Is legacy fundraising actually higher leverage?

It’s of­ten been pointed out that legacy fundrais­ing (ask­ing peo­ple to make a com­mit­ment to give in their will) has a much higher re­turn than other types of fundrais­ing.

On av­er­age, $1 spent fundrais­ing raises about $4.

$1 spent on legacy fundrais­ing, how­ever, raises about $30.

This is taken to be a rea­son to fo­cus more on legacy fundrais­ing.

How­ever, it just struck me that this is wrong. (Apolo­gies if this point has already been made el­se­where).

With legacy dona­tions, you only get the money a long way in the fu­ture. If you per­suade some­one who’s 40 with a life ex­pec­tancy of 80, you’ll get it in about 40 years. If you per­suade some­one who’s 20, you’ll get it in about 60 years, or per­haps longer. With nor­mal fundrais­ing, you get the money pretty fast—of­ten nearly im­me­di­ately, or oth­er­wise over a cou­ple of years.

Money in the fu­ture is less valuable, so legacy com­mit­ments are less valuable.
Let’s quan­tify the effect. Rather than get­ting a legacy com­mit­ment, you could raise money now and in­vest it in the stock mar­ket. If you do that, you could grow it at about 5% per year (real re­turns).

$1 in­vested in short-run fundrais­ing gen­er­ates $4.

Then $4 in­vested at 5% for 40 years will be worth $28.

And that’s about $30 - what you would have got from the legacy com­mit­ment.

So it looks like the ex­tra re­turns of legacy fundrais­ing are fully ex­plained by the fact that you have to wait a long time for the money. It isn’t ac­tu­ally a more at­trac­tive method of fundrais­ing.

More­over, there’s rea­sons in­di­vi­d­ual effec­tive al­tru­ists and or­gani­sa­tions might want to use a dis­count rate even higher than 5%. If you do that, or if you raise legacy com­mit­ments from peo­ple un­der 40, legacy fundrais­ing is go­ing to be sub­stan­tially less at­trac­tive than reg­u­lar fundrais­ing.