Millionaires Drop in Number; Recruiting Big Gifts for Hospitals

The ranks of the world’s financial elite have thinned, and a staggering amount of their wealth has been lost to the recession, Ileana van der Linde, a principal in Capgemini’s wealth-management practice, told the more than 700 fund raisers gathered here to discuss trends in identifying potential donors.

For the last 13 years, Capgemini and Merrill Lynch Global Wealth Management have published a report that tracks the number and distribution of high-net-worth individuals — defined as people with assets of $1-million or more available to invest — and the economic trends that affect them.

The 2009 World Wealth Report, Ms. van der Linde told conference participants, found that at the end of 2008, the number of such wealthy people worldwide was down 14.9 percent compared with 2007. The value of their combined wealth was $32.8-trillion, down from $40.7-trillion in 2007, a drop of 19.5 percent.

Hong Kong lost the highest percentage of wealthy people, 61.3 percent; followed by India, which lost 31.6 percent; Russia, 28.5 percent; and Britain, 26.3 percent.

“These are both mature and emerging economies,” said Ms. van der Linde. “It’s not just the new ones all lose money quickly and the mature ones generally stay more stable. This downturn is something that impacted every single region.”

Ms. van der Linde’s remarks came at the annual meeting of APRA, an organization that represents fund raisers who conduct research on prospective donors and manage information about contributors.

The United States, Japan, and Germany are currently home to 54 percent of the world’s wealthy people, but the report said that concentration was changing. It predicted that by 2013 the wealth held by high-net-worth individuals in the Asia-Pacific region would exceed that held by wealthy people in North America.

One of the biggest misperceptions about wealthy people is that most of them have inherited their money, Ms. van der Linde told the audience. In reality, she said, business ownership is the No. 1 source of their wealth, followed by income and then inheritance.

People who are working for their wealth have a very different approach to money than people who inherited their wealth, said Ms. van der Linde.

“The mind-set is of people who are involved, who want information, who realize what technology can do, that you have access to information,” she said. “That’s what they expect of their own firm and also expect of the firms that they do business with.”

One indicator that Ms. van der Linde said charity leaders should pay attention to: The World Wealth Report found that in 2008 27 percent of wealthy people around the world withdrew assets or left the companies that were managing their investments. Ms. van der Linde said that the rate most years is around 5 percent. Wealthy people who were under the age of 45 or whose source of wealth was business ownership or income were more likely than others to pull their funds.

As wealthy people began to lose confidence, said Ms. van der Linde, “what they told their wealth-management firms was, ‘If you cannot tell me what I have in my portfolio, how much of it I have, how that investment is doing, I’m out of here.’”

Ms. van der Linde told the story of one very wealthy woman who waited 10 days and still did not receive a report on her portfolio from her primary bank. The woman then went to another institution she banked with and asked how long it would take to receive a report on her holdings. The bank said one day, and “in one fell swoop” the woman moved $25-million to the second bank.

“This is going to pervade not just wealth management, but the demands that they put on the institutions that they work with,” Ms. van der Linde told the fund raisers in the audience. “You better be able to report your balance sheets, provide the transparency and simplicity, because at this point, the assumption that everything is OK and being taken care of — you can’t take it for granted anymore.”

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Until Duke Medicine set up its Grateful Patient Engagement program in 2007, there was no organized effort to reach out to patients as potential donors.

“Part of that stemmed from when the HIPAA regulation went into place,” said Helen Poole, the program’s executive director, referring to medical-privacy measures included in the Health Insurance Portability and Accountability Act, which Congress passed in 1996. “People were so nervous. They didn’t know what steps they could take and they couldn’t take, so a lot of people just didn’t take any step.”

But more recently, she said, health-care systems across the country have slowly started to build formal efforts to attract gifts from people who have been treated at the hospitals.

One of the first steps in creating the program at Duke Medicine was six months of discussion with the organization’s legal and compliance departments to set up the ground rules.

