Finding Your Middle

Class Millionaires

Wednesday, April 29, 2015

Our Presenters:

Harold Pinkham:

Principal & Co-Founder, ActivateLegacy

Ron Ware:

Principal & Co-Founder, ActivateLegacy,

President & Personal Legacy Advisor, Wealth Impact Partners

Think Different!

Meet Bob – a Middle Class

Millionaire:

• Actively involved with Organization for 30+

years, served past 10 years on Executive

Board

• Loves Organization!!

• Children greatly benefited from the

Organization

• Program guy, not a fundraiser

• Annually gave $200

What About Bob?

• Not on anybody’s radar for a major gift.

• About to retire and attended an Estate

Planning workshop we hosted to

members/donors of organization.

• Bob and his wife met with CFP/Legacy

Advisor because they were concerned

they didn’t have enough for retirement.

Bob & His Wife discovered:

•They were going to have “excess

wealth” which they didn’t plan to spend

on themselves or want to give to their

children.

•They discovered they could

create/provide legacy gift that would

reflect their deepest values.

Four Months Later…..

They announced that they plan to leave

the Organization over $1,000,000!!!

How did this happen??

The Millionaire Next Door:

A landmark book by

Thomas Stanley & William Danko

Who are they?

• They don’t look like millionaires.

• They don’t dress like millionaires.

• They don’t eat like millionaires.

• They don’t act like millionaires.

The Millionaires in Your

Organization:

• Two-thirds are self-employed.

• Only one in five is retired.

• 57 years old; married with three

children.

• Almost never divorced.

• Spouse is equally or more frugal

• Serious budgeters.

The Millionaires in Your

Organization:

• 97% are homeowners.

• 50% have lived in the same house for

more than 20 years.

• Most live in middle-class

neighborhoods.

• Their homes valued around $320K.

Millionaire Spending Habits:

Frugal, Frugal, Frugal!

• 50% would never spend over $350 for a

suit.

• 50% would never spend over $140 for a

watch.

• Most hold Visa/MasterCard instead of

American Express.

Millionaire automobiles:

• 81% purchased their vehicles outright.

• 59% spent under $35K for their vehicle.

• Only 23% own new vehicles.

• Most autos are over 4 years old.

• F-150, Explorer, top choice.

Millionaire Businesses:

• Self-employed: They make up less than

20% of the work force, but account for

66% of all millionaires.

• “Dull normal” businesses: welding

contractor, farmer, plumber, HVAC,

dentist, accountant, pest controller, etc.

Millionaire Businesses:

• Cash Poor: much of their realized income is

invested in assets that tend to appreciate in

value without generating realized income

(i.e. 20% home equity, 20% retirement, 20%

business)

• Self-employed: 75% are entrepreneurs; others

are professionals (accountants, lawyers,

doctors, etc.)

Millionaire Businesses:

• 91% never received, as a gift, as much

as $1 of the ownership of their

business.

• Less than 20% will turn their

businesses over to their children.

The Millionaire Entrepreneur:

• Most will require planning to unlock

assets for philanthropy.

• Only 3% have plans in place.

• Few are prospected by nonprofits.

• They are the core business of many

financial advisors.

Millionaire Net Worth:

• Of the 8.4 Millionaire families in US only

6% have net assets worth over $10

Million.

• Average $3.7 million.

• Typical $1.5 million (median).

Most Don’t Consider Themselves….

Wealthy!

With Assets between $1 – 5 Million

UBS Wealth Management Study

Assets Over $5 Million

With Net Assets over $5 Million

UBS Wealth Management Study

Millionaires’ Biggest

Concerns:

What Keeps Them Up At Night?

• Running out of money – 88.3%

• Rising medical costs – retirees experience a much higher rate of inflation due to medical costs.

• Living longer – average lifespan continues to increase.

Millionaires’ Biggest

Concerns:

1. Heirs – 79%

2. Medical costs – 77%

3. Retirement income – 71%

4. Kids/Grandkids education – 48%

5. Being sued – 47%

6. Losing job/business – 40%

7. Personal security – 28%

8. Parents’ care – 28%

• 9. Gifts to Charity – 27%

Prince & Associate Survey

Summary:

• Over 8.4 million Millionaires in U.S.

• Over 13 million are worth $500K -

$999K.

• Most don’t think they’re wealthy.

• Few have done little, if any, financial

planning.

So what’s an organization

do to?

A New Approach…

“The Excess Wealth Conversation”

With Your Donors

Every gift begins with…..

a conversation.

But getting a gift from a MCM requires a much

different conversation

MCM Donor’s are looking for…

• Financial Clarity and Confidence with their

future.

• Privacy as they discover their true capacity.

• To be inspired not confused.

The Excess Wealth Conversation is…

a focus on Donors needs first!

It is…

• holistic, deeply personal, and authentic

conversation.

• thoughtful conversation exploring a donor’s

philanthropic intent.

It is…..

