Studies show that helping clients plan their charitable giving can strengthen planners' relationships -- and their businesses.
Thirty-four percent of high-net-worth individuals believe that the topic of charitable planning should be raised during their very first meeting with a financial advisor, and virtually all – 90% -- agree that this discussion should occur within the first several meetings. That's according to a 2013 U.S. Trust survey of 120 high-net-worth individuals and 300 advisors conducted in partnership with the Philanthropic Initiative.
But according to that same survey, advisors are lagging. Forty percent said they are likely to bring up the subject of philanthropy once they have greater knowledge of a client's personal goals; 47% wait for a better understanding of a client's personal goals. Forty-three percent will bring it up when they become aware that a client volunteers or is active in the community.
There are plenty of reasons, even aside from clients' wishes, to have those conversations earlier. According to Fidelity Charitable's 2012 "Advice & Giving" research, 72% of advisors said offering financial strategies for charitable giving was a relationship builder, 57% said it helped position them as a broad financial expert and 37% said such discussions led to a multi-generational relationship with their clients.
Clients stick with an advisor if they have "deep personal relationships" with them, says Catherine Seeber, a principal at Philadelphia-based Wescott Financial Advisory Group. "What better way to accomplish that feeling by discussing something that will not only will make them feel good, but is financially advantageous," Seeber says. "In discussing their philanthropic desires, they win, you win and potentially, the next generation wins."
Despite this, only 52% of advisors in the Fidelity survey said they "proactively" offer charitable planning advice, although 63% believe clients would be interested in it. That's partly because they see philanthropy as a client's personal decision (44%) and partly because they don't feel qualified or knowledgeable enough on the topic (31%).
Michael Repak, vice president, senior estate planner at Janney Montgomery Scott in Philadelphia, says that some advisors are reluctant to bring up the subject of charitable planning because they aren’t up to speed with the sophisticated gifting rules. "But advisors can benefit if they can bring in subject-matter experts who are familiar with those rules," Repak says. "That way, the advisor moves from just being a place where they have their account, to being a resource of information to assist them in decision making."
Katie Kuehner-Hebert is a writer in Running Springs, Calif. She's contributed to American Banker, Risk & Insurance and Human Resource Executive.