Advising HNW clients on charitable giving

November 14, 2018 by Moriah Diedrich

about the author:

Moriah Diedrich

Demand generation specialist

Moriah Diedrich is a demand generation specialist at Advicent, the financial planning technology provider of choice for nearly 100,000 financial professionals.

With the holiday season fast approaching, you may find yourself dropping some change into a Salvation Army red kettle, donating non-perishable goods to local food pantries, or perhaps participating in a toy or coat drive at your place of work. For the general population, charitable giving typically means donating time or small contributions and requires little planning, but for high-net-worth individuals (HNWIs), larger charitable donations can require the expertise of a financial advisor.

The 2018 U.S. Trust® Study of High Net Worth Philanthropy offers valuable insights on the giving and volunteering practices of wealthy U.S. households that can help advisors to better understand and serve their HNW clients’ charitable needs. Let’s dive into some of the study’s highlights.

Tax benefits

Many advisors skip discussions with their clients about charitable endeavors because they are unsure of how to bring up the topic. One approach is to incorporate charitable giving as part of the larger tax strategy discussion.

According to the U.S. Trust® HNW Philanthropy Study, 68 percent of wealthy donors said they have been motivated by tax benefits to give. By creating an advanced giving strategy, advisors are able to show how complex assets can be donated in a tax-favorable way, allowing clients to give back more than they ever thought possible.

A giving strategy

A giving strategy typically includes a budget, investment strategy, time horizon, and the client’s goals for charitable impact. The U.S. Trust® HNW Philanthropy Study found that only 49 percent of donors have a strategy for their giving, meaning there is plenty of market opportunity for advisors to share their knowledge on the subject.

Often, a donor’s biggest challenge is identifying what causes they care about and want to donate to, so advisors can connect with clients by finding endeavors that align with clients’ personal values. One way you can pinpoint these organizations is by discussing their different missions and how well each group uses donations. This helps advisors engage in meaningful conversations with donors and allows donors to see how their contributions can make an impact, therefore increasing the likelihood of continuing donations in the future.

In conclusion

With 90 percent of HNW households giving to charity and less than half of donors having a giving strategy, advisors have an opportunity to establish themselves as go-to resources for philanthropic advice. Offering charitable giving expertise helps to differentiate your firm, increase referrals, and become a family’s trusted advisor to retain AUM for generations through holistic financial planning.

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