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For some clients, charitable donations are tax mitigation strategies. That’s their prerogative and there in fact federal tax deductions associated with charitable. In fact, the recently enacted One Big Beautiful Bill Act (OBBBA) adds some layers to charitable deductions that may be worth exploring with select clients.
“The OBBBA also added a new tax credit of up to $1,700 for charitable contributions to scholarship-granting organizations for elementary and secondary education scholarships,” notes The Tax Foundation. “The credit is non-refundable, so it may reduce tax liability, but not below zero. It applies to contributions received beginning in 2027.”
For other clients, charitable giving is about much more than that. It’s about leaving a legacy. Advisors should note that is especially true among at least two coveted client demographic – high-net-worth individuals and women. That is to say the concept of charitable giving is an excellent avenue for improving client relationships.
Charitable Giving As a Relationship Enhancer
Arguably, charitable giving is a somewhat delicate conversation piece. Advisors don’t want to come across as though they’re prodding clients to do something. Likewise, some clients want to make these decisions on their own or don’t want to do it all.
The good news is that T. Rowe Price’s white paper “The Generosity Effect: Advisor Engagement in Charitable Giving Among High-Net-Worth and Affluent Investors” confirms charitable giving is a pathway to enhanced client relationships. Consider some of the insights from the study.
“Advisors who proactively engage clients on charitable giving report tangible business benefits: 67% see enhanced trust among clients; 54% experience improved client retention; and 32% uncover hidden assets among clients as a direct result of their work with clients on charitable giving,” observes the asset manager.
For advisors that need more convincing, it’s worth noting T. Rowe Price says younger affluent clients are prioritizing charitable giving.
“Younger high-net worth investors (ages 25-49) stand out as the most purpose-driven and receptive to philanthropic guidance: 75% want their advisor to proactively bring up charitable giving, and the vast majority say their family is very likely to stay with an advisor who raises the topic of charitable giving in their engagements,” according to the study.
Transforming Advisor/Client Relationships
Advisors need education and resources in order to drive charitable giving conversations forward and while that sounds like work (it is), the dividends can be substantial in terms of improved connections with clients.
“Our research shows that charitable giving conversations can transform the advice relationship—almost all investors surveyed report greater satisfaction, and advisors reported measurable gains in trust, referrals, and retention," said Emily Barczak, Insights Director, T. Rowe Price U.S. Intermediaries Advisor Engagement. "Philanthropy should not be a point of disconnect between advisors and their clients; it's an opportunity to deepen relationships across generations as advisors help investors clarify their motivations, understand options and build giving strategies that reflect their values.”
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