High Net Worth Individuals

Community Foundation Market Research High Net Worth Individuals Giving Back to Community Helping Community Foundations Reach Out to America s Wealthy Published by the Community Foundation R&D Incubator Commissioned by the National Marketing Action Team Funded by Council on Foundations Community Foundations Leadership Team, Community Foundations of America, W.K. Kellogg Foundation, C.S. Mott Foundation, and Michigan Community Foundations

Contents INTRODUCTION............................................ 1 Part One: Research COMMON CHARACTERISTICS AND VALUES........................... 2 Support of multiple charitable interests Family involvement valued Financial security related to both psychological comfort and material wealth Acceptance of risk Frequent and fluent use of technology Demand for customization and personalized service Increased awareness of giving options Use of professional advisors EXPANDING DEMOGRAPHICS: SEGMENTATION......................... 8 Age Gender Ethnicity Source of wealth Further segmenting the high net worth category WORKING WITH PROFESSIONAL ADVISORS.......................... 12 Increased competition from the financial services industry A high-touch client Collaboration Part Two: Strategy THE COMMUNITY FOUNDATION OPPORTUNITY........................ 14 Establishing relationships through your board of trustees Identifying new donors through existing relationships Leveraging professional advisor relationships SUMMARY............................................... 24 APPENDIX............................................... 25 WORKS CITED................................................28 TO LEARN MORE........................................... 29 Research presented in this paper is based on The High-Net-Worth Landscape and Opportunity, a market research and strategy presentation delivered to the National Marketing Action Team in March 2002 by Community Foundations of America and HNW, Inc., <www.hnw.com>, a company providing solutions exclusively focused on the affluent market. HNW draws from its experience as well as a series of original research reports, the HNW Wealth Pulse, and an array of secondary research sources. The Community Foundations National Marketing Action Team is a joint body representing both the Council on Foundations Community Foundations Leadership Team and Community Foundations of America.

Introduction REGARDLESS OF ECONOMIC FLUCTUATIONS, the number of individuals with a large amount of investable assets continues to grow at a steady pace each year. While the high net worth population has not escaped effects of a weakened economy, it has continued on a growth trend, increasing in both number of affluent households and the amount of assets claimed by each one of those households. From 1995 to 2005, the number of households with investable assets of $500,000 or more will rise from 11.2 million to 33.5 million respectively. 1 Tapping into the economy s high net worth segment is fast becoming the business of all sectors, especially retail, hospitality, and financial services, as well as charitable organizations. To carve out a piece of this segment, community foundations must do their best to identify and understand high net worth individuals, uncover their values and desires, develop services that mirror the ways they like to do business, and find an edge in what will be their economy. Category Minimum investable assets Emerging affluent or mass affluent $50,000 High net worth $500,000 Pentamillionaires Decamillionaires Ultra high net worth $5 million $10 million $30 million In today s market, marketers and practitioners define and categorize the wealthy a number of ways. Above are a few commonly accepted definitions. Part One: Research (based on findings by HNW, Inc.) 1

Common Characteristics and Values Targeting the high net worth audience should not be limited to the traditional framework of norms related to age, gender, ethnicity, or even source of wealth. People across the spectrum of demographics are emerging as the new affluent, leaving funding seekers the challenge to identify them, coupled with the opportunity to address each sub-audience most appropriately. However, as the pool of high net worth individuals grow more and more diverse with regard to demographics, they share some characteristics and values. These commonalities provide community foundations an opportunity to target their efforts and reach out to this increasingly diverse audience. As such, ensuring that all community foundation communications and activities align with these cross-cutting characteristics and values is critical to success with any subsection of this group. Shared high net worth characteristics include: Support of multiple charitable interests Family involvement valued Financial security related to both psychological comfort and material wealth Acceptance of risk Frequent and fluent use of technology Demand for customization and personalized service Increased awareness of giving options Use of professional advisors Giving motivations and obstacles Top motivations 2 Feel strongly about the cause Personal experience with the organization Tax benefits Response to specific requests Moral imperative or right thing to do Involvement of friends and family with the charity Religion or spirituality Common obstacles 2, 5 Not confident that donations will be used in a productive and valuable way Have not found a compelling reason to give Have a lack of time to research and consider giving Are uncertain about their own future financial situation Sources: HNW Wealth Pulse; Schervish, et al. (See Reasons to Give in Appendix) Part One: Research (based on findings by HNW, Inc.) 2

