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Chapter 46. Planning for Long-Term Institutionalization >
Section 16. Securing Endowments and Planned Giving Arrangements >
Securing Endowments and Planned Giving Arrangements |
Tools & Checklists | Contributed by Phil Rabinowitz Edited by Bill Berkowitz |
Checklist
Here you will find a checklist summarizing the important points of the section.
What are endowments and planned giving arrangements?
__ An endowment is a fund built up from donations, of which the principal is invested, and the income used for the support of the organization or institution.
__ A planned giving arrangement is one in which a donor contributes to an organization or institution, and receives both tax advantages and an income from his donation for a fixed period or his lifetime.
__ Planned giving arrangements include:
- Charitable gift annuities.
- Charitable remainder trusts
- Pooled income funds
- Life insurance
Why would you want to secure endowments or planned giving arrangements?
__ They’re attractive to donors.
__ They’re more likely to get you large donations.
__ You can use the good experiences of donors to attract other donors.
__ They give you investment opportunities, and the chance to develop a funding base that will continue to grow.
__ They can make possible programs or opportunities that you wouldn’t otherwise be able to fund.
__ They can give you the long-term financial security that makes long-range planning more than hope.
__ They can free you from the restrictions of public and foundation funding.
When should you try to secure endowments or planned giving arrangements?
__ When you’ve grown to the point that you have, or can buy, the capacity to invest and administer the funds you want to set up.
__ When you have a base of donors and potential donors that can make it worthwhile to set up endowments and planned giving arrangements.
__ When you have the capacity – either through volunteers or a development office – to market your program to potential donors.
__ When the reputation of your organization or institution is one that will make donors feel that their money is both well spent and well used.
__ When your organization has a need for something that requires a large capital investment.
__ When funding restrictions from public or private funders make it difficult or impossible to do work that is in the best interests of the community or the society.
__ When funding from public and private funders becomes scarce.
How do you secure endowments and planned giving arrangements?
__ Determine whether the arrangement you’re considering is possible for your organization in your community.
__ Set up your financial arrangements.
__ Reach out to and recruit potential donors.
__ Implement your plan:
- Monitor and maintain your systems.
- Cultivate current donors.
- Continue to recruit new donors.
__ Keep at it indefinitely.
Tool #1: Twelve Common-Sense Rules for Investing
1. BUY LOW, SELL HIGH.
Don’t follow the crowd. Don’t buy at the top of a bubble just because everyone else is buying. Don’t panic and sell in a slump; grit your teeth, hang on, and buy more if you can. Whatever you do, don’t buy what the gurus say is the hot new thing, because it’s almost sure to be cold three years from now.
2. DIVERSIFY.
Different types of assets – growth stocks, income stocks, international stocks, bonds, etc. – go up and down at different times. Spreading your portfolio out among several asset types moderates the windfalls but cushions the disasters. In the long run you’ll do better.
3. PICK A DISTRIBUTION AND STICK TO IT.
Decide what percentage of your portfolio should be in each asset type. When one section goes up, sell off enough to bring it back down to that percentage. When it falls, buy more. This forces you to observe Rule #1.
4. DOLLAR-COST AVERAGE.
Invest a set amount at regular intervals. If you force yourself to invest on a regular schedule, you’ll invest more. You’ll also buy more of what’s cheap and less of what’s expensive at any given time (Rule #1, again).
5. BUY ONLY NO-LOAD MUTUAL FUNDS.
A mutual fund gives you a start on diversity, no matter how small your stake. A no-load fund is one that doesn’t take a percentage of your principal as the price of investing, or charge you if you take money out before a particular time. A fund that skims a chunk of your assets off the top isn’t going to perform any better than one that doesn’t.
6. CHECK THE EXPENSE RATIO BEFORE YOU INVEST.
The expense ratio tells you the fund’s operating costs, including management fees, as a percentage of the fund's average net assets. The average expense ratio for an actively managed mutual fund is about 1.5%. A higher ratio has nothing to do with better performance.
7. NOBODY BEATS THE INDEXES EXCEPT WARREN BUFFET.
A lucky fund manager may beat the S& P 500 three years running, but over the long run almost no one even manages to match it. So stick with mutual funds that simply mirror the relevant indexes. That cuts your expenses dramatically, too.
8. RISK AND RETURN ARE ALWAYS CONNECTED.
There is no such thing as a safe, high-yield investment. The higher yield is the premium they pay you to assume a higher risk. Don’t believe anyone who tells you different.
9. THE LONGER YOUR TIME FRAME, THE MORE RISK YOU CAN AFFORD.
Over the long run, stocks give you a higher return than bonds. You can guess what stocks will do for you over the next 20 years, but over the next five they could kill you.
10. NEVER INVEST IN ANYTHING YOU DON’T FULLY UNDERSTAND.
The more complicated the deal that someone is trying to sell you, the greater the likelihood that they’re skimming the profit and leaving you with risks you don’t know about. These people are not your friends.
11. NEVER BUY ANYTHING ON THE ADVICE OF SOMEONE WHO’S GETTING A COMMISSION ON THE SALE.
This includes brokers, annuity salesmen, and anyone who works for an investment company. Their interests are not aligned with yours, even if they are your friends.
12. IF IT SOUNDS TOO GOOD TO BE TRUE, IT IS.
Tool #2: Ten Tips for Donor Recruitment and Relationships
1. Know your prospective donor. Learn as much about the donor’s background, affiliations, needs, preferences, and interests as you can.
2. Develop a relationship with the donor – an honest, open, and personal relationship, based upon your mutual interests.
3. Listen to the donor’s needs and concerns. Carefully, attentively, and respectfully.
4. Ask for what you want. This should be a specific request, based upon your knowledge of the donor’s current ability and motivation to give.
5. Show the benefits of giving, again based upon the donor's individual interests and needs. Many different benefits are possible; the ones you offer should be customized for the individual situation.
6. Minimize the costs of giving. “Costs” here mean costs of time and effort, as well any personal barriers, or “psychological costs.” Make it as physically and psychologically easy to give as possible.
7. Modify your request, if necessary, based on feedback you receive to your initial appeal.
8. Refer to models. Along with your request, indicate others who have given corresponding amounts where possible – especially those persons the donor knows, likes, and respects.
9. Express appreciation to the donor for his listening and consideration, regardless of any amount given. Even if the prospective donor does not give this time, there will be other opportunities.
10. Provide feedback. After a gift is given, follow up by indicating to the donor how the gift was used and what results were obtained.