All posts by Aspire Research Group

What’s New in the 2018 Capgemini World Wealth Report

By Elizabeth Eck

“North America accounts for 31.3% of global HNWI population and 28.2% of wealth. The HNWI population in North America grew by 9.9% in 2017 as compared to 7.8% the previous year, while HNWI financial wealth grew at 10.3% to reach US$19.8 trillion. -Anirban Bose

Capgemini WWR 2018What is this article?

The 2018 World Wealth Report gleans data from more than 2,600 surveys from around the world to report on trends for high net worth individuals (HNWI) and ultra-HNWIs.  The report provides insights into asset allocations and investment preferences, such as working with wealth managers and the growing interest in cryptocurrencies.

Capgemini defines HNWIs as those having investable assets of US$1 million or more, excluding primary residence, collectibles, consumables, and consumer durables.

What are key findings from the article?

  • Global HNWI wealth grew 10.6% to surpass the US$70 trillion mark and remains on course to reach US$100 trillion by 2025, with the Asia-Pacific region leading the way.
  • Asia-Pacific and North America fueled the 2017 growth in HNWI population and wealth, with Asia-Pacific accounting for 42.4% of the rise in HNWI wealth and North America accounting for 27.4%.
  • The US, Japan, Germany, and China are the four largest markets for HNWIs, with the US leading at 5.3 million in 2017, a 10% increase over 2016.  Guidestar estimates the number of active US nonprofits courting these individuals at more than 1.8 million, so there is great competition to secure funding from these individuals.
  • Though asset allocation remained fairly stable, real estate saw a significant increase in HNWI asset allocation in 2017, with an increase of 2.8 percent globally to 16.8%, becoming the third-largest asset class, behind equities and cash.
  • In North America, real estate represents 12.4% of HNWI assets, with residential real estate dominating the class at 52.3% – followed by 16.1% in commercial real estate (excluding hotels), 10.2% in land, 7.0% in farmland, and 5.6% in hotels.
  • HNWIs are becoming interested in investing in cryptocurrencies though the wealth management industry remains cautious because of regulatory uncertainty.
  • Wealth management firms are preparing for the entry of BigTech, which Capgemini defines as data-driven tech firms not traditionally present in financial services such as Amazon, Google/Alphabet, Alibaba, Apple, and Facebook.  Leading wealth management firms are investing in intelligent automation and artificial intelligence to prepare for the greater role that BigTech firms will play.

What can I do as a result?

  • Except in cases of public company insiders, the two biggest asset classes, equities and cash, are not readily transparent to a prospect researcher. Real estate, on the other hand, remains the most often used asset in determining gift capacity because of its transparency in the US. Capgemini estimates US real estate at 12.4% of a HNWI’s total assets, so this number can be very useful for estimating net worth.
  • The US leads the pack in the number of HNWIs – 5.3 million. For those prospecting in the US, there is a vast pool of wealth to tap into.  There is also great competition though, with 1.8 million active nonprofits vying for gifts from those individuals.
  • With the burgeoning interest of HNWIs in cryptocurrency and BigTech, there will be a need for prospect researchers and fundraisers to understand better how wealth management firms will be leveraging these vehicles.

Additional Resources

Midlevel Donors: Often Overlooked Gems

By Elizabeth Eck

“Midlevel contributors are usually a relatively small portion of a nonprofit’s donors, but they give an outsize amount of money and tend to be more loyal than small-dollar donors.”

Mark Rovner, Principal at Sea Change Strategies

What is this article?

This article offers valuable insight into the importance of targeting midlevel donors so as not to leave money on the table.  At many institutions, midlevel donors have fallen through the cracks because they were thought to be worth too much for a direct mail campaign but not enough for a major gift focus.  They warrant more attention.  The author gives examples from veteran fundraisers of how to engage midlevel donors and the return on the efforts.

What are key findings from the article?

Focusing on midlevel donors will pay dividends if executed properly.

  • Rovner states that multiyear retention rates of “70 to 75 percent are not unusual.”  The author cites Best Friends Animal Society as an organization that is reaping the rewards of inspiring midlevel donors.  Constituents who give $1,000 to $25,000 annually to the organization account for 2% of donors; however, they also account for 30% of gifts to the annual fund.
  • Good customer service is the first step in attracting these donors.  If they don’t feel well cared, they might not wish to contribute further.
  • Future data collection planning is key when setting up a midlevel-giving program since it is difficult to go back and re-define processes when a program grows in size.  Doing so while the program is small and manageable will ease the burden.  Think about data points such as interests and behavior.  What might you need to collect in order to connect with these donors?
  • Effective segmentation of the database is important for targeting donors who might warrant more specialized attention.
  • Talking with midlevel donors via phone or email gives a more accurate picture of what donors want, one of which is to understand how their giving has impacted the organization.  It feels good to be in the know, especially when you’re being told that you’re making a difference.
  • It’s important to build a sense of community and to let donors experience the mission.  This relates to letting the donors feel good about the contributions they make.