Common Characteristics and Values Support of multiple charitable interests According to the HNW Wealth Pulse, a survey-driven series of reports on the affluent market, high net worth individuals are more likely than the total population to distribute their time and money, among a variety of different causes and organizations. In 2000, more than half of high net worth individuals dedicated their time or money to five or more different causes. 2 Family involvement valued Among pentamillionaires, 97 percent report that they are active in teaching family values to their children. Largely, these parents are not concerned over whether or not their children will be financially comfortable, but that they will be spoiled by money and possessions. As such, 60 percent report taking steps to educate their children specifically about their relative wealth. These conversations often function to expose children to philanthropy. 5 Financial security related to both psychological comfort and material wealth To be sure, a high net worth individual s perceived ability to give of his or her assets is based on the amount of wealth he or she has. But the feeling of security that permits such giving is not derived from asset size alone. Research has shown that recency of incurring wealth, retirement expectations, and gender tendencies are linked to perceived financial security. 3 Perceived financial security is significant because it may have a strong impact on an individual s willingness to give. Strikingly, the higher the net worth of an individual, the greater amount of wealth that individual considers necessary for him or her to feel financially secure. 3 This relativity may occur because, as standards of living rise with income, the more that elevated income becomes thought of as necessary to sustain an acceptable lifestyle. Part One: Research (based on findings by HNW, Inc.) 3

Common Characteristics and Values Only 36 percent of pentamillionaires feel completely financially secure. The median amount needed for financial security is $20 million, or 67 percent more than their current amount of wealth, with an average amount needed of $45 million, or 75 percent more than current wealth. 5 This intense, sometimes disproportionate drive for security can be attributed to a fear of decline of living standards during retirement, or the desire to provide not just individual, but family financial security. 9 According to the HNW Wealth Pulse, the recency of high net worth status plays a significant role in perceived financial security as well. The more recently people have acquired wealth, the more concerned they are about their typical responsibilities: retirement, family financial security, education of their children, etc. Recent acquirers of wealth are less concerned about managing their investments, tax and or estate planning, and providing for health and wellness. 3 Conversely, high net worth individuals who have held their wealth for over ten years are more likely to feel an obligation to give back to their communities than the newly wealthy. 2 Women of wealth assume they need more money to feel secure than their male counterparts. Women often anticipate a longer period of time unemployed and on a fixed income due to long life spans and early retirement then men do. Among wealthy women, 29 percent say they would need more than $50 million to feel completely secure, compared to the four percent of men who say the same. 4 Acceptance of risk Despite the host of psychological barriers to risk, the high net worth population remains the group most comfortable in taking financial risks. Those falling into this category are twice as likely to have started their own business. 3 And many among this group see higher-risk investing as necessary to high performance in their financial portfolios. 6 Still the shifting economy is continuing to induce prudence, rather than risktaking, even among our nation s most adventurous. Many are reducing their equity positions and moving to alternate investments. Recent research shows that between nine and 17 percent of high net worth individuals portfolios are now devoted to investments such as hedge funds, private equity, or managed futures a significant increase from five years ago. Those numbers are expected to continue to grow over time. 7 Part One: Research (based on findings by HNW, Inc.) 4

Common Characteristics and Values Frequent and fluent use of technology High net worth individuals, regardless of their specific demographic descriptors, share a propensity for high-tech solutions. Many are users of the latest technology, and they expect the people and organizations who engage them to do the same. Part of understanding and addressing the needs of the high net worth audience is coming to terms with their affinity for technology. They are the most prevalent, habituated Internet users, interacting and transacting online more than any other group, with 80 percent online penetration compared with 56 percent within the general population. 1, 10 The wealthier the household, the more likely it is to use the Internet to seek financial advice, research products, trade stocks and bank. Wealthy Americans rely on different forms of technology to obtain information and manage their finances. Increasingly, they view the web as an important interface with service providers. And like all sophisticated Internet users, they demand quality content and services in each online experience, especially those concerning wealth management. In response to the technology demands of the wealthy, financial services institutions eager to obtain their business are spending aggressively in this area. Online behavior: affluent individuals in the United States 50% 40% Online activities conduct banking trade stocks seek financial information view stock quotes 30% 20% 10% 0 < $50K $50 99K $100 199K $200 499K $500 749K $750K or more Investable assets Source: U.S. Trust Survey of Affluent Americans Part One: Research (based on findings by HNW, Inc.) 5

Common Characteristics and Values Demand for customization and personalized service From a service provider as sophisticated as a professional advisor to one as basic as lawn care specialist, high net worth individuals are accustomed to receiving top-notch service, customized to their personal, cultural and lifestyle preferences. Because they are such a sought-after group of people, high net worth individuals can demand and expect to receive services exactly the way they like them. Community foundations, featuring a variety of fund types and ways to give, are well-positioned to offer high net worth individuals the ability to customize their giving so that it fits each person s unique set of goals and expectations. Because community foundations are local organizations, steeped in the heritage of giving within the communities they serve and in touch with current community needs and developments, they present a great knowledge resource for high net worth individuals interested in giving back and staying involved. Increased awareness of giving options Most high net worth individuals are frequently presented with opportunities to give by charitable organizations and financial services institutions alike. They are an educated group who may be privy to social needs and financial practices and aware of the services that competitors within the financial services industry can offer. Therefore, they must understand the unique value offered by community foundations to help them differentiate from other charitable opportunities. Giving attitudes High net worth individuals are more likely to: Report that giving has always been a part of their family s way of life Enjoy and attend social functions associated with giving Give because it benefits both their business and their community Give because tax and estate laws provide an incentive Make giving decisions with the help of an advisor They are significantly less likely to give anonymously. 2 Source: HNW Wealth Pulse: Wealth & Giving (See Attitudes Toward Giving and Charities in Appendix) Part One: Research (based on findings by HNW, Inc.) 6

