Advisors who want to have productive philanthropic conversations should follow two key rules:
- Philanthropy needs to be part of a holistic wealth management strategy.
- The advice needs to be personalized to each client’s unique situation, values, and goals.
As for how to go about having those conversations, here are some important steps to keep in mind:
- Start with the big picture. Taking a holistic approach to wealth management is a top-down approach. Start off by helping the client determine their current financial and personal goals, where they are in pursuit of those goals, and what needs to be done to continue achieving those goals.
- Discuss what kind of legacy is important. Which societal issues does the client wish they could address? What’s their vision of a better world and how might that fit into how they use their wealth? What kind of world do they want to live in, or leave to their heirs and/or their community? Even childless donors can feel passionate about bequeathing to favored charities or beneficiaries.
- Make philanthropy part of your initial discussion. Don’t wait for clients to bring up philanthropy first. Paying taxes is arguably a form of involuntary philanthropy, and advisors can educate their clients to become voluntary philanthropists. Ask clients if they consider themself charitable. How do they want to use their wealth? Frame philanthropic giving not necessarily as an entirely new approach, but more of an extension of previous approaches to wealth management.
- Review how all types of assets can be donated. Even if clients aren’t making yearly donations, they may have other assets that can be donated. Appreciated stock, real estate, distributions from retirement accounts and other non-cash assets make great gifts to charitable organizations and can also help clients meet tax goals while supporting worthy causes. The Edward Jones report shows that those who work with a financial advisor on charitable giving strategies are more than three times more likely (70% compared to 22%) to donate non-cash assets.
- Ask open-ended questions. Drive the conversation with open-ended comments and questions like:
– Which causes interest you the most?
– How are you involved in your community?
– What do you want to leave behind for your heirs?
– Which organizations inspire you?
– How would you like to see your wealth utilized?
Give clients space to reflect on their past giving and future plans in a way that doesn’t introduce pressure. Getting to understand underlying motivations and passions can help narrow down which charitable vehicles are the most appropriate and which charities to focus on.
- Openly discuss client concerns. While a majority of American adults (68%) were intent on giving in 2022, concerns over inflation and other economic issues can create barriers around giving. Advisors can address these uncertainties directly by writing up formulas to show how giving can fit into their larger financial picture and even provide savings in some areas. Make a financial plan to assuage client concerns about current and future financial needs.
- Engage frequently and through preferred channels. According to McKinsey there’s a ~25% point increase in client satisfaction when an advisor contacts them weekly instead of quarterly. That’s important, as higher satisfaction can translate to a ~15% increase in the share of wallet for firms. Part of engagement requires that advisors know their audience. While millennials tend to be more tech-savvy, that McKinsey study reports only 6% of HNW individuals are comfortable with digital-only services. While technology can aid in improving the number of communication touchpoints, it should be in service of direct communication, not in place of it.