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A couple with a net worth approaching $1.6 million made a five-figure pledge over three years to a local charity’s capital campaign. They invested most of their assets in diversified portfolios, including IRAs, with money they earned as well as inherited. To make their first pledge payment, they liquidated securities from non-IRA investments and donated the subsequent cash.

When talking with a friend who worked in the nonprofit industry, the friend asked why their advisor just didn’t tell them to transfer the securities to the nonprofit so the couple would avoid any taxable event. The couple said the advisor never questioned the purpose of selling the investments. This usually smart couple kicked themselves over making such an obvious oversight themselves. They got over it because in the end it was about helping more than it was about tax savings. They knew in the future they wanted their advisor to be more strategic with them in philanthropy.

Besides avoiding stories like this real example, why should those advising clients on finances broach the topic of philanthropy? There are many reasons based on the following statistics reported in The U.S. Trust Study of the Philanthropic Conversation: Understanding Advisor Approaches & Client Expectations. 

Clients Desire It

• Nearly three-quarters of high net worth people believe having philanthropic conversations with their advisor is important and prefer the topic arise sooner than later in meetings

• Less than half of these people are satisfied with their conversations with advisors in this area, desiring more discussion around personal values and charitable goals

• Almost all of these people donate to nonprofits, driven by a desire to make an impact, to give back and/or love of a cause, not so much because of the tax effects, and wealth preservation is not their top concern when giving; knowledge of charities is

It’s Good for Advisors’ Business

• 60% of advisors agreed that having discussions about philanthropy has helped them establish new clients

• 74% see these discussions help deepen relationships with clients

• 63% of advisors said philanthropic discussions have helped them build relationships with clients’ extended family

Where to Begin
Dream
A common technique to stir creative juices in organizational strategic planning is to have those involved ponder the question, “What would we do if we had an extra $1 million?” or whatever amount makes sense depending on the organization. This allows the organization to freely dream how it would grow and make an impact.

Similarly, when talking with clients about philanthropy, this technique allows the client to ponder how he or she would like to make the world a better place with their impact. If taking money temporarily out of the conversation helps, simply ask them if they had the magical power to change or improve something in society, what would it be. From there, ask clarifying questions regarding why they would choose that and if they’d like to see how they could implement that into their plans.

Leverage
Who doesn’t love to make their money go further? Advisors have conversations about leveraging assets when it comes to clients’ finances, so include clients’ current philanthropy in those conversations as well. Starting with, “We’ve talked about how we can leverage your financial situation. There are ways to leverage charitable giving as well, making the dollars you may give do more for both you and your favorite charities. Would you be interested in learning more?” If they reply in the affirmative, then you can begin asking questions about their giving. Perhaps a donor advised fund or certain asset donation would fit better with their overall financial picture. Someone who is charitably inclined deserves that their philanthropy not be an afterthought in their overall financial planning.

According to the aforementioned US Trust Study, the majority of individuals want their advisor to refer them to others if expertise outside the advisor’s capabilities is needed, and the vast majority of advisors would do so if needed. This widens the circle of relationships and leads to being included in future discussions with other advisors’ mutual clients. This leverages relationships and potentially clients’ financial situations.

Access Resources
To learn more on having philanthropic conversations, access The Philanthropy Toolkit Advisor’s Manual from the Stanford Center on Philanthropy and Civil Society. This toolkit includes an example of how one wealth advisor uses the toolkit and talks about philanthropy with his clients.

The Catholic Foundation in the Archdiocese of Dubuque’s mission is to multiply charitable resources for maximum benefit to its Catholic community. As a public foundation, it does this through its charitable planning, investing and grantmaking services. It is separate from, yet collaborative with, the Archdiocese of Dubuque and holds endowments and donor advised funds for Catholic organizations and those who support them. It is one of the fastest growing Catholic foundations in the country with more than 250 funds and over $140 million in assets under management. 

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References:
The U.S. Trust Study of the Philanthropic Conversation: Understanding Advisor Approaches & Client Expectations, July 2018
“The Stanford PACS Philanthropy Toolkit” by Stanford Center on Philanthropy and Civil Society, copyright 2021 Board of Trustees of The Leland Stanford Junior University, used under Creative Commons Attribution 4.0 license