Common Characteristics and Values Use of professional advisors High net worth individuals are likely to either consult with or rely upon the services of one or more professional advisors. Seventy-five percent of high net worth individuals have at least one wealth management advisor and are prone to have multiple advisors, each specializing in a different type of service. 1 Affluent investors who say they are highly satisfied with their primary financial advisor have an average of 14 contacts with that advisor over six months. Contact can be a telephone call, a personal meeting, or even a personalized letter or e-mail. 11 High net worth individuals can demand a lot of personal service. Their professional advisors, while ready to provide service in a way that supports their clients entire set of life goals, may appreciate that community foundations value hightouch relationships. Once familiar with the principles and practices of a community foundation, an advisor and his or her client may feel secure that the type of relationship to which the client is accustomed will not be altered (or challenged), but will be enhanced by adding a community foundation to the team. Major Trends for Professional Advisors High net worth characteristics Greater interest in philanthropy Emphasis on long-term philanthropic impact Wealth management industry response Increased provision of specialized philanthropic services such as private family foundation programs, Donor Advised Funds, and charitable trusts Decreased customer loyalty Multi-channel services Tools promoting education and empowerment of advisor base Focus on client retention programs More aggressive branding campaigns Maintenance of relationships with multiple financial service institutions Expectations of full-picture information Account aggregation and other specialized technology resources Increasing interest in comprehensive financial guidance Personal goals versus wealth goals Interest in objective information Increase in offering of managed accounts Fee-based versus commission-based service Wholesale/cross-selling Objective, advice-driven services versus product-driven services Integrated brokerage, asset management, insurance and banking services Source: HNW, Inc. Part One: Research (based on findings by HNW, Inc.) 7

Expanding Demographics: Segmentation While it is effective to target high net worth individuals through their commonalities, building the types of personal, one-on-one relationships required to maintain them means getting to know them as individuals. Therefore, it is critical to understand the trends in values and preferences of each sub-segment of this market. Viewing the high net worth audience as a diverse group with specialized needs, as opposed to a group of one type of person, may provide community foundations the edge they need to compete for attention and funding. In addition to their wealth status, high net worth individuals identify themselves along lines of age, gender, race, and the means by which they encountered their wealth. Age Traditionally, many people think of high net worth individuals as retired or nearly-retired business people of advanced years. While 64 percent of high net worth individuals are over age 55, 12 the age spectrum of wealthy individuals is broadening. The largest intergenerational transfer of wealth in history will result in a group of high net worth individuals that encompasses members of the World War II generation, Baby Boomers, and Generations X and Y, all endowed with different senses of family, civic responsibility and giving values. 8 Today s twenty- and thirty-somethings are giving and volunteering now, demonstrating an interest in community involvement and civic responsibility. Their propensity for giving, coupled with a big increase in assets due to the large wealth transfer on the horizon, may make younger givers prime targets for philanthropic organizations and commercial companies alike. High net worth individuals: broadening age spectrum 12 ages 37 55 32% ages 26 34 4% 34% ages 65+ 30% ages 55 64 Source: Cerulli Associates Part One: Research (based on findings by HNW, Inc.) 8

Expanding Demographics: Segmentation Gender While men still hold their traditional position as the primary wealth holders, women are fast becoming prominent in the upper echelons of wealthy. A recent study by UBS PaineWebber reported that, for the first time ever, women represent nearly half (47 percent) of all investors with $100,000 or more in investable assets, a statistic that has shot up 11 percent in just two years. 13 What s more, in wealthy households the woman of the house is more likely to share or take sole responsibility for decision making related to charitable giving, and tends to be more interested in making charitable donations than her male partner. 4 For more information about gender and charitable giving, see Philanthropy Among Men and Women: How Gender Makes a Difference in the Appendix and Women and Philanthropy: Understanding and Engaging a High Potential Audience. Ethnicity The last decade has been witness to a significant growth in wealth among Latino, African-American, Asian-American and other communities of color. And although the average high net worth individual remains Caucasian, growth of wealth among people of color is notable, and their distinct giving practices, worth the attention of charities. For example, Asian-American households have a higher annual median income than all other races, including Caucasians. 14 This group usually gives out of a sense of duty and obligation to family. Indian- Americans, on the other hand, give to honor future generations. 15 Studies show that, on the whole, many people of color give in situations enabling them to see an impact close to home or related to a specific cause important to them or their families. For a more developed exploration of the giving tendencies of people of color, see Cultures of Caring: Philanthropy in Diverse American Communities, a 1999 Council on Foundations report. Part One: Research (based on findings by HNW, Inc.) 9

