Picture a group of financially stable individuals; not tech billionaires, professional athletes or actors, but those who have reached a point in life where they’re established in their career and earning a comfortable income, have strong retirement savings and an admirable record of philanthropy through their gifts of time and treasure. Sounds like the kind of donor population we’d all like to have supporting the organizations we care about, doesn’t it?
Now, think about how they approach giving. Ample research findings tell us this population supports multiple causes and organizations annually. But what about how they designate their largest gifts? If you could ask this group whether their biggest gift last year was restricted for a specific purpose or completely unrestricted, what percent do you think would say they gave for something specific? Think of things like scholarships, endowed faculty chairs, building projects, or other specific purposes. Would it be at least 50% giving for a restricted purpose? Maybe 60% or 70%?
More than 1,400 individuals fitting this profile participated in the most recent U.S. Trust Study on High Net Worth Philanthropy, which is published biennially in collaboration with researchers at the Indiana University Lilly Family School of Philanthropy. The mean household income of these participants is over $300,000 and net assets (excluding primary home value) is $16.8 million. And while you might think the largest gift these individuals made last year would be restricted for a specific purpose, more than 73% said their largest gift was unrestricted.
If this is challenging your assumptions or experience, consider that this population was also asked whether they prefer to give restricted, unrestricted or have no preference. Only 20% indicated restricted. Nearly 30% answered unrestricted, and over 50% expressed no preference.
These findings may come as a revelation, as many of us were trained in our early fundraising years that unrestricted gifts, usually at smaller levels through annual giving vehicles like mailings or phone calls, were the entry point to the major gift cycle, and donors are cultivated into higher levels of giving for more specific – or restricted – purposes.
This evidence to the contrary should certainly not be used to justify radically changing your approach to raising major gifts. No one should simply assume that all they need to do is start asking for big, unrestricted gifts. These do occur, and many have this year including a $140 million unrestricted gift to MIT, a $500 million gift to UC San Francisco that designated $100 million to be unrestricted, and even smaller institutions like St. Norbert College in DePere, Wisconsin, which received a $30 million unrestricted gift.
Testing an Idea
More large, unrestricted gifts might be possible if donors were presented with structured unrestricted giving opportunities beyond the bland and uninspired “President’s Fund” or “Dean’s Excellence Fund.” I had the opportunity to test this idea earlier in my career at the University of Pittsburgh where I led the development office for the Swanson School of Engineering from 2003 through 2008.
In 2005, we developed an initiative to raise unrestricted endowments. Branded as “Engineering Legacy Funds,” donors could establish one for school-wide purposes, with the income to be expended by the dean, or for one of the seven academic departments, to be expended by the department chair. In the first year, 20 funds were established. This alone was cause for celebration, as the school saw just 30 endowed funds established in the prior decade. We had set a two-year goal of establishing at least 50 funds, and succeeded with 57.
I left Pitt in 2008 to become vice president for development and alumni relations at the University of Texas at Dallas, where I implemented this same model across the university in 2010. Rebranded as Opportunity Funds, more than 120 unrestricted endowments have been established there.
Over the years, I wondered how many more funds were established back at Pitt, and more importantly, whether the early donors who established a fund continued adding to it after they completed the terms of their gift agreement. I also wondered if any of them designated an estate commitment or other deferred gift to benefit their fund. Or if they started supporting other areas of the engineering school or the university.
In 2016, I returned to Pitt after being granted access to donor records and allowed to review a full decade of data from 2006 through 2015. The findings were beyond my expectations and I recently published a case study in the academic journal, Philanthropy & Education to share the details. Some of the highlights include:
▪ A total of 127 gift agreements had been executed, creating 114 Engineering Legacy Funds. This verified multiple donors had completed a second agreement after finishing the terms of their first.
▪The book value of the 114 funds at the end of FY 15 was $3.24 million, and market value was $3.77 million.
▪ The total value of all 127 signed gift agreements was $5.5 million. More than 20% of these agreements were planned gifts, with 11 bequest intentions and 16 charitable gift annuities or remainder trusts.
▪ 91 of the 127 agreements were for the minimum amount of $10,000. But, two of these were established for $1.5 million. One gift was a multi-year cash commitment and designated to support the Department of Bioengineering. The other was a bequest designated for the dean to use for school-wide purposes.
▪ Nine donors went on to document a new deferred gift after establishing their fund with cash. Six of these designated their deferred gift to go into their Engineering Legacy Fund, while the other three designated theirs to create new engineering undergraduate scholarship endowments. These ranged from $100,000 to $400,000.
▪ The overall donor population was comprised mostly of alumni from the 1960s and 1970s and had largely been non-donors, or limited annual donors to engineering or elsewhere within the university. Before establishing their fund, the median lifetime giving of these donors to Pitt was just over $4,000 and the median largest gift or pledge was just $1,000.
▪ By the end of FY 15, 80 funds had been fully established with cash commitments. A total of 30 were paid outright in just one pledge payment, and more than 50% were completed within 3 years or less. Donors were offered a maximum of five years to fulfill their pledge.
▪ There was a very high completion rate, as only three funds were behind on their scheduled payments. Also, only one pledge had to be cancelled, and that was the result of the donor’s death.
Application of Study Findings
This study helps dispel the myth surrounding the giving motives of high net worth individuals, where it is assumed the best solicitation strategy must be built around a gift designated to a specific purpose. We can all agree that big ideas generate big gifts, but this suggests unrestricted designations can be part of the conversation, and provides a model for how to do it.
Another takeaway will appeal to the annual giving staff who work in the higher levels of annual gifts, commonly recognized as leadership annual giving. With so many of these funds established for $10,000, this puts annual pledge payments within the range of most leadership annual gift targets. Also, potential donors at both Pitt and UT Dallas were encouraged to look at these as “starter funds,” as they could change the purpose of their fund at a later date from unrestricted to a specific restricted purpose if the fund’s value reached the minimum for that purpose (such as a scholarship or endowed chair).
Most importantly, the creation of an unrestricted endowment provides a lifetime channel of engagement between the donor and the institution. As deans, department chairs, and development officers come and go, these funds provide an open door to continually reengage a significant donor population that has clearly demonstrated their preference for unrestricted giving. Just as importantly, they have shown others how to do the same.
If you are attending the CASE District V annual conference in Chicago, you can see a presentation on this case study on December 12 by Aaron Conley and Terry Brown, Sr. Executive Director of Planned Giving at the University of Pittsburgh.