There are many personal and financial benefits to adding charitable giving to a financial plan. Philanthropy adds to a client’s sense of purpose and wellbeing while providing important tax advantages. Helping clients incorporate charitable giving into their financial plans can deepen client relationships. Yet many advisors still neglect to discuss philanthropy with their clients.
Fifty-nine per-cent of certified financial planners surveyed last year by the Financial Planning Standards Council said they initiate a conversation about philanthropy with clients only occasionally; 8.5% had never started such a discussion. Advisors in that poll said 38% of their clients never start a conversation about charity themselves.
Understanding why advisors and clients may be reluctant broach the subject of philanthropy may help you overcome some of the common obstacles and get the conversation started.
1. Misunderstanding
Some advisors may avoid conversations on charities with clients for fear of being misunderstood.
“They’re afraid they’ll offend the client by implying that maybe he’s not giving enough or not doing it well enough,” says Marvi Ricker, vice-president of philanthropic services with BMO Harris Private Bank in Toronto.
If the client is already giving to charity, you can commend them on their generosity. Then, suggest reviewing their charitable plan to ensure it best suits the client’s philanthropic interests and is as tax-efficient as possible.
2. Lack of expertise
Other advisors may avoid discussing philanthropy when creating a financial plan because it is not their area of expertise. Advisors may feel that if they start talking about philanthropic goals, clients will ask questions they can’t answer, Ricker says.
What advisors need to realize, Ricker says, is that clients don’t expect them to be the expert. Instead, he says, clients want advisors to help them “think through some of the tax issues [and] to guide them to people who can help them with other aspects of the decisions they need to make.”
3. Loss of assets
Donating money to charity can often mean a reduction of assets in a portfolio — something advisors typically avoid rather than encourage.
Walter Fenlon, a Kingston, Ont.-based advisor with Assante Wealth Management Inc. says: “[Some advisors] don’t want to give up the management of that money.”
If a client gives away $100,000 out of their portfolio there’s a loss of fees for advisors “and quite often they won’t encourage that,” he says.
But by helping a client achieve his or her philanthropic interests, you are cultivating client loyalty and your referrability.
Client concerns
At the same time, many clients are reluctant to discuss charitable giving with their advisors. Here are some of the reasons:
4. Where does the money go?
For clients, talking about including philanthropy in a financial plan can be difficult because of concerns over the way charities handle donations.
“There are those who will tell you right away that they’re turned off by giving to charities because the money is not spent the way they would like it to be,” Says Patti Vigna, coordinator of the Elite Case Team, Desjardins Financial Security in Toronto.
Offer to help the client review financial reports of charities to determine whether the money is well managed.
5. Family first
If charitable donations are being considered as part of a client’s estate plan, the client might be concerned about how it would affect his or her children’s inheritance.
For example, if a will was made years before, the client’s family members might now have needs that were not anticipated when the will was written.
“They’re concerned that the charity will be receiving money before their own family situation is taken care of,” says Vigna.
The solution is to assure clients that they can — an should — update their wills periodically to ensure that their wishes will be carried out and their families will be taken care of.
Next: How to start the conversation on philanthropy
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