Expanding Demographics: Segmentation Other key characteristics Education: Most high net worth individuals hold four-year college degrees; almost half have graduate degrees 5 Marriage: The wealthy are more likely to be married than the total population (72 percent versus 53 percent, respectively) 3 Work: High net worth individuals are workers they are more likely to work than the total population, and almost twice as likely to be self-employed (20 percent versus 11 percent, respectively); they are less likely to fully retire after age 60; and they make up the greatest percentages of people who work long hours within the entire population 3 Children: The vast majority of high net worth individuals have children or step-children and a significant number have grandchildren, including almost half of all pentamillionaires 5 Source of wealth While more than half of high net worth individuals receive some sort of inheritance, researchers have found that only 15 percent can attribute their wealth primarily to inheritance. 1 A greater number of today s wealthy are more likely to be self-made, most commonly through entrepreneurial interests, small business ownership, investments or earned income. Source of wealth can influence individual philanthropic giving practices. For example, small business owners demonstrate a greater desire to give back to their communities than other segments, and, alternately, inheritors are almost twice as likely to view their taxes as their charitable contribution. Sources of wealth: the average pentamillionaire 5 investments 21% other 2% inheritance/gifts 18% 59% business/profession Sources: Schervish et al.; HNW, Inc. Part One: Research (based on findings by HNW, Inc.) 10

Expanding Demographics: Segmentation Further segmenting the high net worth category. Because the high net worth market is broadening in scope, community foundations that further segment this population, understand their attributes, and develop audience-specific messages and activities, will find the most success. Below are some general guidelines for understanding key segments of the high net worth market. Philanthropic Their Messaging audience attributes opportunities Self-made wealthy While many of those new to the high net worth community will have their assets enhanced by the intergenerational transfer of wealth, a majority of them are entrepreneurs with a strong work ethic. Time is money Looking for an experience to share with their families Desire a full-service, sophisticated organization to help them give Want easy, direct access to information, customer service Desire to see results Interested in tax benefits Simpler than other forms of philanthropy (e.g., private foundation) Stay involved in your gift Give back the way you want to, see results A less taxing way to give (highlighting tax benefits and ease of giving) An increasingly female group of philanthropists While men are still the primary wealth holders among high net worth individuals, women are emerging as a prominent group and, for years, have contributed to or are solely responsible for philanthropic decisions within households. Interested in community responsibility, involvement May be focused on one special cause Interested in establishing a family legacy Relationships are important Join others to give back Stay involved in your gift Support the cause you care about most Share your family values with your entire community Community impact of giving A racially diverse group of philanthropists The typical high net worth individual remains white, but an increasingly diverse U.S. population, including diversity among the wealthy, is broadening the spectrum of givers. Organized giving is sometimes not trusted Giving begins at home and in immediate neighborhood/churches May be focused on one special cause Community foundations help you put your charitable intentions into action Giving through your community foundation builds your community Support the cause you care about most Community impact of grantmaking A younger philanthropist We know that today s twenty- and thirtysomethings are on the brink of receiving the largest intergenerational transfer of wealth in history. Also, the affluent among this group are achieving their wealth at a younger age than in years past. Extra time is scarce Want hands-on experience, possibly involving volunteerism Want easy, direct access to information, less focus on customer service Desire to see results Leaving a legacy not as important as with older generations Used to making own decisions based on easy access to information; critical of intermediaries Simple, rewarding way to stay involved Get involved in less time Experience giving firsthand We monitor community needs to inform your giving See how you can make a big community impact Part One: Research (based on findings by HNW, Inc.) 11

Working with Professional Advisors Increased competition from the financial services industry The high net worth market is in flux due to shifts in the economy, changing demographics, and a massive wealth transfer expected in over the next two decades that will encapsulate three generations. In response to the current state and the forecasts for change, both charities and members of the financial service industry are vying for the attention of this growing and increasingly wealthy subset of the population. With high net worth individuals seeking expanded advice and personalized guidance on all areas of wealth management, financial services institutions (FSIs) have gained a growing awareness of the particular importance of philanthropy in the wealth management practices of high net worth individuals. Sample of FSIs currently offering philanthropic services Allfirst The Vanguard Group Bessemer Trust Oppenheimer Funds Charles Schwab Wachovia Corporation J.P. Morgan Fidelity Investments PNC Advisors Bank One Merrill Lynch Citigroup While many FSIs are just beginning to offer philanthropic solutions, they are fast learners and aggressive marketers with significant revenue at stake. In their efforts to promote their own philanthropic services, FSIs have raised awareness of high net worth individuals of the importance of integrating giving into their financial planning. As a result, they have also increased advisor awareness through client demand. Part One: Research (based on findings by HNW, Inc.) 12

