Though offering gift annuities is not appropriate for every charitable organization, gift annuities make a lot of sense for organizations with larger numbers of loyal donors in an older demographic.
While working in an organization with a substantial nationwide charitable gift annuity program (with more than 5,000 contracts at any one time), I learned the importance of continually encouraging gift annuity contributions to make up for annuitants who “matured to glory.” With more contracts and a larger investment pool, an organization can better spread risks associated with the commitment to make annuity payments for the lifetimes of all the annuitants.
As part of a comprehensive gift planning operation, the organization’s gift annuity program had been in place long before I showed up. The first time I personally compiled and mailed a gift annuity proposal (illustration and cover letter), I used $10,000 as the gift amount. A completed CGA application form arrived back with a check for $50,000. It seemed like gift annuities sold themselves.
This was the result of our organization’s ability to continually and successfully reach existing and potential gift annuity donors through marketing efforts. These days, as I work with CGA-issuing client organizations on newsletters and other gift planning promotions, I regularly encourage including at least a reminder that CGAs are available.
From experience, I also think a good deal of fundraising success can come from brief and clear cover letters. No word salad and no hyperbole.
During my gift planning days, this clarity extended into my role of managing our state CGA registrations and reviewing marketing materials. Our organization hadn’t been immune to the technique of comparing gift annuities to certificates of deposit. Fortunately, we were involved with the American Council on Gift Annuities. This and other resources, like the Charitable Giving Tax Service, helped inform adjustments we made to our program from time to time.
I still think about the 2009 Mid-America Foundation decision (Warfield v. Bestgen), where a U.S. Court of Appeals noted that Mid-America Foundation’s promotional materials emphasized tax savings and the opportunity for financial gain and income generation. While this organization’s “CGA” offering became widely regarded as a Ponzi scheme that was not legitimately charitable, the appellate court case alerted many in our sector to concerns about using gift annuity marketing language that could be construed as offering investments subject to regulation under federal securities law.
At the time, I even advised my organization that ensuring “lifetime stream of income” might be something to move away from, as the court had specifically drawn attention to it. I suggested referring instead to “lifetime annuity payments.” It’s a subtle distinction, and I don’t think “stream of income” is the worst thing to say, though it also isn’t necessary to say it.
The appeals court described problematic language used by Mid-America Foundation. Among phrases and sentiments that still seem obvious as those to avoid are “attractive returns,” “amount you deposit,” “current average net-yield” and “to get this same return through the stock market, [the hypothetical investor] would have had to find investments that pay dividends of 19.3%! …. The rate of return on a Mid-America Foundation ‘Gift Annuity’ is hard to beat!”
Given the structure of a charitable gift annuity, it’s easy to get caught up in promoting the fact that someone is getting something back as a return on investment. After all, the broader fundraising community, and donors themselves, sometimes refer to any particular contribution as an “investment” in the organization. Still, that doesn’t give charitable organizations license to market “investments.” I think we always have to remember that what we’re promoting are intrinsic rewards that come from making charitable contributions.
The main things to remember:
- Regularly promote your gift annuity program.
- Promote gifts, not investments.
by Laura Knitt, J.D., Sharpe Group Senior Consultant
Sharpe Group Charitable Gift Annuity Publications
Sharpe Group has two publications to help you communicate the benefits of gift annuities to your donors. Both of these printed materials are designed to fit into a #10 envelope and can include your organization’s logo and contact information. These publications are also available with or without the American Council on Gift Annuities single-life rates printed on the back.
“Giving Through Gift Annuities” is a 16-page booklet offering a thorough discussion of the role gift annuities can play in retirement planning and providing for loved ones. This booklet can include your organization’s logo and contact information on the front and back panels.
A more concise offering, “Questions & Answers About Gift Annuities” is a brochure which allows you to add your overall branding to the printed piece with your choice of images and accent colors and the ability to use a four-color logo.
For more information, click here or contact one of our Sharpe Group Consultants.
Sharpe Group will continue to post helpful information for you here on our blog and on our social media sites. If this blog was shared with you and you wish to sign up, you can do so at SHARPEnet.com/blog.
We welcome questions you’d like us to address. Email us at info@SHARPEnet.com and we’ll share your question and our thoughts in this blog and on social media.