Philanthropic giving is beginning to play a growing role in financial planning in Canada, and advisors should be prepared to discuss the topic with their clients, experts told financial advisors at a conference in Oakville, Ont. on Thursday.

In fact, charitable donations are expected to double in the next decade, and more Canadians are discussing their giving practices with their financial advisors, according to Brad Offman, vice-president of strategic philanthropy for Mackenzie Financial Corp.

“It’s very important in the overall context of an advisor’s professional practice,” he said, adding that a vast majority of charitable donors expect financial advisors to have the knowledge and capabilities to facilitate charitable giving.

“Clients are going to expect you to be able to facilitate that kind of gift,” Offman said. “Advisors need to be ready to have that conversation.”

One factor fuelling greater demand for advice on donations is a rise in estate planning as baby boomers age. An estimated 50% of Canadians have wills, according to Joan Blight, a senior consultant at Strategic Philanthropy Inc. As the population ages, she said this number will soon surpass 70%.

Since philanthropic gifts are commonly incorporated into estates, the rise in the number of Canadians considering their wills will likely inspire a more prominent role for charitable giving in financial planning.

While many advisors consider donations an important aspect of financial planning, however, many fail to raise the subject with clients. A study in the United States found that 80% of estate planners do not acknowledge philanthropy unless clients bring up the subject, according to Blight.

Many advisors find the topic highly personal and difficult to approach, speakers at the conference said. Unlike many practical aspects of financial planning, the topic of charitable giving is values-based, and needs to be approached gently.

“Until we understand how to raise the subject of philanthropy, we will never get anywhere,” Offman said. There are many ways to bring up the topic of charitable giving, including simply asking clients about any causes they support.

Many types of financial planning software also include a module on charitable giving, which can lead to a conversation on the subject, Offman said.

In approaching the topic, it’s important to understand the factors that prompt clients to donate, according to Blight. While philanthropic giving can provide Canadians with sizable tax savings, speakers at the conference cautioned advisors to avoid assuming that donors are motivated by such credits. Only 13% of charitable donors in Canada are motivated by tax credits, according to Blight. She said 94% of Canadians who contribute to charity are motivated by compassion.

“It’s not driven by tax,” Blight said.

She added that incorporating philanthropy into financial planning requires a different approach than most other aspects of the client-advisor relationship, since it does not involve selling a product.

“It’s not about selling,” Blight said. “It’s much bigger than that.”

She said advisors have an important role to play in addressing the topic with clients, since many people may not think to incorporate donations into their financial plan until they’re prompted.

IE