Working with Professional Advisors A high-touch client Advising the wealthy is a task that has expanded in scope. The accessibility of investment information, increasingly complicated tax laws, escalating investor sophistication and the complexity of financial instruments all contribute to a raised set of client expectations among the wealthy. High net worth individuals are likely to view advisors as high-level guides and counselors, connecting them to and consulting them with regard to a number of services. To address the demand for full service, a successful advisor must understand his or her client s personal, lifetime goals not just those specific to finance. This presses advisors, more and more, to develop deep, trusted, longterm relationships with their clients. And, the wealthier those clients are, the more intense the relationship must be, as more assets are at stake. Because relationships with high net worth individuals are more lucrative as well as time-intensive to establish and maintain than those with the general population, they are regarded a precious commodity among professional advisors. Collaboration Because high net worth individuals seek professional advisors who can provide them a means of achieving many financial and lifetime goals, advisors are under increasing pressure to serve as a single point of contact, a factor which may determine their viability in this competitive market. A successful advisor knows that he or she must prove to be a gatekeeper to any number of needs potential clients may have. By assuring professional advisors that community foundations are the ideal vehicle for achieving their clients charitable goals, community foundations can fill a niche that is valuable to every member of the chain the professional advisor, the client, the causes he or she supports, and the community itself. Professional advisor services Attorney (Estate Planner) Attorney (General) CPA Banker/Broker Life Insurance Agent Financial Planner Estate planning and wills Business succession planning Tax preparation Trusts and other long-term financial vehicles Financial security planning Retirement planning Part One: Research (based on findings by HNW, Inc.) 13

The Community Foundation Opportunity Targeting high net worth individuals is about more than community foundations pursuing high-potential prospective donors. It is about fulfilling the need of a population to make a positive difference in the world around them, while supporting their personal interests and those of their families. Individuals of high net worth are interested in giving back. Statistics show that, overall, their most pressing motivation for giving is feeling strongly about a cause. Among women of wealth, giving to support a special cause is significantly higher. 2, 3 To be the partner of choice in helping high net worth individuals address their desire to give back, it is essential that community foundations prove themselves distinctly suitable. And they are. Community foundations are highly appropriate giving vehicles for high net worth individuals and their advisors due to their unique features: Knowledge of local community issues, opportunities, and resources Flexible purpose and ability to direct community resources to the areas of greatest community need Personalized donor service and ability to tailor custom giving vehicles based on each donor s unique charitable interests and financial circumstances Capability to allow donors to remain involved in recommending uses of their gift dollars Focus on generating long-term community capital through endowment building Ability to allow donors to achieve a legacy (via named funds and endowment giving) Position as the low-cost, simple alternative to creating a private foundation Community foundations possess an amount of unrealized potential for catering to the needs of high net worth individuals that remain unmet. Meeting these needs presents a challenge to develop capacities and market the unique benefits to our country s most sought-after and most wary audience. Part Two: Strategy 14

The Community Foundation Opportunity The steady prosperity of the high net worth market presents an opportunity to organizations nationwide, while presenting a particular challenge to community foundations: how to market to this highly sought-after group among sophisticated and aggressive competitors. The high net worth market is and will remain the group most able to make the biggest monetary impact on philanthropy and the good works it enables within each community. It is a community foundation s duty to understand and adapt to the needs of this high-potential group, and turn their financial and lifetime aspirations into realized community dreams and lasting community capital. To access this market most efficiently, community foundations must take advantage of the most relevant and available channels boards of trustees, existing donors and professional advisors. It s easy to make a buck. It s a lot tougher to make a difference. TOM BROKAW Part Two: Strategy 15

The Community Foundation Opportunity Establishing relationships through your board of trustees Make the most of board member abilities. High net worth individuals often seek to develop close social and business relationships with influential people within their community. Board members are frequently well-connected within these networks and can provide a community foundation introductions to prospective donors. Likewise, meeting with high net worth individuals in person right away establishes a community foundation s commitment to high-touch, personalized service one of this audience s core values. Tactic: prepare board members to be ambassadors. At designated networking events and occasional informal meetings, it is important that your board of trustees (both current and past) are equipped and confident in speaking about the charitable giving opportunities and unique benefits of your community foundation. Because board members are typically prominent community members, they can serve as an excellent networking body, positioning your community foundation as the giving vehicle of choice among their high net worth contacts. One way to prepare board members is to create a convenient-size card for them to carry that provides basic language and key concepts for discussing your community foundation accurately and effectively. Tactic: create a house event. Whether focused on a particular issue or targeting a particular demographic group, asking a board member or other friend of your community foundation to host a networking event in his or her home provides an ideal opportunity, for both the community foundation and guests. Because the event is hosted and sponsored by a high-profile person who is attuned to need within the community, he or she can help guests make an emotional connection to a particular cause or feel a stewardship for community giving in general. While the host s role is critical to making introductions, it will be important to have key staff members present at a house event to provide technical expertise and to continue donor relationships. Part Two: Strategy 16

