The new year is fast approaching, and with it, the deadline for making most of your clients' financial decisions related to minimizing 2014 taxes. That makes it a good time to talk about charitable donations, right?
Not so fast, cautions Claire Costello, national philanthropic practice executive for the Philanthropy Solutions Group at U.S. Trust.
Its not that there isnt a deadline looming for making charity donations, she says, but that advisors who make that the focus of their discussion could be sending clients the wrong message.
Our research shows that only half our clients say their advisor brought up the issue of philanthropy with them, and of those clients, only 41% claim they were happy with that conversation, she reports. Why? Because the advisor focused on the tax issues. She adds that the same research showed 90% of advisors claiming that they had discussed charitable giving with their clients.
Clearly, says Costello, there is a disconnect between advisors. And the reason, she suggests, is that for a great many wealthy clients, philanthropy is an important goal in itself.
The number of people whose giving is linked to the tax code is actually very small, she says. They dont stop caring about what they care about just because they wont get a tax deduction for doing it. Thats a big misconception, even in Congress.
Sara Montgomery, philanthropic services specialist at Wells Fargo Private Bank in Denver, concurs. She says, I think generally speaking we find that taxes dont drive why people give, even if they impact how they give.
What this suggests is that advisors who approach the whole issue of charity as a tax issue -- something especially easy to do this time of year -- are not only misunderstanding their clients, but may even risk alienating some of them.
We find that one out of three of our clients chooses a financial advisor specifically because that advisor is good at the philanthropic stuff, says Costello, adding that clients may even change advisors if they feel that their current advisor doesnt get it.
Thats not to say being smart about tax planning isnt important. After all, as Jay Messing, senior director of planning at Wells Fargo Private Bank notes, the client who is able to save on taxes by making a donation to a favorite charity in the form of an appreciated stock with a low basis, instead of writing a check, can afford a larger donation.
The key, these experts agree, is making sure the focus is clearly on helping the client achieve their philanthropic goal, not on how to save on taxes.