• strategic approach to assessing a donor’s financial

capacity and philanthropy intentions.

• an invitation to plan at a new, exciting, and deeper

level: If you knew you could, wouldn’t you?

What it is not….

• It is not focused on your organization’s

needs.

• It is not an ask for a gift

• It is not guided or conducted by staff.

It is not…

• focused on tactics (i.e. Charitable Gift

Annuities, CRTs, etc.)

• an advisor selling a financial product.

• a solicitation for business.

Questions they want be asked:

Concerns & Financial Independence

Conversation Starters:

What keeps you up at night?

Concerns:

Is there anything that you are concerned

about for your spouse, your children or

grandchildren?

Concerns:

What are you up against with your children?

Financial Independence:

Do you feel you have enough money to live

comfortably for the rest of your life

Financial Independence

What would have to happen for you to say you

feel confident about your financial

independence?

Family Legacy:

What’s Your Story?

(Your parents, childhood, spouse, kids, your dreams)

Family Legacy:

What values do you hope to pass on

to future generations?

Family Legacy:

If your family had a crest what would it be?

Family Legacy:

Why do you want to leave money for your

kids? How wealthy do you want them to be?

Why?

Capital Legacy:

What in the world would you like to change

or preserve?

Capital Legacy:

Tell me about the most meaningful gift you

ever made? Why was it important to you?

Capital Legacy

Do you serve as a volunteer or serve on any

nonprofit board? Why? What led you to give

your valuable time to the cause?

If given a choice….

Would you rather be a

Involuntary or Voluntary Philanthropist?

If You could do More that Matters…

without it effecting your retirement dreams, or

family legacy….would you?

Case Study:

The Man who couldn’t pronounce

Philanthropy.

As an Organization…

• Focus on donor concerns, become Donor-Centric!

• Create a Philanthropic Advisory Council (PAC) to help donors begin the philanthropy conversation

• Use your PAC to provide valuable educational resources that address their concerns.

• Demonstrate leadership/Show them that you care about their issues!

Create Your Planned Giving…

Dream Team!

Create a Philanthropic

Advisory Council (PAC)

• 25-40% of most nonprofit supporters work in the financial industry.

• These are the attorneys; accountants; financial planners; insurance professionals; bankers, investment bankers; etc. connected to your organization.

• Recruit and train them to help your organization.

Have them:

• Help produce educational events and materials that inspire your Middle Class Millionaire donors

• Help create a Gift Planning “culture” within your organization.

Leverage their expertise to address donor concerns:

• Estate Planning

• Small Business Exit Strategy

• Elder Law/Medicaid Planning

• Health & Long Term Care Insurance

• Retirement Income Planning

• Asset Protection

As a result, you generate:

• Appreciation and trust from donors who feel valued and understood by your Organization.

• Significant follow-up conversations among donors and PAC members.

• Interest in Gift Planning strategies and opportunities as donors seek to create impact through your Organization’s work.

WIN → WIN → WIN

Growing Trends:

Nonprofit staff’s involvement in helping donors to make charitable decisions:

2006: 41%

Today: 29%

More and more donors are consulting with their legal/financial professionals first.

Bank of America Study of Affluent Families

Growing Trends:

Percent of donors who learned about giving/ philanthropy options from a financial advisor:

1994: 4%

2008: 28%

NCPG Task Force Study, The Future of Charitable Gift Planning.

Growing Trends:

Sources of Charitable Advice

Accountant: 67.5%

Attorney: 40.8%

Financial Planner: 38.8%

Nonprofit Fundraiser: 24.1%

University of Indiana Study

However, before you begin:

Be Aware!

Who initiates the charitable

gift conversation?

CPA’s & Wealth Advisors – Only 5.7%

Attorneys – Only 6.3%

Donors/Clients – 94%

Source: Bank of America/Merrill Lynch

How do donors/clients feel

about this?

Only 21% are satisfied with Advisors!

Why?

• The Tax Lead: Donors motivated to give to reduce taxes. Advisors: 46%, Donors: only 10%

• Donors were frustrated they had to initiate the philanthropic conversation. (34% open to idea if brought up by Advisor. 43% if Advisor shares own plans)

• Advisors focused on the technical; did not discuss personal or social values.

Source: Bank of America Study & The Philanthropic Initiative

The typical approach

to planning:

The Planning Horizon

Why?_____________________________________

How?

80% of time spent on How (tactical)

20% spent on Why (dreams/social values/concerns)

RESULT:

75% of clients/donors don’t take action!

Something to think about …

The transfer of wealth

is coming!

Expected wealth transfer 2007-2061:

Over $59 Trillion

Amount directed to Nonprofits/Charities:

Over $6.3 Trillion

Boston College Center on Wealth and Philanthropy:

Who currently has the wealth:

Share of Wealth

• Silent/Greatest Generation: 53%

• Baby Boomers: 38% (Youngest is now 50 years old)

Are You Ready?

Thank You!

www.activatelegacy.com