Charity driven investors are often high-net worth clients and their families that have accumulated wealth using financial advisors, along with a team of tax and legal advisors. The majority of these clients have, at the very least, some charitable inclinations and want to support the causes that they’re passionate about during and after their life.
Studies show that many financial advisors lag on initiating talks with clients about charitable donations—even though clients have shown to desire input. Clients may not be aware of how financial advisors can offer important advice in guiding them to make a decision on charitable donations.
There are many benefits to financial advisors who initiate this conversation. It can provide the opportunity to bring in additional assets under management from existing clients, deepen relationships or set them apart from other financial advisors.
It just takes an awareness—as soon as investment advisors realize that the majority of their clients, at many levels of wealth, are able to benefit from talks about charitable donations, they are more likely to start the conversation. Here’s a few things that financial advisors can approach with their client base:
- A large number of donors either make donations with cash or credit. Both of these methods are the least tax-efficient ways to donate, but clients are often unaware of other options that exist.
- Financial advisors can help their client base and identify appreciated publicly traded securities. Using these for donations can help clients avoid capital gains taxes if they have been held for over a year.
- Financial advisors can also identify other existing assets—real estate, insurance, collectibles that clients no longer want or need. All of these can be made as donations at fair market value.
- If a client wants to sell a business, financial advisors can assist them in donating some or all of the privately held company stock before the sale to minimize or avoid capital gains and other taxes altogether.
- Financial advisors can often expand their offerings by managing charitable investments so clients receive consistent investment advice and performance.
- Financial advisors can help clients plan and set money aside for charitable donations during their high-income years.
- Advisors can help their clients receive a stream of income during their retirement years so that they can still provide support for their favorite charities.
- Financial advisors can assist clients’ heirs in charitable giving.
- Advisors can reduce frustrations experienced by clients when they make charitable donations, perhaps simplifying efforts by suggesting methods like donor-advised funds and services to manage private foundations.
- Financial advisors can be an objective resource for clients—especially when a client is contemplating a large donation. Advisors help clients determine which fund would be the most appropriate.
If financial advisors don’t initiate conversations—at the very least, occasionally, about charitable giving, clients may assume that such advisors aren’t helpful with charitable donations, are not interested, and have no reason to be involved in the decision.
In order for clients to receive the most beneficial tax, investment, and legal advice overall, it is important to discuss their donation plans. There may be initial costs for this discussion and advice, but in the end, the client-advisor relationship and clients’ favorite causes and charities all benefit substantially.