Professional advisors almost universally agree that philanthropy plays an important role in their high net worth (HNW) clients’ wealth experience, and that engaging clients about their philanthropic ambitions is good for their own business. However, a recent U.S. Trust study reveals several disconnects between HNW individuals and advisors centering on the initiation and substance of philanthropic conversations. For instance, many advisors underestimate their clients’ desire to discuss their charitable goals and passions, and overestimate the importance of tax benefits as a motivation for giving.
“Discussing philanthropy is an excellent way for advisors to learn what matters most to their clients,” said Claire Costello, national philanthropic practice executive for U.S. Trust, Bank of America Private Wealth Management. “The vast majority of wealthy individuals give to charity 1, and many cite charitable giving as one of the greatest freedoms of wealth. Philanthropy today is no longer simply what one does with ‘what’s left,’ but rather a pivotal consideration at the front end of the wealth structuring process. For this reason, we are seeing individuals and families rely increasingly on advisors to help them integrate their philanthropic pursuits into their overarching wealth plan.”
To better understand advisors’ approaches to and HNW individuals’ expectations of these discussions, U.S. Trust partnered with The Philanthropic Initiative (TPI) on a nationwide study, conducted in August 2013, of more than 300 advisors – including wealth advisors, trust and estate attorneys, accountants and other tax professionals – and a random sample of 120 HNW individuals with $3 million or more in investable assets who are actively engaged in charitable giving. Key findings from the U.S. Trust Study of the Philanthropic Conversation include:
- Most advisors (89 percent) discuss philanthropy with at least some of their clients, and 71 percent make it their regular practice to ask clients about their interest in charitable giving. Meanwhile, only 55 percent of HNW individuals say they discuss philanthropy with a professional advisor.
- One-third of advisors (33 percent) say they are the one to initiate these discussions with their clients, and that clients initiate them just 20 percent of the time. However, among HNW individuals who report having discussed philanthropy with an advisor, half (51 percent) say that they are typically the one to initiate the conversation, and that their advisor brings up the subject on their own just 17 percent of the time.
- What matters more to HNW individuals than who initiates the philanthropic conversation is that it be had in a meaningful way early in the relationship. Advisors indicate that they are more likely to bring up the subject of philanthropy once they have greater knowledge of a client’s personal (40 percent) or financial goals (47 percent), or when they are aware that a client volunteers or is active in the community (43 percent). However, one-third (34 percent) of HNW individuals feel the topic should be raised during their very first meeting, and virtually all (90 percent) agree that this discussion should occur within the first several meetings with their advisor.
- Among advisors who discuss philanthropy with their HNW clients, nearly all (91 percent) encourage their clients to give to charity, with 41 percent of advisors doing so regardless of a client’s asset level. However, half (50 percent) of advisors prefer to wait until a client has accumulated at least $500,000 in liquid assets before encouraging charitable giving, and one-quarter (24 percent) place the starting point at $3 million or more.
Wealthy seek values-based conversations about philanthropyThe study also found that less than half of HNW individuals (41 percent) are fully satisfied with the philanthropic conversations they have with their advisors. One reason may be that twice as many advisors (71 percent) say that they raise the philanthropic discussion from a technical perspective – focusing on tax considerations or wealth structuring, for example – compared to those who do so beginning with their clients’ philanthropic goals or passions (35 percent).
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