November 1, 2004

Outsourcing Planned Giving Taps Into Expert Networks
By Michael Patterson
When The Dayton Foundation conducted a survey of nonprofit organizations in its Greater Miami (Ohio) Valley service area, executives were surprised to find that the number of agencies with an endowment fund had declined from nearly 60 percent during the early 1990s to 40 percent in 2001. Asked for an explanation, the agencies replied that the pressures of higher operating costs forced them to spend the funds. This finding came as the foundation was receiving an “unbelievable number of requests” from nonprofits to fund development directors, said Michael M. Parks, president of The Dayton Foundation. Faced with these issues, the foundation wondered how it could cost-effectively provide a service that would help nonprofits build their endowment funds through planned and deferred giving. Thus was born the Legacy Partnership -- a program whereby the foundation provides planned giving support to agencies that ordinarily could not afford to hire their own planned giving staff member. It also serves as one model for how nonprofits can “outsource” planned giving programs without having to incur the cost of adding a planned giving staff position to the payroll. With funding provided by the foundation, corporations, private foundations, the United Arts Campaign, the United Way, and the agencies themselves, the partnership provides each participating nonprofit with a foundation staff member one day every other month. During the days when a foundation staff member works with an agency, they ordinarily join the executive director on three to four personal visits to prospective legacy donors, plus participating in a group visit, such as a luncheon. “The agency’s staff person is the one who’s really got the relationship. Our role is to support them,” Parks said. “In effect, we become an extension of their staff.” And outside of those six days, the foundation’s staff also assists the organizations with mailings and other activities. In addition, the foundation has two attorneys and two CPAs on staff who can provide nonprofits and their donors with assistance on complex gift arrangements. The idea for providing planned giving outsourcing services was formulated by Parks, Joe Baldasare, the foundation’s vice president of development, and Charles R. Nunn, president of Endowment Horizons, Inc. Nunn launched a pilot program in the fall of 2002 with four agencies. Since then, the partnership has grown to 49 agencies. The foundation has added two full-time staff members to serve its agencies. Although it is still early in the process, Parks said the partnership to date has documented 214 new legacy gifts among the agencies with which it works. While the staff support is important, Parks said the service’s ability to provide structure and discipline is equally valuable. “We all get caught up in our day-to-day operations. We understand the value of planned giving, but it often gets pushed to the bottom of the pile. What this provides is a minimum of six days a year you’re working on planned giving.”

One challenge that faces the partnership is coordinating prospective legacy donors who “are close to multiple groups,” Parks said. Since their model is a “heart-based” rather than a “wealth-based” approach, it’s a challenge “that we’ve been able to overcome” by determining where the donor’s greatest interest lies. “Our approach is to help friends of the organization learn how they can support their favorite charity through giving that helps the family achieve family objectives,” said Nunn, the consultant who helped develop the Dayton model. While nonprofits in the Dayton area may be fortunate to have access to the partnership model headed by its community foundation, other agencies contemplating a planned giving program must hire a staff member, add planned giving to the responsibilities of already over-extended staff members, forgo planned giving, or outsource the program. For many organizations, outsourcing has become a viable -- and affordable option. Nonprofits “are seeing that planned giving is important to their future, but a lot of them cannot afford someone full-time,” said Tony Martignetti, managing director of Martignetti Planned Giving Advisors in Forest Hills, N.Y. Working on a monthly retainer, Martignetti said he can offer a “robust planned giving program for a third or less” than what a full-time skilled planned giving employee would cost. “We are never compensated by how many planned giving dollars we raise,” he added, which deals with the issue of percentage fundraising compensation which is considered unethical by professional fundraising organizations such as the Association of Fundraising Professionals. His approach is much like what a staff member would undertake, developing a strategic plan based on a budget. “Once we have a plan approved, we stay on-site and work side-by-side with the client,” he said. His work covers marketing activities, seminars, staff training and cultivating prospective donors. “We like to think we’re the client’s director of planned giving,” he said. “So whatever you would expect your director to do, we would do.” Since planned giving is based strongly on relationships between an organization and donor, critics caution that outsourcing the program runs the risk of alienating an organization’s constituents. But consultants like Martignetti believe the “relationships always belongs to the client. We just help them cultivate those relationships.” “For instance, if a client prefers, I would always meet with donors and prospects along with a client’s gift officers. I could meet alone with a prospect but with an eye toward building the relationship with the client.” To help ensure the integrity of the process, Martignetti said “we do not ask for donor lists. All the mailings are done by the client. We simply help the client analyze their donor base and do the marketing piece.” And in some cases, the staff member who has the relationship moves to another job and “the consultant is the one who offers the continuity,” he said. Janie Davis, chief executive officer of the American Lung Association of San Diego and Imperial counties, decided to outsource her planned giving activities “because of finances…. We also believe we would receive greater expertise.” “Outsourcing is a perfect way to jump into planned giving especially if resources are limited,” she said. “Often, as the association grows, decisions can evolve to reflect changing times and knowledge. The important feature is to jump in at some level now. We find so much of the technical assistance sporadically needed is best available through outsourcing.”

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