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Wealth and Its Longevity
Wealth and Its Longevity
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The article in the April 20, 2014 NYTimes by Mark R. Rank raises a curious issue for advancement officers about wealth and its longevity.  Are those people in the “1%” of income a static group or do the members of the affluent change repeatedly?

Rank and fellow researching Thomas H. Hirschl conducted a 44 year longitudinal retrospective study on 25-60 year olds.  What they found has direct implications for fundraising.

They found that 12% of the population will find themselves in the top 1% of the income distribution for at least one year, 39% of Americans will spend at least a year in the top 5% and 56% in the top 10% of income distribution.  54% of Americans will experience poverty or near poverty at least once in their adult life as well.

The study showed that of those 12% of Americans in the top 1% of income distribution, only 0.6% will do be there for 10 consecutive years.  Digging deeper, IRS records show that of those who earned over $1 million a year did so just once during 1999 and 2007 while only 6% reported million+ incomes for more than nine years. The IRS also showed of the top 400 tax payers only 2% of them were on the list for 10 years or more.

This data directly illustrates the high class fluidity occurring in the US, and this has at least two direct implications for advancement officers.

The first is our expectations of donors who demonstrate great capacity for one project / campaign.  This data indicates a high probability that the circumstances of our top donors could be in flux for a majority of them.  While their income changes may not have great impact on their net worth, a reduction of income will affect them psychologically, and likely give them pause when considering as large a gift as they may have given in the past.  Downward changes in income can also affect their ability to pay off pledges, providing another argument I have made in the GivingTake for advancement shops to go to a cash reporting system.

The second is being aware of the upwardly mobile within your file and the positive change of circumstances.  Both situations speak to the need for strong prospect research and having a relationship network of your stakeholders who know of your donor’s changing circumstances and can provide you with real time intelligence.

This study’s take home message is that there are sometimes large swings in the financial lives of all of us, making assumptions on our part about our donors a risky exercise.

Your takes:

1.      Try and be aware of the changing financial circumstances of your most important stakeholders and donors.

2.      Develop relationship networks with your most important stakeholders and donors to help you stay informed.

3.      Remain flexible for meeting your donors where they are and to maintain good relationships with them through thick and thin.

 

For more information about Copley Raff and its spectrum of consulting services, please see www.copleyraff.comFollow CRI on Twitter @copleyraff.

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