Wealth events – a primer

Wealth events are the most significant financial occasions that can happen to a person in their life. They’re pretty interesting for prospect development pros, too, because they allow us to sharpen our pencils and get down to the math, create beautiful family trees, or follow really interesting stories in the press.

Most of the time, we won’t be able to find out the whole story. Sometimes, we’ll only be able to report that an event has happened in our prospective donor’s life, but without much more detail than that. Occasionally, the wealth event news we’re discovering won’t be positive, such as a bankruptcy. In rare golden moments, we’ll have a news report or transaction filing that shares everything we want to know.

So what are wealth events, anyway?

Wealth events include…

• Winning the lottery
• Sale of a privately-held business
• Sale of a tangible asset: real estate, an art collection, etc.
• Initial public offering
• Conversion/liquidation of securities or options
• Divorce or other legal settlement
• Bankruptcy
• Substantial inheritance or unexpected financial windfall
• Lump-sum retirement payout
• Insurance payout

Now that you have a better idea of what wealth events are, I’d like to share a few ideas for where to go to help you find information about each one. As always, if you have suggestions to help others in their research, don’t hesitate to share them in the comments.

Lottery winnings

Look for newspaper articles, or go direct to the state’s Lottery Commission office (click on the state names to see the list of past winner from Massachusetts and Pennsylvania as examples). Lottery winners winning multi-millions can usually opt to take a lump-sum or have the payout spread out over a certain number of years, and you can check which one the winner opted for.

Sale of a privately-held business

Generally speaking, it is rare to find information about how much a privately-held company sold for unless it was purchased by a publicly held company (which is required to report details of the purchase). In that case, check out SEC documents: the publicly-held company’s 10-K report should have information about the transaction.

If the company recently purchased a privately-held company from an individual and that individual is now an executive or sits on the board, you may also want to look at the company’s proxy statement (here’s how to find one) which may tell you how much the individual was compensated for the purchase of their company, and/or how much stock they now hold in the company which purchased it.

Sometimes local newspapers can get wind of purchase prices, too, so in addition to checking out the paper of record for the state, look for a local paper’s account of the sale, too.

Sale of a tangible asset: real estate, an art collection, etc.

Finding out the sale price of a piece of property is relatively easy, especially with tools such as LexisNexis, PropertyShark, Zillow and others to assist us. If you’re having trouble (or don’t have access to fee-based sources), go directly to the website of the property’s local assessor’s office. Deed information can be very useful and most municipalities that govern real estate transactions provide the information for free.

The sale of a rare jewelry collection or multi-million dollar piece of artwork is less easy to discover, because many times these sales are managed by an auction house, or done privately through a broker. Newspaper articles tend to highlight collections sold by the estate of someone recently deceased or with the owner(s) remaining anonymous. Every once in a while you get lucky though.

Initial public offering (IPO)

An initial public offering is simply the name of the event when a privately-held company becomes public-held, meaning that from that point on the company will offer shares that provide units of ownership to the general public.

In an IPO, lots of people stand to make money. The owners or founders will usually experience the largest wealth event, but depending on how the company is set up, everyone down to the company’s part-time janitor may come into money if the IPO does well. Other people who make money from IPOs include the company underwriting the IPO, banks, and the lawyers and accountants involved. (For some fun reading, check out these articles on the top IPOs of 2017 so far, and how to recognize the signs of a company that is thinking about floating an IPO.

Conversion/liquidation of securities or options

Top executives in publicly-held companies are frequently compensated (in addition to their salary) with shares of stock or options to purchase stock later at a discount price. Shares of stock can be converted into cash at any time, but options don’t “vest” (become valid) until a specific date. This is a great way to get high-performing executives to stick around – see this Fortune magazine article about Apple CEO Tim Cook’s stock options conversion.

Information about how many shares of stock/options a company executive or board member holds is easy to find if you know where to look. If you don’t have access to a fee-based resource like Lexis Securities Mosaic, go to SEC.gov and look at the company’s most recent proxy statement, which in IRS form-speak is the DEF14, or “Definitive Proxy Statement” to find information about the person in question.

You may think that a proxy statement looks daunting at first if you’ve never read one, but once you get going, you’ll find that they make pretty fascinating reading. After you’ve read two or three, you’ll start to grasp fairly quickly which sections to hurry to. This is where a pencil and a piece of paper come in handy – you will be doing some simple math and keeping track of vesting schedules, but it will be great experience and worth it when you can keep frontline fundraisers alerted to these significant positive wealth events. Be aware that many times companies bury the best information at the end of the proxy and in the teeny tiny footnotes, figuring that people won’t last long enough to get there.

Divorce or other legal settlement

When two people divorce, part of the discovery process involves listing all of the couple’s assets and liabilities, and that information goes into the court’s record. I’ve never looked at a divorce settlement, but I know you can get copies of them in the county probate office in which the divorce is filed. My guess is that most divorce settlements are sealed as a matter of routine, so even if you did get a copy of what was still public information, you probably wouldn’t be any the wiser about the former couple’s assets.

That being said, if the couple is high profile enough, there will be plenty of speculative news coverage about it, so check the local newspaper for details. The fact of a divorce can be either a positive or a negative wealth event, depending on which party you’re researching.

Other legal settlements could include a judgement which involved a payout due to injuries inflicted by or upon the person you’re researching, or a payout to an executive which was negotiated when they were hired or on their departure. Again, these payouts will either be tracked in a proxy statement (in the case of a pre-negotiated severance for an executive in a publicly-held company), or in the newspapers, or not at all.

Bankruptcy

Although bankruptcy is a negative wealth event, it’s clearly important to know if your prospective donor is no longer able to fulfil a pledge (or should be asked for a gift at all). Like divorce settlements, bankruptcy filings, liens, and judgments are also available from the county in which the bankruptcy was filed and the information in them is likely sealed from public scrutiny.

Substantial inheritance or unexpected financial windfall

This very positive wealth event is a no-brainer in terms of its importance for prospect research purposes…and also the one about which we very likely will find the least amount of information in publicly-held sources.

That being said, this is where drawing up family trees and reading biographies and family histories makes a lot of sense. From those family trees and biographical sources many times you can find – if not the exact answer you’re looking for – definite pointers to where the family wealth was originally derived and how much may have been, or may in the future be, divided.

Lump-sum retirement payout

Beginning at age 59.5, people who will receive a pension from their company have the option to take a lump-sum payout. There are tax implications for doing this, and so a person with other significant assets may be interested in minimizing their tax burden by donating a portion of it. Not many companies offer true pensions these days, but if you have a constituent who has been enrolled in one and is considering taking a lump sum payment, this is a positive wealth event you should be aware of.

Insurance payout

An insurance payout is a positive wealth event that usually derives from a negative life event, such as the death of a spouse, a major theft, or a hurricane destroying a vacation home. If you learn of the life event, an insurance payout can certainly be assumed, but publicly-available information will be nonexistent.

The more you know

So those are examples of wealth events and how you might go about researching them. Most of the time you learn about them by pure luck, but as you’re researching, don’t forget to do some smart speculation (as in “Hmmmm…my prospect has put in 35 years at GE…”) And always be certain to track the ones that are easy to find – such as the vesting dates of options and other potential payouts buried in a proxy report’s fine print. You’ll be glad you did!