospect has wealth to give.

Click here to download our Prospect Research with a Purpose eBook, which is full of more great tips!