JPowell, Rate Cuts, and Fundraising...Now What?

The U.S. Federal Reserve announced this week (September 18, 2024) a 50 basis point cut in interest rates, with reactions of joy from some and concern from others.  So what?  How does that impact me as a nonprofit leader?

In this special edition of the Practice of Nonprofit Leadership, Nathan Ruby tackles that topic and provides some practical fundraising tips in light of the interest rate news. 

Chapters

• 0:06 Navigating Market Volatility for Donors
• 9:10 Donor Giving Predictions for Next Year

Transcript

Nathan Ruby: 0:06

your donors are your donors.

Nathan Ruby: 0:09

They are unique to you. Nobody else in the universe, no other organization in the universe, has the same donor file as you. So if you hear an expert saying this is going to happen and it means this and blah, blah, blah, that doesn't mean that it's going to happen to you or your donors. Welcome to the Practice of Nonprofit Leadership. I'm Nathan Ruby. Well, big news happened a couple of days ago from when I'm recording this. On Wednesday, september 18th 2024, the Federal Reserve Chairman, jerome Powell, announced a 50 basis point cut in interest rates. Now you you will hear it on the radio or on whatever. Whatever news source you watch, you may hear it as a 50 point basis cut. You may also hear it referred to as 50 bips. For us, normal non-economist fundraisers, it basically means he lowered the rate by a half a point. That's what it actually means and I don't know if you listen to the financial media. I do. It's economics and monetary policy is kind of interesting to me. I know that's kind of weird and makes me a little bit of a. I don't know. I don't know what it makes me, but I just find it interesting. I think it's probably my history background. I love history that's what my degree is in and so I love the history of economics and how it all ties together, because monetary policy makes such an important impact in our lives in your life and mine and our families and also our donors and so it is worthwhile to at least have an idea of what's going on. But you have to be so careful because you could get totally overwhelmed with it really fast. And so on this 50 basis point, cut, the media, the financial media is all over the place on it. He did too much, he didn't do enough. This is terrible for the economy. This is great for the economy. Everyone out there has their own perspective and their own thesis on how this is going to play out. But here, at the practice of nonprofit leadership and for you and my donors, you know it's, and for us it's more of well, what do we do to prepare for what's going to happen from this basis point and cut? And so here here's a couple of things to remember. And then I've got, uh, I've got one thing for you to do that will help you kind of navigate your way through this. Uh, and first of all, just remember that your donors are your donors. It's your donor file. Nobody else in the world has the same donors that you do, and so if you hear anybody out there, any experts, saying, oh well, this is going to happen and this is going to be the impact, blah, blah, blah, blah, that doesn't mean that it's going to happen to you and your donors. Okay, you are unique and different than everybody else. Second, even though the 50 basis point drop is a big one and it is it's a whopper. It's not the biggest one ever, but it's a pretty good one for the first cut.

Nathan Ruby: 3:34

When the Fed starts to cut rates, but it doesn't mean that rates are going to go into a free fall. Right now there are a lot of your credit card rates and your car loan rates. Those will probably react pretty quickly. But real estate rates and other borrowing rates that people borrow on, those are sometimes defined off of something else other than that interest rate from the Fed, or it could be a quarterly or semi-annual or annual. So not everything is going to just drop like a rock just because he dropped that rate. So there are some things that will take a while to happen, so you're not going to see everything at once.

Nathan Ruby: 4:17

The other thing is, the market does not like volatility and volatility impacts people differently. So the 50 basis points it's a symptom, it's not the root cause. So the drop in the interest rate is going to add to the volatility. But part of the reason that there is a drop in the rate is because of the way the economy is and what's happening, and so the volatility does not impact all of your donors the same. So you could have, let's say, one of your top five most affluent donors and so that donor they could have their investments positioned for long-term growth and income. So individual volatility in the market, now increased by this interest rate drop, it's not really going to affect them that much. Or they have. All of their assets are wrapped up in their business and their business is okay. Their business is resistant to some of the ups and downs in the market, so it's not going to be a big deal for them.

Nathan Ruby: 5:38

Other, maybe some of your middle donors, a lot of your middle donors are still giving out of income and for them it may be a little different. They may have if I'm giving $500 a year to your organization and it's coming out of my income, but now because the economy is shaky and there's layoffs going on and all of these things, that maybe I'm a little concerned and I'm pulling back and so I'm going to drop. You know, if I give to five organizations, maybe in 2025, I'm only going to give to two, or maybe I only give to one, and so there's that that impacts them differently. And then you know, you could get into some of your smaller donors that are maybe are on fixed incomes or, you know, retirement incomes and for them, people that where, where income is a, is more of an issue. You know it's 18 bucks, 15 bucks to go eat at McDonald's. So you know, there, there's folks there that may, just they just can't do it anymore, and so the market and volatility and the economy hits people differently. And so my point here is don't make an assumption that this is going to. You know your donors are going to all do this.

