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  • Writer's pictureKevin Leahy

Unleashing the Potential of Stock Gifting: Steps Fundraisers Can Take

This post comes to us from our great friend and partner, Steve Latham. Steve is the co-founder and CEO of DonateStock.


After more than a decade of steady growth, cash giving fell in 2022 and is likely to be flat or down in 2023 as well. Persistent inflation and economic uncertainty are putting pressure on development and advancement offices, and the teams that work for them. While charitable stock gifting represents billions in untapped funding, it is rarely utilized for numerous reasons. That’s all about to change as innovative solutions have made stock gifting easy and manageable for donors as well as the recipients they support. 


Unleashing the Potential of Stock Gifting
Unleashing the Potential of Stock Gifting

Here are the steps fundraisers can take to exponentially grow stock gifting with confidence and ease.


Charitable giving has often been called recession-proof, but it’s hard to say that is still the case.  After eclipsing record levels in 2020 and 2021, cash giving gave back some growth by contracting $20 billion or 13%, due to several factors:


Fewer Donors

Today, fewer than half of US households gave to charities, churches, schools, and foundations.  Only 20 years ago that number was 65%.  As reported by the Fundraising Effectiveness Project, the pool of donors shrink by almost 20% in the last 10 years.


Record Inflation

The highest inflation in 40 years put significant pressure on family budgets in 2022.  With fewer dollars left over, there was simply not as much to donate to charities, schools, and community organizations.  


Economic Uncertainty

Epectations of a long-awaited recession and layoffs left many consumers feeling uncertain about their financial situation.


Growing Consumer Debt

Consumer credit card debt approached $1 trillion an all-time high.  


While the result for 2023 will not be known until the 2nd quarter of 2024, many fundraisers are expecting another tough year.  The perfect storm of circumstances continues to weigh on cash giving. 


Silver Linings for Fundraisers

While the outlook is challenging for organizations relying exclusively on cash and credit, innovative fundraisers are looking beyond cash to diversify and grow funding.


As Russell James’ research proved, cash is not king when it comes to charitable giving.  The table below shows how nonprofits that solicit non-cash gifts (in addition to cash) have been much more successful in growing revenue.  In short, those orgs that receive stock along with cash, grew 6 times faster than those that relied solely on cash and credit cards. 


5-Year Average Growth in Total Funding
5-Year Average Growth in Total Funding

The data is compelling but also intuitive. Those organizations that give donors options in ways to support them are much better positioned than those who limit how supports much give. 


When you consider that more 100 million Americans own more than $30 trillion in stocks, mutual funds and ETFs, it’s clear that among non-cash assets, securities and investments are the largest and most widely held.


Stock also offers donors unmatched tax benefits over cash – namely the ability to avoid capital gains tax while deducting the current value of gifted stock held more than one year. 


For these reasons, stock represents $50-$75 billion in potential funding for nonprofits – more than enough to fill the gaps in 2023 and beyond. 


Historic challenges with stock gifting

While stock gifting has been around for decades, it is rarely utilized outside the major gift office – and even then, it’s relatively underutilized.  


On the donor side, few investors are aware of the unmatched benefits of stock gifting.  Among those who are aware, the friction associated with manually initiating a stock gift is a significant deterrent. 


Stock gifting is also challenging for recipients for several reasons.  


  1. It’s a time-consuming, manual process that typically involves several people including gift officers, donor relations, advancement services and the organization’s treasurer or head of finance.  If you consider that each stock gift requires 3-4 cumulative hours to process, the soft cost of manually processing stock gifts is more than $200 - plus brokerage fees.

  2. It’s also a manual process for the brokerages who are responsible for transmitting the stock from the donor’s account to the recipient’s brokerage.  Delays and disruptions are to be expected.  Without transparency into the status of the gift, it’s difficult to know where things stand. 

  3. The process is made even more difficult by the fact that the donor’s information doesn’t accompany the stock.  If the donor des not contact the recipient to specify the details of the stock gift, it may sit in their account “unclaimed” or “unknown” for weeks or months.  Some offices can’t sell the stock or reconcile the gift without verifying who sent it, creating another more friction and an ever-present risk that the asset will depreciate as hot stocks are known to do.


The challenges of manually facilitating, reconciling, and acknowledging stock gifts makes it impossible to scale.  Even worse, a failed or disrupted stock gift can leave a bad taste in the donor’s mouth.  For these reasons, many gift officers have been reluctant to recommend stock gifting to mid-level and major donors, opting for smaller, “safer” gifts via check, ACH or credit card. 


Consequently, stock gifting rarely comprises more than 1% of gifts and is vastly underrepresented in almost all fundraising budgets.  This is both a problem and an opportunity. 


Breakthroughs in stock gifting 

Fortunately, stock gifting has been reinvented and is now easy and manageable for donors and recipient organizations.  By addressing the pain points mentioned above, the traditional limitations and perceived risks of stock gifting are now a thing of the past:


Pleasant donor experience

What used to take hours can now be done in minutes through our Easy Button for Stock Gifting™.  Like “PayPal for stock gifting”, donors can initiate stock gifts in minutes with ease.  By making stock gifting an enjoyable process, donors will be more inclined to make subsequent gifts.


Automation

Development and advancement offices can now scale stock gifting while reducing the administrative burden their staff.  By automating the initiation, monitoring and reporting of each gift, fundraisers can exponentially grow the volume of stock gifts without overwhelming their staff.  For those seeking to outsource the entire process, we can sell the stock, reconcile the gift, acknowledge the donors and distribute proceeds to the recipient on their behalf.


Transparency

With real-time donation alerts and interactive dashboards, both donors and fundraisers know when stock gifts are initiated and received, the value of the gift and whose stock is whose. 


Due to these breakthroughs, fundraisers are now able to exponentially grow stock gifting while saving time, money and administrative burden.  


Case Study: World Central Kitchen

In 2021, World Central Kitchen was seeking to grow its stock gifting program to fund relief efforts for victims of disasters and conflicts.  After implementing DonateStock’s Easy Button on its website WCK.org, stock gifting grew 1500% in 2022 with its share of total proceeds growing from 1.3% to almost 9%.  WCK also saw tremendous gains in efficiency: by outsourcing the back-end process of selling, reconciling and acknowledging gifts on their behalf, WCK was able to scale stock gifting without adding staff.  WCK proved that by making stock gifting easy for donors and its team, the sky was the limit. To read the case study please visit https://bit.ly/wckcase2023 


Why now is the time for stock gifting

While cash giving is facing numerous headwinds, billions in appreciated stock is waiting to be accessed.


Now that tax-advantaged stock gifting is easy for donors, and accessible, manageable and scalable for all fundraisers, stock gifting is poised the fill the gaps in development and advancement budgets.  


There is also an early mover opportunity as innovators that are quick to introduce stock gifting to their donors stand to get the lion’s share of stock gifts this year. 


We are excited to work with Givzey to make stock gifting easy for their nonprofit clients and the donors that support them.  By collaborating to unlock value with ease, we can help fundraisers diversify and grow revenue with greater efficiency for years to come.  


To learn more about stock gifting and how to launch and grow your own program (no brokerage required) please visit us at https://donatestock.com/for-nonprofits



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