Why you should provide advice on Charitable Contributions

For high-net-worth clients, their charitable contributions are every bit as important as how they make the money.
Philanthropy plays a crucial role in the life of wealthy clients and financial advisors who don’t take the time to understand it are risking irrelevancy. High-net-worth investors feel that giving their money away is one of the highest freedoms of wealth, according to many wealth management professionals.
Going Against the Grain
Putting the focus on charitable contributions probably feels natural to some investment advisors and financial planners because the general rule of thumb is to have the focus on maximizing and preserving wealth. But advisors who view philanthropy as only a way to get tax breaks are missing the point and might be missing out on an opportunity.
More than 98% of high-net-worth households give to charity as reported in the 2014 U.S. Trust Study of High Net Worth Philanthropy; almost all.
Charitable contributions are one way for investors to express their values. Many even place higher importance on the good deed itself rather than the actual dollar amount. I might suggest that you ask your clients if they could only pass on either their wealth or their values, which would they choose? I think that you’ll find that most will choose values over wealth. The investment advisor who spends time understanding their clients desires through charitable contributions is an advisor who strengthens their relationships with wealthy clients.
The bottom line is that clients will trust and value you more if you assist them in making the impact on the world that they desire. You’re doing a real tangible service for your individual investor client …and your bottom line at a wealth management firm.
Starting the conversation
High-net-worth clients are eager to begin the discussion on philanthropy. Approximately 30% of households would prefer the subject be approached in the initial meeting with a prospective wealth management firm…and an impressive 90% desire to broach the charitable contributions subject within the first three meetings.
However, it’s worth noting that the majority of wealthy individuals do not consult their financial advisors before making a charitable contribution. According to the aforementioned U.S. Trust Study, only 45% of wealthy clients consult with any advisor before making philanthropic decisions. Of the clients that did consult with someone, almost half of those (49%) consult with charity employees; 46% consulted with their RIA or wealth management firm, and about 45% of these clients went to their accountant.
High-net-worth households prefer to be highly involved with their philanthropic contributions. They tend to be people of action—preferring not to give away money and sit back. Charitable contributions present the financial planning representative with the opportunity to strengthen and solidify their relationships with the wealthy clients in their book of business. It can also provide the opportunity for financial advisors to grow professional relationships with philanthropic organizations as well.