Guest post by Steve Latham, Co-founder and CEO of DonateStock
The murky outlook for fundraising means nonprofits will need to work smarter to meet their budget goals in 2023. This challenging setup presents a wake-up call for the nonprofit industry. Organizations of all sizes must reassess how they engage donors, recognizing there is increasing competition for fewer dollars.
A recent study found 65% of fundraisers reported last year’s results fell short of those from 2021. Unfortunately, the outlook for 2023 is also grim. Inflation, volatility and recession fears will undoubtedly impact charitable giving this year.
The good news is that billions in untapped funding is waiting to be harvested. More than 50 million households own $30 trillion in stock – more than 8x the amount of cash held by households over 45. Appreciated stock also presents the most tax-advantaged way to support nonprofits: donors not only avoid the capital gains tax on appreciated stock, but they can also itemize the fair market value of stock held more than 12 months.
Stock is a massive untapped source of funding. If half of U.S. investors donated $2,500 in stock, more than $60 billion would flow to nonprofits every year.
Unfortunately, stock gifting has been a 1% solution to date. Despite the overwhelming benefits, stock gifting has largely been utilized by the wealthiest donors and the largest nonprofits to date.
- Few Investors are aware they can avoid capital gains tax and deduct the current market value when donating stock held more than one year
- The process of initiating stock gifts is manual and painstaking for donors and their financial advisors
- 99% of nonprofits can’t open a brokerage account (and are therefore unable to receive stock) because of broker compliance requirements
- Nonprofits with brokerage accounts are unable to scale stock gifting given the complex, manual process and a lack of data about the donor
But by using software to automate manual processes, provide transparency and process stock gifts quickly and efficiently, nonprofits can finally tap into this vast source of funding. Companies like DonateStock make stock gifting easy and accessible for all donors and nonprofits.
Image by Sergei Tokmakov, Esq. https://Terms.Law from Pixabay
The benefits of an automated stock gifting solution
- Pleasant donor experience
Historically donors had to jump through hoops to donate stock. It usually required researching the process, contacting the nonprofit, completing and downloading forms and submitting paperwork to their brokerage. It often took days to complete the process. The friction is a major deterrent to executing stock gifts.
However now, with solutions available to make the stock gifting process much easier for the donor- like “PayPal for Stock Gifting” – the donor can now initiate gifts in minutes vs. days.
- Nonprofit ease and efficiency
Processing stock gifts is a painstaking manual process for organizations of all sizes. Facilitating requests for information, selling, reconciling and acknowledging stock gifts is a costly, manual process – even when the nonprofit knows who made the gift.
If the donor does not inform the nonprofit of details (ticker, number of shares and brokerage), the nonprofit will not know whose stock was received. The inability to reconcile and acknowledge gifts in a timely manner creates problems for the operations, accounting, finance and donor relations teams.
What used to take days or weeks can now be done in minutes, enabling nonprofits to quickly acknowledge donors and account for each gift.
No longer must nonprofits explain the convoluted stock gifting process to each donor, train and retrain its staff and scramble to process gifts. Nor must you worry about the unknown donors who are waiting for a thank you note. Processing stock gifts can now be a breeze.
- No brokerage required
As mentioned above, small nonprofits (vast majority of all organizations) cannot open a brokerage account due to compliance requirements and restrictive policies of financial institutions. As a result, most nonprofits have been largely excluded from stock-gifting altogether.
DonateStock, for example, solves this problem by processing stock gifts through Donatestock Charitable (501c3) which will liquidate, reconcile, acknowledge and distribute proceeds from the gift directly to the nonprofit. This is why we say “no brokerage, no problem!”
Roadmap for stock gifting success
- Educate your board and your team on the need to make stock gifting a key part of your fundraising program.
- Get informed: Check out this Ultimate Guide to Stock Gifting for nonprofits. The accompanying stock gifting guide for donors is also available for download.
- Optimize your website– namely your “Donate Now” and “Ways to Give” pages – to make stock gifting a prominent option for donors.
- Leverage research (like the figures provided above) to educate website visitors on the benefits of stock gifting.
- Inform your donors: Use email, direct mail and other materials to let donors know that you can now receive tax-advantaged stock gifts. Share the benefits and ease of donating stock and how they can have a greater impact by making a pre-tax gift. Changing behavior takes time – start now and remind them throughout the year.
- Ask your board and major donors for stock gifts: Most of your board members (and all of your major gift donors) own stock. Show them a better way to support your mission.
- Make it social: Include stock gifting in your social media posts, newsletters and web communications.
- Integrate stock gifting language in all communications: Newsletters, brochures, emails, donation requests, pledge fulfillments, etc.
- Communicate your successes! Nothing drives stock gifts like prior stock gifts. Share your wins with your supporters and create a virtuous cycle of support.
The timing for “stock gifting made easy” could not be better. While donors may be concerned about cash, most own appreciated stock that offers much greater tax benefits. Take time now to incorporate stock gifting into your development program – it’s a small investment of time that will pay massive dividends for years to come.
About DonateStock: At the intersection of Fintech and philanthropy, DonateStock is transforming charitable giving by making stock gifting easy and accessible to millions of nonprofits and donors. DonateStock streamlines the stock gifting process to help donors make tax-advantaged stock gifts with ease in minutes while organizations benefit from larger pre-tax gifts along with the tools, automation and support to launch and grow their stock gifting programs.
Be sure to visit DonateStock for Stocktoberfest! This annual virtual event provides thought leadership and resources from philanthropy experts throughout the month of October.
