Key Trends in the Nonprofit Sector

ACE Presentation June 19, 2014 Presented by

Bank of America

U.S. Trust Philanthropic Solutions

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• Demand for Services continues to grow • Donors are being more Strategic • A revaluing process is on the horizon • Technology is evolving and will play a major role in the future • Marketing tools and techniques are developing • Accountability and transparency standards are essential • Investment performance continues to be on donors’ minds • Collaboration and Partnerships are being considered

Key Trends in the Nonprofit Sector

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• We have experience four consecutive years of rising demand for service reflecting the sign of deepening community need. - The resource Squeeze – smaller to no government resources - Upward Spiral of need

• 75% of organizations who have been identified as providing critical ‘lifeline’ services noted an increase in demand

• 54% of those state they are not able to meet the demand for services • Only 37% of organizations providing critical lifeline services are able to meet the demand !

• Nonprofits are trying to meet increasing demand with program expansion • 49% added/expanded programs • 41% increased the number of people served • 15% expanded geography served

Source: Nonprofit Finance Fund State of the Nonprofit Survey 2013 National Council of Nonprofits 2014 Nonprofit Trends to Watch

Demand for services continues to grow

• Individual donations are slightly rising overall, but donors are taking a more strategic approach • Larger gifts to fewer organizations • Making choices based on specific, measurable impact that they expect their gift to bring to the

community • Investing vs. donating

• Corporations and businesses are becoming more strategic in their giving approach as well

• Nonprofits are being held to the same kind of measurable standards as the private sector • Companies are directing philanthropic dollars towards causes that directly impact their businesses

(health, community quality, education, environment)

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Donors are being more strategic

• Comprehensive gift planning is becoming increasingly more important as donors are becoming

more targeted and strategic in their giving - 70.9% of high net worth households have a strategy and philanthropic budget - 74% of high net worth households report giving because they are moved at how their gift can make a

difference - 76.4% of high net worth households feel a “sense of accomplishment because my charitable activity leads

to results/direct impact”

• Creating awareness of your impact and vision with professional advisors is necessary - Donors are increasingly depending on outside advisors versus development professionals

Accountant consulted 53.4% 2012 up from 44.3% in 2007 Financial/wealth advisors 36.9% 2012 up from 27.8% in 2007 Nonprofit personnel 33.4% 2012 up from 26% in 2007

• Sources: The 2012 Bank of America Study of High Net Worth Philanthropy

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Donors are being more strategic

• Nonprofit Organizations that can demonstrate that they are delivering donors a significant “Bang for their Buck” will thrive, while those that struggle to clearly define impact and measurable results will face an uphill battle.

• Clearly defined mission • Powerful Impact statement • Clear and transparent strategic plan • Sound Fiscal practices • Donor Stories are significant

• What Donors are Saying: • We are giving money through an organization, not to an organization • We won’t give to an organization because they have needs; we will give to an organization

because they meet needs Sources: NFF 2013 State of the Sector Survey Results and“ Show Tell and Involve” Gary Laermer

Summarizing demand and giving patterns

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• Nonprofit organizations will be viewed in a new light, along the same philosophical thought process that consumers use for other major investments

• Is it effective? • What is the impact? • Will it last? • Will it get the job done?

• Consolidation of nonprofits seeking to achieve the same mission • Can be more cost effective • Streamlined • Sustainable

• “Nonprofit” viewed more as a tax-status and less as a business model • Increased merging of nonprofit and for-profit business practices

• Joining sustainability and effectiveness in operations with mission-driven passion

Source: Peering into the Nonprofit Crystal Ball, Marc Chardon For institutional use only. Distribution to any other audience prohibited.

A revaluing process in on the horizon

• Looking to the future … • Supporters will be able to observe real-time mission delivery through

mobile devices. • Nonprofit organizations having a comprehensive understanding of all the

ways their supporters interact with them can tailor branded experiences for each and every supporter.

• The use of mobile technologies will more than double for most nonprofit organizations in the coming year.

Source: Peering into the Nonprofit Crystal Ball, Marc Chardon

Technology is evolving and will play a major role for both nonprofit organizations and their supporters

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1. The Authentic Voice: Donors want authenticity • “Humanvertizing – a real look at the organization and Mission • Market to address concerns • Tell Where the donation is going (Impact)

2. The Superpower of Stories • Nothing generates emotional investment (or lack thereof) in mission then telling real-life stories • “ When you tell a story to a friend, you can transfer experiences directly to their brain…As you relate

someone’s desires through a story they become the desires of the audience.” Psychology Today, 6/6/11

3. Photo Assembling • Photos are the evolutionary preference for consuming information in a short amount of time • The use of amateur photos – authentic, real, picture-driven story of the mission you serve!

