Written by: Hannah Shaw Grove | Foundation Source
It’s true that wealthy clients value philanthropy as a smart tax strategy, but that’s not the only reason they care about it. Philanthropy is a means for them to invest in their families, communities, and futures. Conversations regarding charitable giving can help foster a meaningful relationship between wealth advisors and their clients. However, when beginning a discussion about charitable giving, there are a few common missteps you’ll want to avoid.
Opening with tax advantages
Wealth advisors often assume a client is interested in philanthropy primarily due to the tax savings. However, your client may have an interest in philanthropy unrelated to money. Keep an open mind about what clients may want to get out of your counsel on philanthropy. As opposed to leading with the tax details, uncover your clients’ most important and personal charitable objectives with probing questions. For example, ask them about their current giving to get a sense of where they are focused and what their charitable budget is. How they respond will likely highlight their passions, interests, and frustrations, and where creative philanthropy may benefit them. Beginning this type of dialogue initiates a more holistic discussion that can encompass, but not be limited to, any tax advantages available in the giving plan.
Holding off until year’s end
Although giving usually peaks around the holiday season, waiting until the end of the calendar year to discuss charitable giving can lead to a missed opportunity for advanced planning. Discussing charitable giving early and often can help improve your overall relationship with your clients as the frequency of your interactions accelerates and the range of subjects you cover becomes more diverse. The outcomes for nonprofit organizations may improve, too. Philanthropists typically have an idea of what causes they would like their contributions to go towards each year, but when crises occur (such as natural disasters like Hurricane Ian or international conflicts like the Russia-Ukraine war), your clients may wish to adjust plans quickly to ensure those needing urgent assistance receive support. Providing crucial ongoing aid beyond the immediate aftermath of a sudden event can be challenging. With time to plan and regular conversations, you can improve client relationships as well as strategically reserve and allocate dollars to respond more effectively.
Going it alone
Starting a charitable giving conversation with your client doesn’t mean you have to become their only source of guidance. For clients who have more complex needs, it may make sense to confer with a philanthropic specialist. These experts can provide helpful benchmarks and illuminate trends to help shape your clients’ decisions. For example, they can provide technical guidance around charitable vehicles and tax considerations and can give you and your clients access to a broader network of philanthropic advisors. These skills will improve your clients’ experience and reflect well on your practice in a variety of ways. Even clients who have had foundations, charitable trusts or donor-advised funds in place for years may have concerns and challenges that need attention and support today. Specifically, an experienced philanthropic consultant can contribute support and insight to clients who want to increase the funding in a charitable vehicle, engage younger generations in the family’s philanthropy, or address succession issues within a foundation’s board.
Overlooking the big picture
Clients put trust in you and expect to benefit from having more centralized oversight for a larger piece of their portfolio when they seek you out for charitable giving support. They’re giving you the opportunity to look across their investment accounts, estate plan, tax strategies, insurance policies, budgets, and other areas to ensure there is alignment and efficiency wherever possible. When asked, you can point out any opportunities they might have to strengthen their portfolios, reduce their fees, increase their tax deductions, or simply eliminate redundancies. By considering a client’s full portfolio, you can achieve better results for your clients and help them further understand how all the different pieces of their financial plan work together. However, if you approach charitable planning in isolation, both you and your clients miss out on the benefits of a more holistic process.
Hannah Shaw Grove is chief marketing officer at Foundation Source, the nation’s largest provider of support services to private and family foundations.