Estimating wealth - Institute of Fundraising

RIF Scotland Conference
Estimating Wealth – the “Holy
Grail” or the “Red Herring”?
Sacha Tremain
Research Manager
National Trust
Chair of RIF
3rd October 2011
A bit about me
• Chair of Researchers in Fundraising group
• Research Manager for the National Trust since 2006
• Manage the Raiser’s Edge database single-handedly
• Research individuals with £5k+ giving potential
• Monthly Prospect Review and Management meetings
• Part of a large team – 25 strong
• There’s just me and my assistant
• Major Gifts and CT team raises £5m every year
• Support at least 3 multi-year £1m+ priority campaigns.
• 3 Annual Giving programmes: £250-£5k+
• 2 Lifetime programmes: £10k and £100k
• We run a series of events every year at our properties
What I’m going to talk about…
• Why we need to estimate wealth, or do we?
• What to look for and where to find it
• How to do it – some common formulas
• Is estimating giving capacity more important?
• How to estimate giving capacity
• What else you have to think about
• How to know if you’re getting it right
• Questions
What’s the fuss about?
Why do we need to estimate a prospect’s wealth?
• To know what size of gift to ask for
• To prioritise and segment your prospect pool
• To identify who your most ‘valuable’ prospects are
• To help assign a rating and cultivation strategy
– A £1k prospect clearly needs a different approach to a £1m prospect
According to the latest World Wealth Report,
there are 10.9million HNWIs worldwide 103,000
UltraHNWIs 103,000 worldwide
That’s a lot of wealthy people in the world
waiting to be found by researchers like us!!!!
What to look for…
What else?
Anything else???
Wealth indicators
Property value
Income and remuneration – bonuses
Title or type of job they do
Assets & Investments – owns an island/Art collection
Shareholdings and investments, e.g. venture capital trusts
or invest in film production companies
Company ownership – public or private
Philanthropy – publicised donations
What they do in their spare time - expensive hobbies
Private education – school fees
What car they drive
Where they go on holiday
Previous giving to your cause or other cause
Where they shop or ‘hang out’
Who they ‘hang out’ with
Where they live
Where company is based – offshore – higher-rate taxpayer?
…and where to find it
Obvious starting point…
Various Rich Lists
The big “Purple Book” (Sunday Times)
Sunday Times
Regional, e.g. Business Insider/ Archant
Industry, e.g. Estates Gazette
Wealth Watch (Sunrise Publishers)
Asian/Greek Rich List
Lists of Rich Lists, incl. Helen Brown group
Other places where the work’s already
been done for you:
• Wealth tags from screening cos
– e.g. Prospecting for Gold/ Factary/ Wealth
Who’s Who
Who’s Who
Debretts People of Today
Burkes Peerage & Baronetage
Who’s Who in Scotland
Power Lists, e.g. Management Today, Elite 100, Business Insider
Financial News Top 100
Media Guardian Top 100
Entrepreneurial Exchange
Retail Week Power list
Institute of Directors, Scotland – list of winners and nominees
Who’s who in the City
Citywire / CityAM
•Your home price
• Our Property
• Mouseprice
• Zoopla
• Annual reports/Account
Companies House / Company websites for published accounts
Onesource, MINT, DASH, ICC, Boardex
Average remuneration or highest paid director
Dividend payments
NED Director’s Fees (£25k/£50k medium-large cos)
Stock Options
• Digital Look – Director Dealings
• Job adverts – similar positions advertised
• Salary lists, e.g. Guardian Executive Pay
• Salary Surveys, e.g. Michael Page and Robert Walters
• The Lawyer Hot 200
• Author book sales
• Newspaper articles
• Any others?
Company ownership
• Similar sources as Income/Shares
• Private vs Public
Liquidity ratios – assets/liabilities
Share structures – ownership as a %
Compare with similar sized/industry company
Accounts type – small company exemptions
If not Pre-tax profit, then use Shareholders
funds as an indication of profit – 5x
Net worth
Tax payments
Look for stability
P:E ratio
Markets and company
structures confusing?
• Donor boards
• Donor rolls online or in annual accounts
• Sunday Times Giving List
• Factary Phi
• Charity Commission
• Trustfundraising
• Company Giving
• Hollis Sponsorship
• OSCR or Northern Ireland Charity Commission
• Jersey charities
• Who’s Who in Charities
• Guidestar
• Newspaper articles
• Who else are they giving to? How much?
