For those of you out there still trying to avoid using the words “net worth,” I’m here to tell you that the war is over – and you lost. There might still be skirmishes left unresolved in out-of-the-way places, but with the entrance to the sector of heavily-funded start-up companies like Windfall, there is no avoiding net worth.
Not only are people using net worth – with success, real or perceived – but Windfall pushes the envelope claiming to offer “precise net worth data, not a score or a range,” which we all know is not possible. I find it difficult to believe that all of the individuals in their database have opened up their private finances to the company to calculate assets minus liabilities.
But it’s great marketing. And that means there is a pain point that is not being relieved by capacity ratings.
Capacity Ratings
Capacity, and more specifically, major gift capacity, saturated the market in tandem with electronic wealth screenings. Typically, it is based on a percentage of found or visible assets and multiplied by 5, representing a 5-year pledge, which was standard at the time. Over time companies have added more nuance to their proprietary scores.
When wealth screenings first emerged, this information felt like manna from heaven! Suddenly hundreds of thousands of records could be rated in the blink of an eye. And then those segments could be evaluated and assigned to development officers. Major gifts became a …movement!
But fundraising professionals, not least the prospect researchers among them, sniffed out the discrepancies and imperfections in the automated capacity rating approach. The screening companies responded with algorithms of increasing accuracy, but between the marketing language that over-promised, the limitations of visible assets, and the increasing efficiencies in major gift programs, consumer pain continues to emerge.
Is that consumer pain assuaged with a net worth number, such as provided by Windfall?
The Prospect That Didn’t Rate
I recently had a client asking for “just a capacity rating” on a few prospects, and super quick before her meeting with the CEO. All you researchers out there know how fraught with peril that request was! But I understood the pressure she was under and I really wanted to help.
And yet, the electronic wealth screening capacity rating was low and this prospect had occupation suggesting there was more. Without time to research I was without a good response, beyond “I think there’s more.”
We agreed that deeper research was what would help this CEO who was keen to know Net Worth – forget about capacity rating. And sure enough, deeper research revealed that the husband had serious monetary potential that was difficult to untangle, let alone value. (Tell me again how Delaware can get away with making it super difficult to identify officers and members of companies?)
But we fit the couple into a wealth tier based on visible assets, an asset allocation model derived from Capgemini data, and, well, our subjective assessment.
Wait for it… Here Comes the Backlash
So, what does Windfall have that I haven’t got? Data! Algorithms! More Data!
I’ve been talking to a few data companies who are looking to fill in gaps in the nonprofit fundraising market. Based on those conversations, the likelihood of a “scandal” involving nonprofits and data feels like an inevitability.
It’s not that it’s “wrong” to use all kinds of new and old data in new ways, but it’s a tough sell to get an organization’s leadership on board with communicating that usage to donors and the public. Policies are dull and boring and no-one cares – until they do. Ask any fundraiser in the U.K., especially at organizations that have been fined for violating GDPR.
As if that’s not a big enough hurdle, the data sources being used by these companies is not known. It’s not that companies are being secretive necessarily, but unlike the traditional wealth screening products, we have not been demanding full disclosure.
I remember the news headline fallout from the early wealth screening days. This new use of data smells like trouble all over again.
Caring is Sharing
Similar to the early days in wealth screenings, using data in new ways isn’t “right” or “wrong,” but it does need to be evaluated and communicated.
Opening up discussion, writing opinion pieces, presenting, and otherwise sharing your experience and knowledge with others, especially through global forums provided by associations like Apra and AFP, is worth the effort and will benefit you and your organization.
Estimating net worth isn’t the bogey man. Lax data policies and poor communication are the openings for trouble!