May 21, 2009

There Are Fewer Millionaires These Days

The numbers of millionaires in the United States dropped by more than a quarter last year, and those millionaires have seen their assets drop in value by about a third.

Research from Spectrem Group, a Chicago-based consulting firm, indicates the number of American households with a net worth of $1 million or more fell 27 percent to 6.7 million in 2008, the lowest level in five years. Those with a net worth of $5 million or more dropped by 28 percent, to 840,000 last year while households with $500,000 or more in net worth declined 28 percent in 2008 to 11.3 million, down from 15.7 million in 2007.

“America has a lot fewer millionaires than when this economic crisis began. The 2008 decline --- which reduced the millionaire ranks by 2.5 million households -- shrinks this important population close to levels seen in the last recession. The culprit is not just the stock market, which we all know has dropped precipitously, but broad declines in the asset classes available to the nation’s wealthiest investors,” George Walper, Jr., president of Spectrem Group, said in a statement accompanying the release of the report.

To keep up with sharp drops in wealth or news on donors that you wouldn’t find in public documents, nonprofits might try the old-fashioned route: talking to people. “All of this wealth profiling ‘en masse’ has come out during the boom period of the past 20 years with more computers and information,” said Robert Sharpe, Jr., president of Memphis-based The Sharpe Group. “Prior to that, people based their profiling on information that they gathered through internal research, use of volunteers on committees, etc., who knew about wealth that didn’t ever ‘show up,’” he said.

In addition to the usual sources of wealth to examine, such as real estate and stocks, nonprofits also might want include the client list of convicted financier Bernard Madoff in their resources. The name of people who invested with Madoff, unwittingly in his multibillion-dollar Ponzi scheme, has become public information through court filings during the last several months.

“Most of the wealth that was lost in the Madoff scandal was not invisible to the public in the first place,” said David Lamb, senior consultant, Blackbaud, Target Analytics Division. “A lot of people who had money with Madoff, nonprofit offices didn’t know about it. Now there is this list of people who lost money with Madoff, certainly everyone looking at it to see prospects on it,” he said.

This list might be the first that anyone even knew that these people had investments with Madoff. While it might not have an effect on the way nonprofits search for prospects, Lamb said if any donors are on the list, organizations “definitely want to take a second look at what their capacity might be. It could be considerably less than what was before.”

Barlow Mann, chief operating officer of The Sharpe Group, stressed the idea of learning from face-to-face contacts what you might not get from, or until, public documents are filed.

“The key will be to find donors and prospects who are interested in the work that you are doing and to help them give by whatever means they are comfortable with, and that is not likely to be a large check or three-year pledge,” Mann said. “If the timing is not right, treat them the way you would want to be treated with great respect and stay in touch,” he said. “Eventually the economy will recover and most of your major gift prospects will too.”

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This article is from NPT Instant Fundraising, a publication of The NonProfit Times.

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