A third of all those donations come in December, and historically, 10% comes in the last three days of the year.
This has a lot to do with that magical holiday spirit that has a way of melting even the coldest of hearts into a warm mug of hot chocolate. It brings a shared feeling of generosity and goodwill across every community all at once and unleashes a powerful and rare combination of unity and generosity.
Less magical, but certainly practical is knowing year-end is around the corner. That means donors who want to make the most of tax benefits better get their donations in before the new year!
Right now, philanthropy is top of mind for your clients. Whether they talk to friends and family or a professional advisor, they are seeking advice about giving.
‘Tis the season to get the charitable conversation started
Your advisors can use this season of giving to get the charitable conversation started. And why wouldn’t they? Charitable conversations are an easy way to build trust and a deeper bond with clients, but many advisors don’t feel confident initiating the discussion.
Advisors often underestimate how much their high-net-worth clients want to talk about charitable giving and overestimate the motivation of maximizing tax benefits. Discussions that involve both the financial and personal aspects of giving allow advisors to bring a more balanced approach to the conversation.
The key to a successful charitable conversation is to start by asking clients about their goals and passions. Turns out, the vast majority of people aren’t primarily motivated by tax incentives, so starting with the technical perspective isn’t the right approach.
Here are a few questions advisors can ask their clients to understand their philanthropic goals:
- What are some causes you care about and would like to support? How would you like to support them?
- Are there any organizations you support regularly? How did you get connected with them? Why does their mission resonate with you?
- What are some organizations you’ve supported in the past? Why was it important for you to support that organization?
- How many organizations do you support throughout the year and how do you contribute to them?
- Is there anything you’d like to accomplish that you haven’t yet?
- Do you have charitable plans?
- Is there anything in your local community or the world you’d like to see changed or preserved?
- Thinking about your past, were there any opportunities or resources you wish you’d had? Would you like to support causes that make sure others have access to these?
Philanthropy can play a crucial role in a client’s financial portfolio, and many depend on their advisors for the right guidance to help them make the most of their gifts.
Holistic wealth management includes philanthropy
Globally, the U.S. is ranked the number one most generous country when it comes to individuals who donate. Clearly, charitable giving is a priority for people in the U.S., and this reveals an important message to the wealth management industry – philanthropy is essential to holistic wealth management.
Given the numbers, there’s no question that the majority of your clients contribute to causes and organizations they care about. The question is whether financial institutions are providing the best solutions for their clients’ giving.
The vast majority of affluent households give to charity, but giving methods are different among multiple generations. There’s a growing number of people attracted to more innovative forms of giving.
A path to younger generations
“Financially empowered and technology-enabled, these affluent donors are looking to deepen their impact, using a range of tools and vehicles available to them to advance the issues they are passionate about,” said Una Osili, Ph.D., Efroymson Chair in Philanthropy, professor of economics and philanthropic studies and associate dean for research and international programs at the Indiana University Lilly Family School of Philanthropy.
Millennials are now the largest population in the U.S. at 21.75%, making them a powerful consumer group. As the great wealth transfer takes place, the next generation of donors poses an exceptionally great opportunity for wealth firms, but millennials and Gen Zs have different expectations and desires.
Donors ages 38 and younger were more than two and a half times as likely as older donors to use giving vehicles, such as donor-advised funds, for their donations. This financially conscious generation pays close attention to their portfolio and cares deeply about supporting meaningful causes.
Perhaps, the key to this generation is to include a variety of smart philanthropic options they can apply to their overall wealth strategy.
A premium offering that differentiates a wealth firm
While tax incentives may not be the main incentive for many, it’s a still nice benefit, and advisors can provide guidance to help maximize donations.
Given that around 91% of high-net-worth households give to charity, financial institutions that aren’t offering philanthropic services are missing the opportunity to meet their clients’ full financial needs.
Offering smart and strategic philanthropic products and services to a wealth program gives institutions a competitive advantage. And those who incorporate a range of charitable giving solutions sooner have the biggest advantage because they can offer premium services that keep clients around while other firms cannot.
The main takeaway
During the season of giving, financial institutions can equip their advisors with a powerful lineup of philanthropic solutions to help clients make the most of their giving. This creates multiple opportunities and advantages for wealth firms, advisors, and their clients.
So, as you think about all the gifts that are shared this holiday season, consider that the best gift you may be able to give clients is a smarter, easier, and more impactful approach to their charitable giving.