Nathan Ruby: 7:01

Now, I also think that there's another aspect to this, and that is the mindset of, I think, our population in general, because right now they're just being and you probably are too, if you listen to the radio at all or TV you're just getting bombarded with how bad things are and how the economy is bad, and you know, of course, we're going into a very contentious election, and so you've got both sides that are just chirping constantly, and so you've got both sides that are just chirping constantly, and so there's a talking about volatility. Volatility is a lot of volatility in your emotions and inside of you, and also inside of your donors, so I think that's playing a role as well. So, ok, so what are we? What are we going to do? So here's what I'm recommending you do, and I am actually looking at myself as I record this. So I'm literally looking at myself in the mirror, but here's what I'm going to do, and I am actually looking at myself as I record this. So I'm literally looking at myself in the mirror, but here's what I'm going to do.

Nathan Ruby: 7:53

I'm going to go out and I'm going to see my donors, and this is what I'm going to say to them. Well, I'm going to go see them, I'll see them face to face, and if I can't see them face to face, I'll do it on Zoom, so at least I can see them that way. And I'm going to do four things. First thing I'm going to do is I'm going to thank them for their giving. That is the single best thing you could do to a current donor is just remind them how thankful you are for their gifts. So that's number one. Let's thank them for their giving. Number two give them your vision for the future. This is what we're doing now. That's okay, you could. This is, this, is this. This is what we're doing now. That's okay, you go, you could reference that, but this is where we're going and this is what we're trying to achieve. This is our vision, this is our mission. Here's a story about how we're achieving that and this is where we want to go in the future. Um, so that's. Two is is vision for the for the future.

Nathan Ruby: 8:47

Reinforce how important their giving is to finish this year strong. Uh, you know we're in September. Uh, we're coming up to year end giving season. Uh, this is. You know, we're going to be elections in November. Um, you know, just remind them of how important it is for them to finish, for you to finish strong this year.

Nathan Ruby: 9:10

Um, and then, lastly, and this is the most important one, is, ask them if they see any major changes coming in their giving for next year. Um, and it's really, it's really not that hard If you have any relationship with your donor at all. Um, it is okay, it might be a little awkward, um, but it doesn't have to be a whole lot awkward. And you just say something like hey, we're starting to work on next year's budget. Here at my organization, we're already in planning next year's budget.

Nathan Ruby: 9:45

So for me, that is actually what we're doing and, as I see, in the next year's budget, we're going to have an increase as we work harder than ever to hit that vision and mission and you know, referencing back the vision that you talked about earlier in the conversation and for us to reach those things, we know that we are going to have to probably raise more money than we did last year, and so I'm just you know, I'm visiting with donors and asking do you see anything in the next 12 to 18 months that would significantly impact your giving? That's how I'm going to ask it. And then I'm just going to let it sit there. And you know, cause they may have. Well, yeah, I'm planning on selling my business, so I'm going to double my giving. Or, um, well, you know, uh, business is down right now, and you now, and fourth quarter doesn't look good either. So, yeah, it's a possibility that I may see a decrease next year.

Nathan Ruby: 10:40

So just have that conversation. Don't feel like you're prying or you're being rude or overstepping. That is a very benign question and it is a real question and your donors will appreciate it hearing from you and being asked that because they're your donors. Prudence for you to be looking at expenses and revenue over the next year and where are you going to be so you can use those resources to their most effectiveness. So don't worry about asking the question.

Nathan Ruby: 11:24

So I'm going to do that with some of my top donors and then some of my middle donors and then some of my lower donors, and get a sense of what's happening. And then you know we can, we can plan accordingly. So that's what I'm going to do and you know, like I said a little bit a bit ago, it's really not about the rate cuts. I think the rate cuts were. Just when I saw that happen, I wanted to get out and do this, do this session real quick for you. It's not the rates, it's the overall economy. And just remember that not everyone is going to have the same experience, not everyone's going to have the same point of view and for sure not everybody is going to have the same consequences of what's going on in the markets. Right now, the best thing you could do is to go talk to your donors and just ask them what they see coming up in the future for them, so that you could be prepared for whatever is coming next.