Interpretations of the HIPAA rules vary from institution to institution, Ms. Poole said, but Duke Medicine decided that fund raisers could receive the names of patients and the dates that they received care, but could not know the patients’ diagnoses or the names of their doctors. They are also not allowed to visit patients while they are in the hospital, unless the patient is a previous donor who has requested a visit.

Fund raisers who oversee the Grateful Patient Engagement program now receive a daily list of people who were admitted to the hospital. The list excludes people under the age of 35, prisoners, and psychiatric patients, as well as people who have specifically asked not to be solicited, have received Medicaid or charity care, or have had what the hospital calls a “risk-management event,” which Ms. Poole said could range from a minor concern they had about their care to something very serious like a medication error.

Each night, the list is uploaded to a wealth-screening service that runs those names against 12 databases of publicly available information on real-estate holdings, stock ownership, charitable contributions, and other data.

The results of the screening, along with a rating of the person’s ability to make a large gift, are waiting when fund raisers arrive at the office the next morning.

Fund raisers review the results. Then the names of people who have been rated as capable of making a gift of $25,000 or more are sent to Duke Medicine’s risk-management department for a second review, and people who have less wealth are sent direct-mail appeals tailored specifically to former patients. People who can give large donations receive a letter, signed by a senior vice chancellor, roughly four weeks after their discharge.

Starting the outreach process relatively soon is critical in hospital fund raising, Ms. Poole said. While large gifts by alumni grow over time, hospital patients are much more likely to make a big donation soon after receiving care and become less and less likely the more time goes by.

Ms. Poole calls soon after people have received the chancellor’s letter to try to set up a visit, during which she asks them about their experiences as a patient and provides information about research and other programs at Duke Medicine.

“I always try to make sure that I can pretty easily explain some of the latest research in layman’s terms for them that might just grab them,” she said.

She uses the visits to gauge whether people are interested in building stronger ties to Duke Medicine, and if so, which fund raiser might be the most successful with them. The Grateful Patient Engagement program, while still relatively new, is showing significant results.

During the 2009 fiscal year, which ended in June, donors identified through the program made a $1-million bequest, a $200,000 bequest, one $100,000 gift, two $50,000 gifts, and three $10,000 pledges. In addition, fund raisers are working with donors on four planned-gift proposals, and the program’s direct-mail efforts garnered more than $28,000.

Over the last year, the program has focused on training doctors and other medical professionals about the importance of philanthropy.

Ms. Poole talked about a missed opportunity that happened while she was working as a nurse in Duke Medicine’s hospice program.

The family of a hospice patient asked a staff member what they could do to help the hospice, saying they could pay for a new building. The staff member said, No, what they needed was a fax machine, which the family purchased. By the time the hospice leadership heard about the family’s interest, more than a year later, they had already chosen another charity to support.

“I tell that story a lot,” said Ms. Poole. “We do this in the medical professions: ‘No, no, no it’s OK. We’re glad to do this.’ We are robbing those patients of part of their healing process of being able to give back.”

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Fund raisers who are responsible for identifying potential big donors should think of them like an investment portfolio, Augie Freda, director of development research at the University of Notre Dame, said during a panel discussion at the conference. And as with investments, it’s important to diversify and seek out people in different industries, he said.

Right now, he said, if an organization’s prospect portfolio is too heavily weighted toward people who work in financial services, that group is in “a fair bit of trouble.”

But as tough as the current economy is, some industries, such as energy, entertainment, and hospitality, are holding their own — or at least haven’t suffered as severe a blow.

“If you have prospects in the industries that are doing well, it can offset the prospects that are in industries that aren’t doing well,” said Mr. Freda.

He advised organizations to look ahead and think about what industries might be on the upswing in 2010. Now, he said, is the time for groups to try to identify people in those industries who have a connection to their organization and sufficient wealth to make a large gift in the future.