What can I do as a result?

  • Identify: Look for affinity first, even if you only have past giving behavior. Try pulling a list of individual donors who have given recently, frequently, over a long period of time, and who fall within your mid-range of annual giving amount. If you don’t know what your mid-range of giving is you can run a quick mean, median, and mode calculation on total cumulative giving per donor in your last fiscal year to begin figuring it out.
  • Cultivation: Is there a simple way you help your donors “experience the mission?” Host (and video-tape) a one-hour talk by the CEO or a subject matter expert during which the problem the organization is trying to solve and the organization’s successes are discussed. Deepen engagement with your volunteers and donors by asking them to host this “punch-and-cookies” event.
  • Stewardship: Are you sending handwritten gift thank you notes? Deepen engagement with your board members and volunteers by asking them to write thank you notes to your mid-level donors. You might even consider giving them a script and asking them to make thank you calls, especially for higher gift amounts.
  • Staffing: Mid-level donors are perfect training grounds for future major gift officers. Are you hiring your first major gift officer? Start with calls and visits to mid-level donors. Or you can hire a dedicated mid-level donor officer and create a career path.
  • For specifics on how to plan for a midlevel donor program, see Advancing Philanthropy’s “A Strong Middle Promotes a Healthy Fundraising Program” (link below). The article offers insights on how to define what constitutes midlevel for your particular institution, how to do data analysis and use data appends, and how to take action.

Additional Resources

 

The Wealth Report | Frank Knight | 2018

“It is therefore a fairly safe bet that the next decade will not see a repeat of the double or even triple digit property price growth we have seen in leading markets over the past ten years.”

 

What is the Report?

The Wealth Report is a global perspective on prime property and investment published by Knight Frank, a global real estate consultancy firm. The report defines prime property as the most desirable and most expensive property in a given location, generally the top 5% of each market by value. The report emphasizes ultra-wealthy individuals, defined as US$50 million or more in net assets

What Are Key Findings From The Report?

2017 was a banner year for the real estate markets and for the ultra-wealthy. Where are those wealthy individuals and what do they look like?

  • Leading with the most ultra-wealthy individuals, North America takes the top spot with 44,000; Asia overtakes the second spot with 35,880; and Europe narrowly finds itself third with 35,180.
  • Recent changes in U.S. tax law favor a continued upswing in wealth accumulation. Interestingly, while New York tops the list of ultra-wealthy residents now and predicted into the future, London out-performs for where the ultra-wealthy invest in real estate and have preferred lifestyle elements such as quality universities and luxury hotels, shopping, and restaurants.
  • While the majority of the ultra-wealthy have their primary residences in the country from where their wealth is derived, a significant number are globally mobile.
  • Top three reasons for luxury investments: (1) joy of ownership, (2) capital appreciation, and (3) safe haven for capital.
  • Two key trends in 2017 for luxury residential markets were a big slowdown in China’s top-tier cities: Guangzhou, Beijing and Shanghai; and growth in Europe, including Amsterdam, Frankfurt, Paris and Madrid.
  • The top three priciest cities for luxury residential real estate, relative to square meters, were Monaco, Hong Kong, and New York.

What Can I Do As A Result?

  • If the ultra-wealthy are not in your database or on your radar, you still have some takeaways from this report: Owning a second home is a reliable indicator of someone who has wealth. For those that do own multiple properties, consider the top three reasons. Use conversation to help you identify whether the second home purchase is purely out of joy and stretches the purse strings, or if your prospects considers it a good investment, which suggests smart financial planning.
  • New York and London remain the global hotspots for the ultra-wealthy and in the U.S., real estate ownership and sales are public pieces of information. If you have US$1 million gift prospects, consider these addresses as key indicators of wealth worth verifying.
  • While Asia is vying with Europe for the most ultra-wealthy individuals, if your prospects are in China you will want to keep current with government decisions that impact wealth accumulation.

Additional Resources

Aspire Introduces Wealth Tiers and Asset Allocation Model

By Erica Sauer

Wealth Tiers and Asset Allocation Models Aid Research

This year in 2018, Aspire introduced its Tactical Briefings and Strategic Assessments. These profiles estimate net worth, assign a wealth tier, and project asset allocations.

The thread tying everything together is estimated net worth. Net worth is defined as assets minus liabilities. Because liabilities such as debts are private and not all assets are public, we can only estimate net worth. Although estimated, it’s still a helpful tool because the visibility of public assets tends to diminish with wealth.

Wealth Tiers

Wealth Tier Net Worth Low Net Worth High
Working $1 $199,999
Affluent $200,000 $999,999
HNW $1,000,000 $4,999,999
VHNW (very HNW) $5,000,000 $29,999,999
UHNW (ultra HNW) $30,000,000 $99,999,999
Elite $100,000,000 $999,999,999
Billionaire $1,000,000,000 And up

Aspire created its wealth tiers to make our research more efficient by understanding what’s typical. We estimate a prospect’s net worth and place him or her in the appropriate wealth tier. In its World Wealth Report, Capgemini defines high net worth (HNW) as US$1 million or more. We felt that further classification better represented differences in wealth and giving behavior at various levels of wealth.

