Charity begins with caring advisors

A big part of the reason why this figure is so low might well have to do with the disconnection between what advisors think they’re offering their clients when it comes to charitable-giving services and how their HNW clients view their advisor’s input.

“Clients are more ready to talk about giving than advisors are,” says Marvi Ricker, vice president and managing director of philanthropic services with BMO Private Banking in Toronto.

Although the study revealed that HNW clients are overwhelmingly in favour of discussing their philanthropic ambitions early in the development of the client/advisor relationship, advisors hesitate to bring up the topic, Ricker says. When they do, the message apparently is not hitting the target, with a majority of HNW individuals claiming charitable giving wasn’t discussed or the discussion was very basic.

Further, the study found that advisors focus on the wrong elements when they finally do raise the topic, zeroing in on the technical aspects of giving (using tax strategies, for example) vs the emotional aspects that drive these decisions.

“What clients want from their advisors,” Ricker says, “is to talk about ‘How I can be a good person. How can I give this money to the community where it’s going to make a difference and have an impact?'”

Advising clients on charitable giving is not all about ensuring Canada’s charities keep receiving cash injections. There’s a strong business case for you to pay attention to the results of studies such as the BMO report, according to Ruth Mackenzie, executive director with the Canadian Association of Gift Planners in Ottawa, a co-sponsor of the BMO report. By becoming just as adept at covering the softer, qualitative side of the charity conversation with your HNW clients as you are at handling the technical aspects helps to reduce the risk that your clients turn elsewhere for this conversation.

Increasingly, financial services institutions are offering philanthropic services to attract these clients.

Discussing philanthropic issues with your clients, Mackenzie says, “is a way, right from the start, to set the tone of what this relationship can be about and build from there. Advisors can really use this [topic] as an avenue to build a deeper relationship with their clients.”

Mackenzie says that one of the barriers preventing advisors from giving the topic of philanthropy more than short shrift is the concern that this pillar of estate planning only serves to diminish assets under management (AUM).

“That’s a fairly short-sighted view,” she says, adding that meaningful conversations – discussing values, passions and life events – are much more likely to deepen a relationship, leading to more business and referrals down the road.

That’s been the experience of Rebecca Horwood, director of wealth management with Richardson GMP Ltd. in Toronto. Horwood says offering expertise in this area has translated into temporary dips in AUM, but the payoff is worth it. “We’ve had as much as $1 million go out of an account,” Horwood says. “It’s really hard.”

But, she says, the boomerang effect – the resulting increase in wallet share from satisfied clients, along with a bump in referrals (from clients and charities) – more than makes up the difference.

Horwood points to a client relationship of hers that has evolved over the past decade. The relationship started when she was approached by a charity’s chairman regarding a board member who wanted to take advantage of one of Horwood’s charitable-giving strategies. That new client initially invested $10,000. A decade later, he now has more than $5 million in AUM invested with Horwood. Further, the client’s wife, parents and children have been brought in as clients.

“[The client relationship and its side benefits] all went back to that initial donation strategy,” she says.

Here are some suggestions to help you develop a charitable-giving conversation with your HNW clients:

– Make the topic a priority

Vow to bring up the giving side of money management early with your clients, says Rosemary Smyth, a business coach in Victoria. And be sure to revisit the topic frequently. “It’s not a one-time thing,” she says. “It’s a continuous part of the plan.”

The topic of philanthropic goals often comes up when a situation arises that brings about the liquidation of assets – such as the sale of a business or an inheritance. But touching base on these goals is equally important when discussing other important life events, such as a marriage, the birth of a child or even upcoming holiday plans (when people are more likely to think about giving).

Business coach Sylvia Garibaldi, founder of SG and Associates in Toronto, says you should emphasize your commitment to helping your clients wade through the charitable-giving waters via your client communications. “You want to jump on this opportunity to engage clients further,” she says.

Newsletters and targeted emails can further cement your willingness to help in this area. Garibaldi recommends holding special events that focus on philanthropy as a way to identify clients who might be interested in doing more on that front. She also suggests letting centres of influence know about your expertise in philanthropy.

– Encourage emotions

The disconnection between what HNW clients want from their advisors (meaningful conversations about personal interests and how they can give back to the community) and what they often get (basic discussions, at most) was one of the more striking findings in the BMO Harris study.

This anomaly, Ricker says, is due to the nature of financial planning, an area in which emotions can interfere with cold, hard strategies and generally are discouraged. Yet, feelings lie at the very heart of a client’s charitable leanings. That’s why women have the cultural advantage in the charitable-giving sphere, Ricker says. They generally are more accustomed to delving into family and relationship issues than men are.

But all is not lost if you feel awkward when discussing emotions. Often, the best place to start is by discussing your own charitable leanings, Ricker says. Sharing your excitement and pride about your team’s community activities – volunteering, for example – is a great way to steer the client conversation in the right direction.

Horwood, for example, takes every opportunity to share news with her clients about her firm’s various charitable efforts.

Smyth suggests keeping questions related to charitable tastes open-ended: “What’s your connection to a particular charity?” “What do you support, and why?” Nothing pleases clients more than talking about what they care about. And by encouraging this conversation, you are likely to discover more about your client.

– Learn about the sector

According to the BMO study, HNW individuals sometimes are hesitant to make a large donation to a charity because they’re not sure their gift will be used wisely. This is where your insight can be valuable. Learning how to review charities and knowing which organizations to approach to seek out more information can equip you to help your clients make better decisions.

© 2015 Investment Executive. All rights reserved.