The Community Foundation Opportunity Identifying new donors through existing relationships Create a forum for sharing high net worth motives. Creating a forum that enables donors and prospects to share their giving values and practices helps position a community foundation as a convenor of peers and charitable giving and provider of next steps for people ready to act on their values. Creating a sharing forum provides high net worth attendees valuable learnings on a variety of local needs servicing their tendency to support multiple charitable interests. Additionally, such a venue provides high net worth individuals an opportunity to involve their family members in sharing giving values with their greater community. Tactic: conduct a survey on community needs or individual giving motives. Share data and create a group dialogue. Provide dialogue participants an opportunity to compare notes with others and spark new motives and giving practices. By facilitating a dialogue, your community foundation gathers important information on the target audiences within your local area and positions itself as a knowledge resource for their charitable giving needs. Part Two: Strategy 17

The Community Foundation Opportunity Facilitate giving and information sharing through technology. High net worth audiences are among the most frequent and fluent users of technology. To meet their high expectations, community foundations must leverage technology to make themselves easy to engage, yet connective to a vast network of knowledge and resources. Tactic: have a simple, informative website and easy access to further information and tools. Have a simple but functional website, rich in content and links to products, donor stories, services for donors and professional advisors and contact information. Make connecting to information and resources easy and quick through the use of internal and external databases. They can be accessible to community foundation staff who can field calls and meet with donors in person, as well as connect remotely to online users. Maintain all database information so that results can be tabulated and called up quickly and regularly. Leverage statistical information from financial, governmental and charitable organizations nationwide. Many community foundations gave excellent websites. A few examples include: Arizona Community Foundation <www.azfoundation.org> The Cleveland Foundation <www.clevelandfoundation.org> The Community Foundation for Greater Atlanta, Inc. <www.atlcf.org> Community Foundation Silicon Valley <www.cfsv.org> The Rhode Island Foundation <www.rifoundation.org> Part Two: Strategy 18

The Community Foundation Opportunity Build awareness through targeted local promotion. Ensuring that a community foundation is accurately and consistently represented through targeted promotion establishes awareness around its distinct benefits and advantages. Accurate, positive media coverage and other forms of promotion help differentiate community foundations from their competitors for high net worth audiences who are keenly aware of their many giving options. Tactic: stimulate accurate news coverage and effective promotion. Establish and maintain relationships with media executives and local reporters and work with them to develop stories that promote philanthropy in general and your community foundation specifically. Ask local corporations to donate airtime to your local community foundation in exchange for donations to the station. Other tactics: Hold a community breakfast regularly to update people about the community and the community foundation; target key individuals for personal contact Hold regular bring a friend events, or ask certain donors to bring a friend to your annual donor appreciation event Create and distribute donor stories as handouts or in newsletters about wellknown, recognizable high net worth individuals who have established funds at the community foundation Hold network events in which donors host an event in their home and invite friends (see create a house event tactic on page 16) Part Two: Strategy 19

The Community Foundation Opportunity Leveraging professional advisor relationships Build and leverage trusted advisor relationships. Most high net worth individuals engage the services of one or more professional advisors, so relationships with these advisors can provide community foundations access to their multiple high net worth clients. In order to build a relationship with a professional advisor in which he or she becomes a community foundation partner or advocate, it is first important to establish trust and ensure the advisor that working with a community foundation will enrich his or her professional offerings and help satisfy client needs in a way that is not competitive with the services the advisor provides. Easy, non-intrusive methods of contacting and engaging professional advisors are ideal. Tactic: develop a plan. Create and implement a marketing plan to develop relationships with professional advisors. Since advisors reach is usually regional, partner with another nearby community foundation as you plan your marketing strategies, sharing successes and failures regularly. Tactic: establish an Advisor Council. Solicit professional advisors willing to serve on an advisory board that will help you understand and connect with the professional advisor audience and influential individuals. Part Two: Strategy 20

