Ten Questions To Ask Clients About Their Charitable Giving

by Ken Nopar

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Though some clients wait until December to send checks or donate appreciated stock to their favorite charities, the ideal time to plan their giving is much earlier. The clients, their advisors and the charities they support will substantially benefit when the advisors proactively engage in the charitable conversation with clients far in advance of the end of the year.

This should be a very natural discussion with clients because studies indicate that 95-98% of wealthy Americans contribute to charity every year – in both good and poor markets. Furthermore, for wealth advisors to provide the best possible investment advice to clients, they need to know their clients’ philanthropic intentions for both the short and long term.

Charitable Giving
Image source: Wikimedia Commons
Charitable Giving

Many clients do not realize how their advisors can help them maximize their charitable impact and in many cases save them time, frustration and money, so they continue to donate their least tax-efficient assets. When advisors do not bring up the subject, clients go online or turn to their neighbor or brother-in-law for advice and select an option that is less than ideal for both them and their advisor. Once clients go on a path that is contrary to what their advisor would suggest, it can be difficult for the advisor to regain control and manage those charitable assets. Donor-advised funds (DAF) have become so prevalent that some clients establish them on their own when it would be more beneficial to do so with the help of their advisors.

There are numerous indications that clients would welcome the charitable discussion or that they need help. These are especially evident when advisors review existing or prospective clients’ tax returns, help them prepare information for their returns or get ready for year-end tax planning. A few hints include:

  1. Donating tax-inefficient assets, using checks or credit cards
  2. Not keeping track of donations, disorganization or frustration
  3. Philanthropic intent and assets are positioned to be sold (land, business, appreciated stock)
  4. Rushing to make donations at tail end of year
  5. Donating different amounts and often to different charities every year

Traditionally, some advisors would speak primarily with their older, married clients about their charitable intent as it pertained to what they wanted to do with their wealth. Now, however, that question is relevant for many different types of clients who may be more inclined to be philanthropic during their lifetimes and/or at death, including:

  1. Women (who statistically outlive their husbands, volunteer more, are more involved with charitable decisions and have more disposable income now than in the past)
  2. Individuals or couples without children
  3. Parents who have successful children who don’t need inheritance, who already gifted to their kids or don’t want to give or leave them too much
  4. Younger people who want to get their children involved, who volunteer or who earn much and want to share their good fortune.
  5. Employees who will retire within 10 years and who may want to set aside current excess income, stock, bonuses or assets for future charitable gifting purposes in a donor-advised fund while they are still earning and can benefit from a significant tax deduction

The charitable conversation is truly a prime example of a win-win-win for the advisors, clients and charities that the clients support. Since most clients are very committed and often passionate about their philanthropic activities, they want to talk about this topic. It is also more pleasant than taxes, death and market volatility. This is a way to deepen relationships with clients, even helping to retain the next generation in the family as clients. This discussion can help advisors bring in additional AUM (i.e. clients can donate complex assets to a donor advised fund that advisor can manage), bring in new clients (can be differentiating factor) and help clients achieve their philanthropic goals.

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