4. Crowdsourced Inspiration • Virtual Tours and webinars bring each and every donor or prospect the opportunity to be “in” the

organizations presence, “in” the life of the people the organization serves, and “in” the passion of the mission and impact of the organization

Source: Stelter “What makes them give” 2012 survey For institutional use only. Distribution to Any Other Audience Prohibited

Marketing tools and techniques are developing – Four Key Trends

Top Goals of Nonprofit Marketing/Communications Executives: 1. Acquiring New Donors 2. Engaging Community 3. General Brand Awareness 64% of Nonprofit Executives picked donor retention as a Top Communications Goal Large Nonprofits – Prioritize brand awareness and thought Leadership Small Nonprofits – volunteer recruitment and retention Social Media Facebook 95% Twitter 64% YouTube 38% LinkedIn 26%

Marketing – Communications What the nonprofits are saying

(2014 Nonprofit Communications Trend Report – Nonprofit Marketing Guide)

• One of the most prominent laws affecting nonprofit accountability is the federal law known as the Sarbanes-Oxley Act of 2002,

-Sarbanes-Oxley Act requires nonprofits to have a Whistleblower Protection and Document retention policy

• Donors are becoming more savvy – asking key questions and doing their research -Be prepared. Ask yourself - Accountability and Transparency standards are essential

What do our financials look like? Do they tell a story about our objectives and impact? How does our executive compensation compare to similar organizations? How are the rating agencies rating us? Can we articulate our programmatic impact?

• Your financials should tell a story and be part of the marketing and communication with supporters

-Communicating vision and measuring impact is critical

• In addition to their fiduciary role, Board members need to be strong community advocates and embrace the culture of accountability and transparency

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Accountability and Transparency standards are essential

• Sophisticated donors are asking about endowment performance, and the process through which investment decisions are made

• The Board is entrusted with significant fiduciary responsibility to oversee the assets of the

nonprofit and ensure they are being used to fulfill its mission • Duty of care (prudence) • Duty of loyalty • Duty of obedience

Prudent policies and practices should be in place

• Investment Policy Statement • Spending Policy • Investing for mission vs. return on investment • Socially responsible and mission related investment decisions For institutional use only. Distribution to any other audience is prohibited.

Investment performance continues to be on donors’ minds

Collaboration and Strategic Partnerships are being considered

• The economic environment has created a need, and in many cases an opportunity, for strategic

partnerships and collaboration

• Collaborations are not just an option for cash strapped nonprofits. The right partnerships can: • Strengthen effectiveness and increase impact

• Expand reach more cost effectively

• Efficiently utilize scarce resources

• Leverage strengths

• Knowing your strengths is key to successful collaborative relationships. Organizations should

be asking the questions: • Does our organization solve this problem, offer this service or implement this program effectively and

efficiently?

• Do we do it better than everyone else?

• Is there an opportunity to partner or collaborate with another organization?

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Questions & Answers Contact Information Bank of America U.S. Trust Philanthropic Solutions Garrett Gin Joe Bui Director, Los Angeles Market Manager Vice President, Philanthropic Specialist garrett.gin@bankofamerica.com joseph.bui@ustrust.com U.S. Trust Philanthropic Solutions Bank of America – Small Business Banking Matthew Laufman Roger Chan Senior Vice President, Senior Nonprofit Advisor Vice President, Small Business Banker Manager matthew.laufman@ustrust.com roger.chan@bankofamerica.com Bank of America Foundation Stephanie Lomibao Senior Vice President, Philanthropy Manager stephanie.lomibao@bankofamerica.com

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2013 State of the Nonprofit Sector Survey Results http://nonprofitfinancefund.org/files/docs/2013/2013survey_nat_summary.pdf “Show, Tell and Involve; Fundraising Fundamentals for a New Era of Philanthropy”, Gary Laermer “Peering into the Nonprofit Crystal Ball…2013”, Marc Chardon http://afprc11.blogspot.com/2013/01/marc-chardon-peering-into-nonprofit.html The 2012 Bank of America Merrill Lynch Study of High Net Worth Philanthropy Giving USA 2012 http://www.givingusareports.org/ Rating Accountability and Transparency There are a variety of organizations referred to as “Charity Watchdogs” that rate charities against various measurement standards. Many of these standards include specific expectations for ethical conduct and accountability, primarily in relation to a nonprofit’s relationship with its donors.

-Better Business Bureau Wise Giving Alliance: Standards for Charity Accountability -Charities Review Council: Accountability Standards -Charity Navigator considers whether a nonprofit has a “donor privacy policy” in its evaluation

The Council of Nonprofits http://www.councilofnonprofits.org For institutional use only. Distribution to any other audience is prohibited.

Bibliography