Weโre happy to welcome Karen Houghton to Ask a Responsive Fundraiser. As the CEO of Infinite Giving, Karen helps nonprofits achieve financial sustainability through smart cash management, curated investments, and streamlined asset donations.
Be sure to check out past editions of Ask a Responsive Fundraiser and leave us a comment on LinkedIn so we can answer your questions!
Editorโs note: Karenโs answers were edited for length and clarity. Watch the video to see her full answers.
Dear Responsive Fundraiser: We’re seeing more donors ask about giving stocks or even crypto, but honestly, it feels a bit overwhelming for our team to navigate. What would you say to a nonprofit hesitant to start accepting asset-based donations? And what first steps would you recommend that we take?
Karen Houghton: Great question. I would start by saying I get it. The traditional financial system is really not made for nonprofits. There are so many things that are easy for business and retail folks in the finance world that are incredibly more difficult when you are a nonprofit, and something like receiving stock gifts or even opening a brokerage account can be incredibly painful. So, you’re not alone. Unfortunately, it’s a broken system when it comes to being a tax-exempt entity.
I also want to talk about the next kind of pain point that people look at. No one wants to give stocks and no one has asked about. And so it becomes that chicken and the egg problem: โAm I asking for it? No, but no one’s asking me for it.โ So, what’s a nonprofit leader to do? And I say this because even though I’m an investment advisor now, I’ve also been a nonprofit’s executive director, founder, and fundraiser.
So there is this whole question of โHow do I spend my time and money?โ But also, โWhat are all of these future opportunities?โ And, โHow do I steward my time and efforts of the team well?โ Asset gifts are a huge opportunity. There are a lot of data points that can help us start to rationalize where to put our time.
The average online cash gift is $128. The average stock gift is $8,000. Also, many grants come in stock form. So now you have your intention. So even if they are less common, which they are, they are often much, much bigger. In fact, there was a study done by Dr. Russell James that found that nonprofits who ask for stock gifts in addition to cash raised 55% more over a five-year period.
How do we change opening a brokerage account from a 12-week, 50-plus page application and process to something easy? There are solutions out there. So, for something like Infinite Giving, we can open a nonprofit brokerage account with 30 minutes of your time and three business days on our end.
Then you’re looking at a lot of millennials and Gen Zโthey prefer modern giving solutions, right? Like stock or crypto.
You are looking at this younger, more modern generation. You have to think, โHow can we position our organization to meet our donors where they are?โ
We want to simplify that process. So yes, you want a brokerage account, but now you can do it in three days and 30 minutes of your time. Then how do you sell it and liquidate it? And what do those donation receipts look like? And there are all these special tax rules. There are solutions to that, too.
You start to see these pathways to financial sustainability. Ultimately, that’s where every nonprofit wants to be, right?
I can’t promise that stock gifts will fly in if you open a brokerage account. I wish we could. There’s usually more than one person in your donor circle who wants to take advantage of the tax efficiencies, right? So when you can give a stock gift, generally those tend to be 20 to 30 percent more because that donor gets a double tax savings where they’re avoiding paying capital gains taxes.
Open a brokerage account. I don’t suggest DIYing it because, again, there are just so many pain points in the traditional financial system. You update your gift acceptance policies. An advisor, like Infinite Giving, should do it all for you.
Then it’s repeat, share and educate, share and educate, share and educate, right? Letting donors know that you have the ability to receive stock gifts.
And we are seeing a significant rise, especially with an upmarket. I mean, the amount of donations being given in stocks at the end of 2024 is likely near record-breaking.
Dear Responsive Fundraiser: Our board is very risk-adverse. They’ve been hesitant to explore investing our reserves. How can we ensure our board feels secure about investment decisions while protecting donor funds?
KH: Great question. First, all nonprofits are risk-averse and that is wise, right? So that is where we want to be. We want to steward these funds. But, I think the other side of that coin is that being fearful or having a lack of curiosity about better ways or understanding about how you can steward your nonprofit funds is not wise.
And so sometimes there are wonderful intentions that are being emotionally led with fear or a lack of curiosity or understanding where it’s like, โOh, we can’t do any of that. These funds have to be here.โ
Advisors who serve nonprofits understand the risk tolerance is always going to be low, but sometimes what we feel like is โsafeโ is not always the right path for a nonprofit.
We onboarded somebody the other day, and they went from 11 bank accounts to an Infinite Giving account and one bank account. So, they had 11 bank accounts because they were trying to spread it out and have FDIC coverage. An FDIC suite program solves it.
It’s super common in the business world and banks don’t offer that to nonprofits. Sometimes we have folks in millions of dollars with us just sitting in a cash FDIC suite program at a higher yield rate than their bank.
We’re investment advisors, right? So you can do cash holdings. You could do money markets. We are always trying to be thoughtful. You want to be making strategic decisions that are not emotionally driven for our organizations. Sometimes we even get the question of, โWe’re a nonprofitโnonprofits can’t even invest. We’re not allowed to.โ But, every endowment is invested in the market in a growth-oriented way.
Most banks are not offering nonprofits competitive rates. So again, you can get to an advisor like Infinite Giving, but we’re going to look at cash management. So very low risk, high liquidity holdings. When you need it, you click transfer. It’s transferred via ACH into your bank.
Dear Responsive Fundraiser: We’ve seen a lot of shifts in how donors give, especially in the last five years. What trends do you see shaping nonprofit finance in the next few years, and how can we stay ahead of the curve?
KH: I mean, I’m biased, but I think the rise of asset-based giving is going to continue, right? So you look at donors and just all the tax savings that they can get, and just the more commonplace it is for higher capacity donors who want to be more philanthropic, right? With the rise of donor-advised funds, and the rise of crypto, everybody thinks crypto is dying, and then bam, here it is again.
The IRS treats it [crypto] like securities, right? So, nonprofits have to meet donors where they are. And, I think, making those types of gifts as streamlined and available and easy to do and removing all that friction for your team and your donors can be really important.
This is nothing new, but I think focusing on transparency and impact is important. That’s the key to what we all do. We are always really looking at how you have real-time donor transparency. Financial reporting and storytelling are really important.
And then, even with partnerships like with Infinite Giving, like how do we work together to evolve and make donor engagement even more personalized and more data-driven. And then, with somebody like us, it’s that fiduciary capacity as well.
Then I would think looking at sustainability. Donors don’t give bigger gifts to organizations they fear may not be around in six to 12 months. So, building a reserve fund is important.
Look at making endowments more accessible. There are quasi-unrestricted endowments. We do a lot of endowment creation. And just normalizing legacy gifts, smaller endowments, and micro-endowments. I think endowments are going to be, and they already are getting a huge influx. It’s not just these huge organizations. Smaller organizations can have an endowment of a million dollars, but guess what? That a million dollar endowment is going to give off $50,000 a year that you’re not fundraising. I think having sustainability, particularly through endowments is going to be a big growth point.
