Even though the COVID-19 crisis didn't make Americans any less generous in their charitable giving, even more people will need humanitarian assistance in the following year, requiring nonprofits to further increase their programming budgets.
If your nonprofit is looking for a way to raise more funds, stock donations are the way to do it. Whether your nonprofit has been accepting stock donations for a while or has never received a gift of stock, this guide will become a useful addition to your fundraising strategy as it will cover all the main aspects of stock donations and how they can benefit your charity.
The stock market is now on the rise, and stock giving is growing faster than ever. Around 80% of all U.S. donors own appreciated stock or securities, which makes stock donations a lucrative opportunity for charities to maximize their fundraising potential. In fact, stock donations are becoming one of the most promising fundraising channels, compared to the traditional donations of cash, credit or goods.
According to Bloomerang, wealth is not held in cash — instead, people tend to have the majority of their net worth stored in non-cash assets, such as stocks, bonds and real estate. In fact, cash comprises less than 10% of the collective assets and wealth owned by Americans.
This means that if your nonprofit only asks for cash gifts, you’re ignoring 90% of your potential donations.
Nonprofits that receive stock donations see 55% higher fundraising growth than those that only accept cash. Stock gifts tend to be larger than traditional donations, so the charities that accept stock donations often see a significant increase in their total giving within three months — without having to attract new donors, as the majority of your nonprofit's current donor base already owns stock!
Why? The reason is quite simple: donating stock helps your donors save big on their taxes and make a bigger donation to charity by avoiding the capital gains tax. When selling stock shares, investors have to pay a 37% tax on the appreciated value of the shares — even if they intend to donate the proceeds to charity. However, when donors donate stock directly to charity, the stock shares are transferred to your nonprofit and retain their full value while investors don't pay the capital gain tax and get a tax deduction for the fair market value of the shares.
For years, stock donations have been one of the most convoluted ways of giving, making it accessible primarily to wealthy donors or donors with wealth management advisors. Even though more than half of Americans now own stock, over 1 million charities and nonprofits in the US still can't access non-cash donations.
This is because accepting stock donations used to be a highly complicated process as well. To receive stock gifts, charities had to work with each donor individually to send and process the stock donation form, track and record each gift, send the acknowledgment letter, and ensure that the paperwork was correct for both parties.
However, this is no longer the case. Overflow has revolutionized the stock donation process, making it easy for both donors and nonprofits.
If yes, read our guide below to increase your donations, make the most of your fundraising efforts and maximize your nonprofit's net-giving with stock gifts!
Before your nonprofit can start accepting stock donations, there are two main steps you need to take. First, you will have to open a brokerage account with a low-fee firm such as Schwab or TD Ameritrade. Keep an eye on the brokers that offer special deals to nonprofit organizations, as this will enable your charity to save even more money.
Afterward, your charity will need to establish a formal investment policy that will determine whether your nonprofit will sell the stock shares as soon as it receives the donation or hold onto the gifted shares until their value increases.
There are two ways you can use email campaigns to promote stock donations among your donors.
Option 1: Plan an email campaign announcing that your nonprofit is now accepting stock donations and send it to your entire donor community at once. This will help you make sure that each one of your donors knows that your nonprofit accepts stock and can do so easily.
Option 2: Analyze your donor base to figure out which of your donors are most likely to own and donate stock. Use this data to create customized email campaigns that target your donors when the stock market is on the rise or when it's time for investors to assess their tax liability for the year and balance their portfolios. Book a meeting with us to see how Overflow can help you with that!
When your donors visit your nonprofit's donation page, "donating stock" should be listed as one of the main giving options. There are two ways you can advertise stock giving on your donation page — you can either use the Overflow Button or create your own design that highlights various donation choices.
Here are the two most commons examples of the Donate Stock buttons:
It's important to let your donors know that your nonprofit accepts stock gifts as soon as they visit your donation page — this way, you can make sure that your nonprofit is getting the biggest gift possible!
Sometimes, it can also be beneficial to provide a couple of quick facts on why stock donations bring more tax advantages than cash. Here is a sample copy that you could include:
Donating stock to charity is one of the most tax-efficient ways to give! Why? Because stock donations will help you avoid the capital gains tax and make a bigger donation to [the name of your nonprofit].
Your nonprofit's social media channels can become a powerful tool for promoting stock donations among your donors. Here are a few things your nonprofit can do to educate your community on the importance of stock donations:
Whether it's an in-person gala or a virtual gathering, hosting a fundraising event celebrating your stock donors can become a valuable addition to your nonprofit's fundraising strategy. As stock gifts tend to be 15 times larger than traditional donations, a successful "Stock Happy Hour" could help your charity raise thousands of dollars in stock donations alone!
Since most of your donors already own some sort of stock or cryptocurrency, you can advertise this event through your usual outreach channels, such as your website, email newsletter, and social media. Don't forget to describe all the benefits of stock donations to attract those donors who never donated stock before!
When you take into consideration that $128 is the average online donation amount, for many donors, a $3,000 cash donation may seem like a big commitment.
But did you know that $3,000 is the current price of just one Amazon share? And that your donors can have dozens of such shares in their portfolio?
By giving a single Amazon share to Larkin Street, a donor could provide 6 young people with paid internships. It's useful to illustrate how an individual stock share could impact your nonprofit's programs and communities in need — this way, it will be easier for your donors to realize the philanthropic potential of their stock portfolio.