The Community Foundation Opportunity Tactic: host educational seminars. Offer professional advisors continuing education credit for coursework covering technical topics such as charitable giving, estate planning, planned giving, and taxes. This can be accomplished through contracting with a nationally-known speaker or a local expert. Some community foundations have increased participation in their seminars by partnering with local professional organizations such as estate or planned giving councils. Tactic: leverage existing advisor networks. Identify the local chapters of professional advisor associations, as identified by the referral of current advisor partners. Ask for introductions from these current advisor contacts in order to establish relationships that give your community foundation a chance to deliver group presentations to advisors and participate in other activities that are mutually beneficial. Maintain data from new contacts by creating an updated professional advisor database. Appoint a professional advisor advisory board among contacts and consult them as experts who can provide direction and review materials. From this board and from other advisor contacts, solicit and publish case studies in which the community foundation has helped high net worth clients. Below is a list of several national advisor associations. Local community foundations may find it helpful to use these sites to locate state or local chapters or link to individual members of these associations. In addition, these national sites offer information to learn more about various advisor professions. Professional advisor associations American Institute of CPAs www.aicpa.org National Association of Insurance and Financial Advisors (NAIFA) www.naifa.org Financial Planning Association www.fpanet.org National Association of Tax Professionals (NATPTax) www.natptax.com The National Association of Estate Planner & Councils (NAEPC) www.naepc.org National Committee on Planned Giving (NCPG) www.ncpg.org Society of Financial Service Professionals www.financialpro.org American Bankers Association www.aba.com Independent Community Bankers of America www.ibaa.org Part Two: Strategy 21

The Community Foundation Opportunity Tactic: create advisor presentations for use in in-house seminars. Develop an introductory presentation that introduces professional advisors to distinct community foundation features and benefits. Create another presentation or presentation insert that focuses on the charitable vehicles that best suit high net worth individuals (keeping in mind the common characteristics and values starting on page 2). For example: Discuss planned gifts as a way to ease fears of financial insecurity during retirement Promote Donor Advised Funds and Supporting Organizations as simple, cost-effective alternatives to a private foundation Tactic: establish a process of engagement. Develop a clear, concise process for working with advisors and their high net worth clients, incorporating individual advisor preferences. Share this with advisors to increase their trust and confidence in the ways your community foundation will enhance, rather than compete for their client relationships. Key messages Helping professional advisors understand how they can benefit from working with community foundations: We work through you. You stay in control of your client relationships; we re here to help you serve your clients charitable giving needs. We partner with you. We provide support, information, and expertise around charitable giving options; think of us as your personal planned giving center. We help you build stronger relationships. Your clients will appreciate the charitable impact and tax advantages you help them achieve by working with a community foundation. We help you connect across generations. When you help families establish an advised fund at their community foundation, you begin an ongoing process of involvement with current and future generations. Part Two: Strategy 22

The Community Foundation Opportunity Tactic: provide an advisor section to your website. On your community foundation s website, create and make known a section that allows advisors to register themselves to access information, download gift language and connect with community foundation experts on charitable giving. Web access allows advisors to get to know your community foundation and the services it can provide them and their clients at their own pace, establishing trust. And, if you create a registration process, they enter into your foundation s contacts list and can be invited to special advisor-focused events that will help them expand the services they already provide their clients. Your community foundation can also use the site to assess an advisor s level of interest, enabling you to engage him or her in partnership activities accordingly. Tactic: create advisor newsletter. Create and maintain a newsletter for professional advisors that features testimonials and case studies shared by advisors within the community and highlights new tools or services offered by the community foundation. Include general invitations and previews of special advisor events hosted by the community foundation or its board members, as well as events that may interest advisors high net worth clients. Reference the advisor web section when appropriate. See The New York Community Trust s Professional Notes newsletter as an example. Other tactics: Create an advisor handbook (see Arizona Community Foundation s Charitable Giving Guide for Professional Advisors) Supply advisor partners with community foundation informational materials that they can use with their clients Part Two: Strategy 23

Summary The high net worth segment is targeted by businesses and charitable organizations alike. While there are many competitors vying for the attention of this audience, community foundations have a distinct opportunity to serve their needs. Statistics show that high net worth individuals share some common characteristics: they pursue multiple charitable interests, involve their families in philanthropy, are likely to take risks, expect high-tech solutions and highly customized services, and utilize professional advisors. In targeting the high net worth audience, community foundations must cater to these cross-cutting needs and desires. At the same time, community foundations must understand the affluent on a case-by-case basis. This is an increasingly diverse group. Though, largely, high net worth individuals remain older, white males who have held their wealth for decades, significant numbers of young people, women, people of color, and new wealthy are beginning to fall within this category. To best target and work with high net worth individuals, community foundations can market themselves through channels: their boards of trustees, existing donors and professional advisors. By reaching high net worth individuals through these means, and understanding their desires and servicing their needs, community foundations can help high net worth individuals achieve their personal and charitable goals. The gratification of wealth is not found in mere possession or in lavish expenditure, but in its wise application. MIQUEL DE CERVANTES 24

