The Importance of Soft Assets

Dear Diary,

When conducting research, a prospect’s visible assets (a noun, defined as a useful or valuable thing; a person; objects; or property owned), are always analyzed. Assets can be divided into two categories – Hard Assets, the most prominent, includes real properties (homes), stock (shares of a company), compensation, a family foundation – philanthropic entities that also hold assets, art, yachts, and planes. The second category is Soft Assets, the least capitalized. Examples of soft assets include hobbies, membership dues to clubs, patents, philanthropic giving (arguable), career history and trajectory, investments, family wealth and inheritance (arguable), and luxurious displays of wealth (exe: car collections).

Additional definitions: Fixed Assets (think of the real property) it is a long-term tangible asset. Current Assets (think of the membership dues to clubs) it is a short-term asset, tradable, and liquid.  

A prospect researcher’s estimates are based on 5 percent of a prospect’s visible assets, assuming that the prospect could give 5 percent, over the standard 3 to 5 years. 5 Percent is a general marker for a major gift, and 1 to 2 percent is a general marker for annual giving.

To understand a person’s full potential, you have to analyze both hard and soft assets. Imagine a capacity range based solely on a prospect’s home value of $600,000, their firm’s 2021 revenue was $10 million, and total compensation was $1,150,000, in 2021.

What is missing? What could actually enhance a prospect’s capacity to give?

1)  Career history – What is their industry? And how far have they grown in the field? Does there seem to be professional growth in their future? How old are they? Are they investing in projects or companies?

2)  Board services – Are they on any public boards that could lead to additional compensation through cash and/or stock?

3) Philanthropy – Past giving and philanthropic interests can give a very clear view of how much a prospect is willing to donate, which equates to a hard asset, but I see how it can have a softer appeal when you consider the giving areas, and the likelihood to give again. While you look at what a person owns, consider what they have given away, and investments in their community.

4)  Family – Family wealth matters, it contributes to the way someone grows up, establishes their privilege, and gives them an advantage. Consider their parents’ careers. Is there a spouse and what are their career endeavors? Paint a full picture on a prospect because a holistic perspective is only going to help your goal.

NOTE: If additional information is not available, then that is a different case. However, this entry is in support of seeking soft assets to expand a prospect’s capacity.

So, I offer you two scenarios, which analysis makes the most sense, and which scenario is taking all assets into consideration?

Mark’s home value is $600,000, his firm’s 2021 revenue was $10 million, and total compensation was $1,150,000 in 2021. Based on this, Mark has the estimated capacity to give at $100,000 to $250,000, over several years.

Mark’s home value of $600,000, his firm’s 2021 revenue of $10 million, and total compensation of $1,150,000. Mark is a Partner at a firm of 300 employees and 10 partners. Mark is married to Ngozi, a neurosurgeon that earned $800,000 last year. She makes donations on behalf of the family at $5,000 to $10,000 every quarter. Ngozi has been philanthropic since she was a child thanks to her parents’ philanthropic foundation setting an example. Based on this, Mark and Ngozi have the estimated capacity to pledge $250,000 to $500,000, over several years.

Rethink the importance of soft assets, and what you are counting on when analyzing capacity.

Until next time, May 15th!