Advisors and Philanthropy

The Times They Are A-Changin’

RESEARCH PAPER 

The face of philanthropy is changing, and recent studies show a big part of that change is in how donors (and financial advisors) are connecting with charities. Craig C. Wruck could not have said it any better in Planned Giving in a Nutshell *.

A 2016 study by U.S. Trust and the Philanthropic Initiative called “High Net Worth Philanthropy: Charitable Practices and Preferences of Wealthy Households” revealed that an increasing number of wealthy donors are talking with — or want to talk with — financial and legal advisors about their philanthropic intentions and options. To compile the data, researchers surveyed advisors — financial/wealth advisors, attorneys, and accountants — and people with investable assets of $3 million and up.

According to the findings, a little over 23 percent of wealthy individuals consulted with at least one advisor about charitable donations. Of those, 19.5 percent broached the topic, while 5.3 percent had the discussions initiated by an advisor.

The Donor Dilemma

Number soup aside, the study makes one thing clear: Donors are becoming increasingly comfortable with seeking professional advice about their philanthropic efforts. In fact, researchers found that many donors prefer talking with an advisor over going straight to a nonprofit to discuss their intentions.

Researchers found that many donors prefer talking with an advisor over going straight to a nonprofit to discuss their intentions.

There’s a caveat, however: The study shows that although more wealthy people are involving advisors in their philanthropic planning, they’re not entirely satisfied with how those conversations are going. The donors felt that their advisors didn’t understand their motivations for giving; didn’t bring the topic up early enough; and didn’t discuss how to involve the donor’s heirs in charitable giving. What’s more, they said their advisors were too focused on philanthropy as a tax shelter, rather than as an altruistic goal rooted in the donors’ values. The fact is, even though advisors are getting more involved in philanthropic decision-making, there’s a problem: They don’t know much about it — and they know even less about planned giving.

The fact is, even though advisors are getting more involved in philanthropic decision-making, there’s a problem: They don’t know much about it — and even less about planned giving.

Still, the study found that almost three-quarters of donors who talk with advisors about charitable giving feel that the discussions are important, despite these misgivings. Perhaps most telling, it also found that nearly a third of all wealthy individuals surveyed would lean toward an advisor who understands charitable giving.

Advisors Opportunity

The takeaway is that while wealthy donors are seeking guidance more often, they’re not getting the help they desire — meaning there’s a huge opportunity for knowledgeable advisors who understand charitable giving.

And to that end, an earlier U.S. Trust study (from 2013), found that more than half of advisors surveyed planned to gain a better understanding of charitable giving, including developing a strategic giving plan; understanding giving vehicles (see advisor planned giving websites); integrating a client’s philanthropic goals into a financial plan; and engaging the next generation in philanthropy.

For their part, the charitably-minded advisors certainly realize it’s in their best interests to learn more — 74 percent of those surveyed said talking about charitable giving is good for business, and 56 percent said it provided inroads with their clients’ extended family.

74 percent of advisors surveyed said talking about charitable giving is good for business, and 56 percent said it provided inroads with their clients’ extended family.

A 2015 story from Financial Advisor magazine comes to a similar conclusion: Advisors who discuss philanthropy with clients differentiate themselves from their competition, and can benefit by attracting more assets from current clients.

Everybody Wins

Furthermore, the article states that clients and charities also benefit from advisor involvement: Donors are getting the best legal, tax, and investment advice, and charities are getting more money because of the relationship. For instance, the story says a good advisor can make clients aware of ways to avoid unnecessary taxes; find ways clients can give more money (or caution them against giving beyond their means); and even find alternate ways to give, such as through the donation of real estate, vehicles or art. They can even help clients manage their assets so that the client receives an income after retirement while still supporting a charity.

Embrace the Change

The world of philanthropy is becoming more complicated every day: tax laws are subject to change, there are a plethora of options for donation vehicles, and the financial implications of making a bad decision can be disastrous. The need for expert guidance will only continue to grow — it’s up to advisors to ensure that they’re up to the challenge of providing it.

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Planned Giving Websites for Advisors  |  Planned Giving for Churches