• Any others?
Common Formulas
Estimated net worth =
– Total known direct stock holdings x (1-3)
– Total real estate holdings x 5*
Working out certain parts of net worth:
– Company Value = average profit (over 3 years) x P/E ratio
– Hedge Fund – 2/20, i.e. an average hedge fund manager charges
a 2% management fee of the fund's net asset value each year and
a performance fee of 20% of the fund's profits.
– Estimating net worth of a public company, assuming the value of
stock holdings represents 20-25% of an individual’s estimated worth
– Sale of company: Total Sale price x % stake – 40% deduction for
capital gains tax
*Real estate, you may want to have bands according to value, i.e.
change the multiplier down for lower value real estate
If you only know 1/2 things…
Source: World Wealth Report 2011
Let’s try it
You know:
– The value of a person’s property = £1.5m
– Annual salary = £250k
– Add these two figures together = £1.75m
– This represents 48% (almost half of their wealth)
according to the World Wealth Report (29% income
and 19% real estate).
– Double it and you get to estimated net wealth of £3.5m
– NB: if we’d used - Total real estate holdings x 5 = £7.5m
– Which feels right when looking at the whole picture
– Doesn’t have to be an exact science!!!!
– Wealth Band = £3.5m-£7.5m
Calculating Gift Capacity –
some more common formulas
Even more formulas…
20 x level of consistent annual giving = giving ability over 5 yrs
10% of annual income = giving ability (over 5 years)
0.5% - 1.5% of liquid assets = giving ability
5% of total known assets
(real estate + stock holdings + annual income for 5 years) =
giving ability (5 years)
– 5%-10% of annual income + bonus over 3-5 years (2-3% in a single
gift), i.e. Annual salary + bonus x 0.05 (or 0.10) = gift potential
– 2%-5% of net worth
– 10% of stock options of $1m+
– 0.5%-5% of net worth of company
– HNWI in Europe (assets of $1m) give 4.6% of their wealth to
charitable donations (only 6-7% of HNWIs and 10% of UltraHNWIs
in Europe give philanthropically)
NB: Major gifts usually come from assets, not income
My favourites
Ones I use most often:
– 0.5%-5% of net worth = 5 yr gift capacity
– 10% of income / 3 (average no of charities a person
supports = 3 yr gift capacity
– Total giving to NT / No of years x 10 = 5 yr gift capacity
– NB: You can add an inclination rating, i.e. 2 = low and 4 =
high to indicate likelihood of giving at a higher level
– £3.5m-£7.5m net worth, no previous giving, so…
– 0.5% = £17,500-£37,500 over 5 years
– But = £3.5k-£7.5k a year, i.e. 0.1% of estimated net worth
= single gift
Don’t forget tax-effective giving – higher-rate tax
How rich they really feel
Net worth Definition
£1m - £2m The comfortable poor
£3m - £4m The comfortably off
£5m - £15m The comfortably wealthy
£16m - £39m The lesser rich
£40m - £74m The comfortably rich
£75m - £99m The rich
£100m - £199m The seriously rich
£200m - £399m The truly rich
£400m - £999m The filthy rich
Over £1bn The super rich
Source: Felix Dennis “How to Get Rich”
What else you need to
• Who’s asking them to make a gift and how?
• Is it the right time for them to make a gift?
• Trouble in paradise?
Children at school/university
Trouble at work – job insecurity / fraud
Legal proceedings
Tax year / tax owed
Death in the family
Change of job / retiring / selling business
Debts – loans / remortgages
Gambling addiction?
Top tips
Look at the whole picture
What does your profile tell you?
If someone has met them, find out what they
discovered at that meeting
Capture the information on the database
Use a couple of formulas to test it out
What is your gut telling you?
Keep it SIMPLE
How to know if you’re getting it
Test the formulas on previous donors where you have estimated
wealth information
– What’s the % for your organisation?
– Which wealth band is the most common?
– How has the estimate been arrived at? - Property/ assets/ stockholdings…
– Were there any fluctuations? What caused them?
– Where are the gaps? We were missing donors with ENW of £200m+
– Good worked example of calculating net worth that is right for your
organisation: Virgina University
Any questions?
Sacha Tremain
Research Manager
National Trust
[email protected]
01793 817689
Member of RIFUK? E-mail: [email protected]