At the Working, Affluent and HNW Tiers, real estate serves as the key asset. At VHNW, UHNW, Elite and Billionaire Tiers, the key asset shifts to business interests. Additionally, data from the 2016 Federal Reserve Survey of Consumer Finances describes Working and Affluent tiers, where a personal vehicle and residence represent most of the assets.

HNW Asset Allocation Model

Aspire adds asset allocation projections directly from Capgemini’s report, where it provides a breakdown of financial assets. Once we estimate net worth at the HNW or above wealth tiers, we apply the asset allocation model to reveal a prospect’s liquidity. Although imperfect, this asset allocation model meets the demands of fundraisers to have a better understanding of a prospect’s likely ability to make an immediate gift.

What Can I Do With the Result?

  • If you are an Aspire client, you can now understand at a glance how your prospect sits relative to her wealthy peers. You can use the wealth tiers and asset allocation model as guides. How does what you know about the prospect fit neatly into or deviate from what you know about a wealth tier or the typical asset allocation?
  • As you seek to differentiate the VHNW and above wealth tiers, recognize that you are looking to identify additional income and assets beyond earned income and real estate as well as different giving behaviors. You might identify multiple business interests, exclusive private banks (always check the bank name on the check), private foundations and other sophisticated giving vehicles, among other indicators.

Additional Resources

Tax Webinar | Follow-up Questions

The Tax Cuts and Jobs Act that was signed into law on December 22, 2017 was over a thousand pages long. Like previous tax law, the changes are complex and interrelated. In Aspire’s webinar, Discover Gift Opportunities in the New Tax Law with Prospect Research, we primarily covered the income tax changes that might affect your donors and their ability to give or their perception of their ability to make a charitable gift.

At the end of the webinar there were a few questions that went unanswered. We dug a little deeper to find answers for you, which we have presented below.

Does the new tax law have any impact on charitable remainder trusts and charitable gift annuities?

No. There was no change to those or other deferred giving vehicles. On a related note, there was no change to the capital gains tax rate and no change to the rules for gifts of appreciated property, such as stock.

The Aronson Nonprofit Report produced the following article that summarizes this information and more.

 

Other than the athletic seating deduction are there other elements that impact what benefits nonprofits can offer to donors and what is considered goods and services versus what is fully tax deductible?

I’m going to answer this question with a firm “maybe.” While Aspire’s webinar covered the implications of the new tax law relevant for fundraising from donors, we did not review how the law impacts the rules governing nonprofits.

But I would not leave you without a great resource! The following article from Yeo & Yeo, CPAs and Business Consultants provides a great summary that should do a much better job of giving you the information you seek.

 

Did you miss the webinar? Click here to learn more or to purchase a recording.

2017 Capgemini World Wealth Report

Curious about your HNW prospect’s liquid assets? We have good news!

By Erica Sauer

What Is The Report?

Compiled and written for the financial services sector, Capgemini’s World Wealth Report is now in its 21st year. It is based on survey responses from more than 2,000 HNWIs from across the globe and includes information about high net worth individual’s (HNWIs)
asset allocations, which is of key interest to fundraising research.

As defined by Capgemini, a HNWI is someone with investable assets of at least US$1 million excluding primary residence, collectibles, consumable, and consumer durables.

What Are Key Findings From The Report?

The number of HNWIs reached 4.8 million in the US in 2016 according to the Capgemini World Wealth Report. These HNWIs experienced exceptional returns of 24.3% on their portfolios on average in 2016.

GuideStar estimates the number of active nonprofits competing to capture the attention of these individuals at 1.8 million.

According to the Capgemini study, wealthy individuals keep more than half of their assets in liquid classes including cash, cash equivalents and equities. It reported, “HNWIs boosted their allocations toward equities and cash at the expense of alternative investments and real estate in 2016.”

Real estate holdings have remained a small portion of total assets over the years in North America (13.5% in 2013, down to 10.7% in 2017), but the transparency in the US has made the asset an anchor to prospect research. Conversely, equity, the largest asset class in North America for HNWIs (37.2% in 2013 to 37.1% in 2017), is only available for public company insiders.

What Can I Do As A Result?

  • There is tremendous wealth in the US and this wealth is set to grow with the Tax Cuts and Jobs Act recently passed by Congress. Click here for a webinar to learn how to identify this opportunity segment.
  • In the US, real estate is the anchor of a chain of data indicators that allows prospect research to identify HNW gift capacity. Wealth screenings typically identify this information for you. Your prospect research professional can use that information to estimate individual or household wealth.
  • HNWIs are holding a large portion of their wealth in liquid asset classes, which means a motivated donor can give your organization cash instead of other less liquid assets.

Additional Resources