Appendix Reasons to give Reasons why high net worth individuals give: High net worth individuals Total population (for comparison) Feel strongly about the cause 74% 59% Personal experience with the organization 55% 40% Tax benefit 54% 28% Response to a specific request 46% 25% Moral imperative or right thing to do 42% 47% Involvement of friend, family member, or co-worker with the charity 38% 33% Religion or spirituality 37% 36% An event associated with the charity 35% 26% Health (illness of a family member, friend, or self) 30% 30% Family tradition 21% 16% Tithing 17% 21% News or media story 16% 15% Acquisition of new wealth by myself or my family 14% 5% Business connection 13% 4% Personal event (such as divorce, marriage) 5% 9% Atonement for past misdeeds 1% 4% Source: HNW Wealth Pulse: Wealth & Giving Attitudes toward giving and nonprofit organizations Percentage who say: High net worth individuals Total population (for comparison) I give to social causes that I strongly believe in 78% 80% It is imperative that I know how a recipient will use my money or that I see the tangible results of my giving 64% 64% Charitable giving has always been a part of my family s way of life 62% 57% Because of my religious beliefs, I believe it is essential for me to help others 48% 50% I feel an obligation to repay organizations that have helped me in the past, for example schools or medical centers 40% 42% I give because it benefits both my business and my community 37% 33% Tax and estate laws provide me with a huge incentive to give 34% 11% I prefer to be anonymous in my giving 30% 46% For the most part, my experience with giving to nonprofit organizations is that they are not wellmanaged or well-organized 29% 28% I decide how much to give based on a percentage of my annual income 26% 28% I enjoy the social functions associated with giving to charities, and I try to attend them regularly 25% 15% I feel social pressure from my friends and family to give 6% 5% Source: HNW Wealth Pulse: Wealth & Giving 25

Appendix Giving triggers Percentage who in All $500,000 to $750,000 to $1 million to $2 million to $5 million the past year have: wealthy $749,000 $999,000 $1.9 million $4.9 million and more Attended a local community event 57% 68% 62% 63% 38% 46% Attended a church event, such as a cocktail party or black tie dinner 49% 64% 42% 53% 33% 44% Given through an on-thejob campaign 38% 44% 33% 34% 48% 31% Made an anonymous donation 36% 51% 58% 28% 21% 30% Tithed their income to charity 25% 27% 30% 27% 18% 21% Served on a charity board 22% 19% 26% 19% 23% 26% Made an online gift 11% 14% 4% 11% 15% 9% Participated in a venture philanthropy project 2% 3% 1% 6% Not done any of the above 13% 5% 12% 3% 14% 46% Source: HNW Wealth Pulse: Wealth & Giving 26

Appendix Philanthropy among men and women: how gender makes a difference Why people give: HNW All HNW All HNW All women women men men Americans Americans Feel strongly about the cause 86% 59% 66% 59% 74% 59% Personal experience with the organization 57% 38% 53% 41% 55% 40% Tax benefit 51% 18% 56% 36% 54% 28% Response to a specific request 43% 22% 48% 28% 465 25% Moral imperative or right thing to do 47% 43% 39% 50% 42% 47% Involvement of friend, family member or co-worker with the charity 46% 32% 32% 35% 38% 33% Religion or spirituality 35% 36% 39% 37% 37% 36% An event associated with the charity 33% 25% 36% 27% 35% 26% Health (illness of a family member, friend, or self) 42% 39% 21% 22% 30% 30% Family tradition 23% 17% 20% 14% 21% 16% Tithing 17% 18% 17% 23% 17% 21% News or media story 18% 20% 15% 11% 16% 15% Acquisition of new wealth by self or family 15% 8% 13% 3% 14% 5% Business connection 12% 5% 14% 4% 13% 4% Personal event (such as divorce, marriage) 8% 11% 3% 7% 5% 9% Atonement for past misdeeds 1% 1% 6% 1% 4% Percentage who say: HNW All HNW All HNW All women women men men Americans Americans I give because it benefits both my business and my community 29% 37% 42% 28% 37% 33% My religious beliefs I think it is essential for me to help others 55% 53% 43% 48% 48% 50% I give due to social pressure from family, friends 9% 4% 4% 5% 6% 5% It is imperative that I know how a recipient will use my money/see the tangible results of my gift 67% 62% 62% 65% 64% 64% I prefer to be anonymous in my giving 34% 43% 28% 50% 30% 46% I decide how much to give based on percentage of annual income 27% 33% 25% 24% 26% 28% Tax & estate laws provide a huge incentive for me to give 25% 12% 40% 11% 34% 11% I enjoy social functions associated with giving to charities I try to attend them regularly 23% 17% 27% 14% 25% 15% I make most giving decisions with the help of an advisor 6% 5% 9% 4% 8% 4% I give to social causes in which I strongly believe 90% 82% 70% 77% 78% 80% I have an obligation to repay organizations that have helped me in the past schools, medical centers, etc. 46% 44% 36% 40% 40% 42% Charitable giving has always been part of my family s way of life 76% 62% 53% 52% 62% 57% Typically, my experience with giving is that nonprofit organizations are not well-managed, well-organized 31% 23% 28% 33% 29% 28% Source: HNW Wealth Pulse: Wealth & Giving 27