Older or retired people who have accumulated wealth continue to give, but they aren’t the only ones and advisors should take note.
As advisors strive to help clients achieve their financial goals, they must also seek to better understand clients’ charitable goals since the two are so often linked. Today’s donors include new categories of clients -- those who have become involved with non-profit organizations or have more control over their finances or have simply begun to contribute at an earlier age.
Here’s a look at the groups that have become increasingly active in charitable planning and giving in recent years:
Women often volunteer more than men at non-profit organizations and those who volunteer often donate more. Women also tend to give more than men. And because more women now earn more than before and are living longer than men, they often are more likely to be responsible for making the charitable giving decisions. Because nearly three-quarters of widows change wealth managers when their husbands predecease them, advisors would be wise to engage both the husbands and wives in the charitable discussion.
INDIVIDUALS/COUPLES WITHOUT CHILDREN
Increasingly, attorneys and advisors are discussing what these clients, some who have never married or are divorced, want to do with their wealth after their deaths and during their lifetimes. Often, these clients are giving while living or selecting charitable beneficiaries rather than leaving their assets to siblings or nieces or nephews.
INDIVIDUALS/COUPLES WITH CHILDREN
Clients may not want to leave too much to their one child or children for various reasons. For example children may squander money, may lose motivation to be productive members of society if given too much, may be successful already and may not need additional money, or clients may have already gifted money to children.
Studies have shown that entrepreneurs donate up to three times more than inheritors of wealth. Many of these young business owners feel they can always earn more, and often they come from more modest backgrounds so they feel a greater need to give back.
Many clients are involved with charities and see the need to give now. While some clients do not feel confident that their wealth may not outlast them and postpone their giving until their deaths, many others want to give during their lifetimes to the causes and organizations that are most important to them so they can have an impact now.
Because the number of high school and college students as well as younger employees who volunteer has increased significantly, many of them have volunteered for years and are now in a position to donate money. Others want to get their children (or parents) involved. Others will inherit money from parents and will increase their giving at that time.
CLIENTS WITH COMPLEX ASSETS
Many clients who have charitable intent own businesses, land, privately held stock, second homes, collections or other items that they will need to sell. Should they have charitable intent, clients may be able to donate these assets rather than more liquid assets.
Of course, many older clients are in an excellent position to donate. Many want to create a legacy, many want to encourage younger family members to get involved, many want to give back to the organizations with which they have been involved or the causes they have been most passionate about. Others often don’t want to pay taxes. With older clients, it is essential to talk about charitable giving while they are fully capable of making these decisions. This will enable them to feel a great sense of pride and satisfaction and will allow them to include their families in these discussions if they choose. Too often, incapacity, illness or death comes before the clients make these important decisions and what could have been a wonderful opportunity for the clients, their families, and the charities they support becomes a source of frustration and bewilderment for all.
Because there are so many types of clients who now donate, everyone benefits when the advisors initiate the charitable conversation: the advisors, the clients and their families, and the organizations they support.
The charitable conversation can help advisors secure new clients, retain existing ones, and bring in additional client assets as they discuss with clients when to give, how to give, which assets to give, how much to give, who will be involved in the giving process, and even why and where to give.
And finally, it is in the clients’ best interests if their advisors understand the extent to which charitable giving is important to them.
Ken Nopar is the Principal of Nopar Consulting, a firm that trains wealth management firms, banks, and other professional firms how to have the charitable planning conversation with clients and how this discussion benefits the firms and clients.