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How to Increase Major Gifts Through Stock Gifts

Stock gifts are on the rise for many donors. While they are becoming more common, many nonprofits haven’t invested in these alternative donation sources for a few key reasons:

  • Development and fundraising teams are unaware of how to implement stock giving at their organization.
  • A fear of implementing a new fundraising strategy that may not be successful – or a method that’s of little interest to their donors.
  • Their organization does accept stock giving but hasn’t made that information easily accessible on their website or giving forms.

What may surprise you is that 80% of donors own stocks and other non-cash assets, but only 20% actually donate these assets!

In a recent webinar, we chatted with the experts at DonorSearch and Overflow to learn how you can increase major gifts through a responsive stock gift program, or read on to learn more!

 

Why Your Nonprofit Should Accept Stock Gifts

As more organizations are prepping for an uncertain economic year, accepting gifts of stock should be a top priority for your nonprofit’s development team. Why? Because donors are more likely – and willing – to donate non-cash assets like stock gifts as opposed to their disposable income or out-of-pocket expenses.

Even better, the average stock gift is worth $5,000, a major gift-level contribution for many organizations. Imagine how incredible it would be to receive a $5,000 gift from a supporter! Gifts of that denomination can be life-changing for many organizations and enable your team to fund important projects, campaigns, and initiatives to serve your community better.

Even more so, major-level gifts can enable your organization to hire additional team members and reinvest that back into the organization through purchasing innovative technology that allows you to cultivate more major donors.

Additionally, stock giving is one of the most tax-savvy ways for donors to give and has the potential to become recurring donations.

What Types of Stock Gifts can be Donated

It’s important to note that there are various types of stock gifts and you may want to consider what types of stocks your nonprofit is willing to accept.

Publicly-Traded Stocks

These are the most frequently donated non-cash assets because they’re wildly owned and have publicly known prices.

Privately-Held Stocks

These often have significantly higher values but require independent appraisals to determine their fair market dollar values. These are typically a type of stock offered exclusively by a private company to its employees and investors.

Mutual Funds

These risk-mitigating bundled stocks are a popular option among everyday traders and investors.

Benefits of Stock Gifts for Donors

Of course, when a donor gives stocks to your nonprofit, it’s an incredible act of generosity – but donors gain some positive consequences as well! When a supporter donates stock gifts to your organization, they’re able to bypass capital gain taxes that they would otherwise need to pay if they instead liquidated the stock and donated it in a traditional cash format.

By donating stock, donors can bypass the 37% capital gains taxes and can instead donate the full, 100% value of that stock. Even better, donors can still claim a charitable donation for the current fair market value of their stock at the time of donation on their tax returns.

Talk about being savvy!

Often times we see donors are unaware that donating stock – as opposed to liquidating it to cash – is the most beneficial option for both parties. For example, let’s take two donors:

Donor John and Jane both want to donate $100,000 to your organization. John decides to liquidate the stock into cash and has to pay the 37% capital gains tax on his donation, resulting in only donating $63,000 to your organization. That’s still a fantastic gift, but you’ve lost $37,000 of that donation to taxes.

Jane, however, knows the rules about donating stock gifts to nonprofits. Instead of liquidating the stock, she donates the full stock amount to your nonprofit, resulting in a $100,000 donation to your mission.

Benefits of Stock Gifts for Nonprofits

We’ve shared a few ways that accepting stock gifts can be beneficial to nonprofits, but it goes beyond the act of generosity from your supporters.

Accepting stock gifts is incredibly responsive to donors who are interested in supporting your cause through other financial ways. While not all donors may pursue this option, there very well could be supporters within your nonprofit CRM that might.

As economic conditions continue to change, only asking your supporters to donate liquidated gifts – such as traditional methods like ACH, credit, debit, or check – may begin to limit their ability to give as openly as they once preferred. Disposable income is certainly more challenging to part with as supporters look closely at their budgets.

Research has also shown that nonprofits that actively encourage and accept non-cash assets can see revenue growth of up to 65% more than those that accept gifts of cash. What would it mean for your organization if implementing stock giving into your fundraising strategy resulted in a 65% year-over-year revenue growth? We’ll take a guess that it would be revolutionary!

4 Steps Needed to Accept Stock Gifts at Your Nonprofit

Now that we understand why it’s important for your nonprofit to accept stock gifts, let’s dive into some practical and tangible ways you can begin implementing stock giving into your fundraising strategy.

Step 1: Internal Staffing Needs to be in Place

While it’s exciting to start offering a new form of donation—it’s absolutely critical to ensure that internal staffing is in place and you have developed a system to manage, track, and steward stock gifts.

To get started:

  • Gather stakeholders from key teams like Development, Accounting, and Finance teams to coordinate the ownership of stock gifts and develop an internal process for handling non-cash gifts.
  • Ensure that your gift officers and frontline fundraisers are educated and equipped to promote stock giving. This includes being aware of any necessary internal documentation or forms required by the government to process stock gifts.
  • Train your nonprofit CRM administrative team to properly record and track stock gifts.
  • Create and prepare individualized and customized gift acknowledgments as there are different requirements than the traditional gift acknowledgment letter.

Step 2: Establish a Stock Acceptance and Investment Policy

Once your organization has established that you will be accepting stock gifts and working with internal team members to drive adoption, it’s important to ensure you have a written policy in place for accepting stock gifts.

  • Have a policy in place with guidelines on steps to be taken following the acceptance of stock.  Generally, nonprofits will liquidate the stock immediately upon receipt, and this should be communicated to the donor.
  • Stock gifts are also generally considered unrestricted income unless otherwise agreed upon in consultation with the donor. Alternative examples include capital campaigns and planned gifts such as charitable gift annuities.
  • Guidelines should also be established regarding what stocks the organization will or will not accept – these could be stocks from particular for-profit companies.

Step 3: Open a Brokerage Account

You’ve made excellent progress in making it this far! Now comes the fun part, opening a brokerage account so you can begin accepting stock gifts! Opening a brokerage account is required in order to receive these non-cash assets and you can use one of the many popular options available—UBS, Schwab, or Fidelity Charitable.

In the cases of donors giving private stock, they will need the shares appraised by a broker or financial institution to determine the fair market value.

Additionally, once you begin accepting stock gifts, it’s best practice for a member of the nonprofit finance team to monitor daily activity for new stock gifts received. Ideally, the development and finance teams remain in close contact with the donor as there is a regulated transfer process that must be adhered to.

Step 4: Market Stock Gifts As A Giving Option

Now that you’re ready to accept stock gifts, it’s time to tell your donors! There are a variety of responsive ways to inform and educate your donors about stock gifts, but most importantly, you’ll want to:

  • Make the option of stock gifts present on your “Donate” or “Ways to Give” page of your website and promote through other communication channels such as email and direct mail.
  • Highlight the advantage of stock gifts, the “win-win” that can result from a stock gift.
  • Be thoughtful and thorough with the content, particularly on your website, where the most detailed information can be offered.

Key Takeaways

Accepting stock gifts is a responsive way to offer your donors new and modern ways to contribute to your organization. Offering this alternative donation option can increase your organization’s major gifts and likely see an increase in average gift amounts.

Remember, not all donors may participate in giving stocks, but for those who do, it shows that your organization is listening and responding to their desired form of giving.

What you should do now

Below are three ways we can help you begin your journey to building more personalized fundraising with responsive technology.

See the Virtuous platform in action.  Schedule a call with our team for personalized answers and expert advice on transforming your nonprofit with donor management software.

Download our free Responsive Maturity Model and learn the 5 steps to more personalized donor experiences.

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