Trends likely to shape your clients’ end-of-year

In some ways, the coming chaotic rush to beat the year-end clock no doubt will be like all of those we’ve experienced in the past. On the other hand, as the seconds tick a little louder in the lead-up to 2024, we’re watching some interesting shifts in the strategic charitable giving landscape, shifts that we believe could alter your clients’ plans for year-end giving.

The umbrella trend

One overarching trend you’re probably already monitoring is the shift toward holistic wealth management. However, you might still be trying to get a handle on how charitable giving factors into it.

Let’s start by defining holistic wealth management. As we see it, a holistic planner evaluates the entire scope of a client’s finances – everything from how they make their money to how they give it away, and from how they want to impact the world to the legacy they want to create for their families – to make recommendations that make sense both financially and personally for each individual investor.

We contrast this with the more traditional approach, which has focused almost in a vacuum on building wealth through investment and tax guidance. While experts are seeing this shift among all investors, for the sake of your future practice, it should be noted that the up-and-coming generations, which have proven themselves to be particularly generous, seem especially drawn to this perspective.

And, besides, charitable giving probably is already a part of your clients’ long-term financial goals – you just might not have looked at it that way. Here are three reasons I believe that:

  1. The majority of Americans – including nine out of 10 high-net-worth investors – give to charity every year, which means they make sharing their wealth a financial priority. Unfortunately, a lot of wealth managers don’t talk to clients about their philanthropic activity, and a lot of wealth managers don’t ask.
  2. Donor-advised funds (DAFs) are an increasingly popular and flexible means of charitable giving and a tremendous tool for wealth management. As the nation’s fastest-growing philanthropic vehicle, DAFs address several items that investors typically care about, including giving to good causes, reducing tax burdens, and creating a legacy for their heirs.
  3. Technology plays an increasingly important role in charitable giving. Actually, technology drives a lot of everything we do, and in some cases, it has meant clients’ taking more wealth management into their own hands. However, technology can be a tool for strengthening client relationships if you use it well. The connection between charitable giving and technology can make that process easier than ever.

So, what does it look like to offer holistic wealth planning? We see three key characteristics of holistic wealth managers:

  • They offer a fuller suite of services to clients to provide a better experience and increase overall satisfaction.
  • They grow and enhance these programs, which keeps more client assets under management.
  • They report a 67% higher growth in the number of clients compared to advisors who do not.

Under this holistic management umbrella, we see three key ways that philanthropy is becoming an increasingly popular component of a truly comprehensive wealth management plan.

Donating non-cash assets

Americans hold a vast majority of wealth in assets outside of cash, but they often think only of cash when it comes to charitable giving. That’s changing, as more and more people recognize that giving non-cash assets – or complex assets – can deliver a range of benefits beyond what can be done with cash.

Perhaps most notably, donating non-cash assets, like real estate, business interests, art that has grown in value, and appreciated stock, can help an investor offset taxable gains that effectively reduce the amount of wealth the investor can give to charity.

Furthermore, by donating complex assets through a DAF, clients can create a vehicle for long-term giving and a legacy of giving for their families. And they’ll do all of this while keeping assets under the management of their trusted financial advisor.

Giving through economic ups and downs

People with philanthropic intentions tend to want to give consistently, year after year. That becomes a challenge, however, when markets decline, and they see an increased need for charitable support while also feeling their margin for giving tightening.

You can help them navigate this challenge by providing a vehicle that insulates them from the market’s roller-coaster ride: a DAF.

A DAF functions as a pool of money from which funds can be granted to nonprofit organizations on an ongoing basis. As a result, it can allow a donor to feel comfortable that they can still make a difference in the community even if the economy is lagging. Plus, this pool of philanthropic wealth can be sustained over generations, which means it will offer this ability to give to heirs, establishing a legacy for the future.

In addition, clients who donate assets to a DAF will enjoy tax benefits for both the initial gift and ongoing contributions, and they can continue to work with you to guide how funds are invested and granted. Meanwhile, the assets in the DAF can remain under your management, giving you yet another relationship-building connection with your client.  

Thinking charitably all year long

Far too often, if clients and their wealth managers talked about charitable giving at all, it’s usually at the end of the year, as they seek opportunities to trim tax liabilities. However, we’re seeing more people thinking of charitable giving as a year-round activity, and they’re expecting their wealth managers to be a part of – if not the leader of – conversations about philanthropy.

The good news about this trend is it opens the door to opportunities and flexibility that a year-end rush doesn’t permit, including:  

  • Utilizing a DAF to receive charitable deductions and having time to assess and select charities worthy of support.
  • Donating appreciated assets to avoid capital gains tax.
  • Bunching charitable deductions via a DAF.
  • Using charitable deductions to offset income from rebalancing the portfolio.
  • Spreading benefits to charities over time.
  • Making charitable deductions to offset taxes from Roth conversions.
  • Making qualified charitable distributions (QCDs) from an IRA to charity. Clients who are 70.5  years old or older can avoid taking required minimum deductions by donating up to $100,000 from a taxable IRA.
  • Leveraging a charitable gift annuity (CGA) or charitable remainder trust (CRT) to provide income while supporting charity.

Lead, don’t follow

Clients look to their wealth managers to guide them to the best overall use of the wealth. As part of that, they want you to be someone who sees where things are headed and takes them there – not someone who lags behind trends and, as a result, misses opportunities. By getting on board with the trends we’ve listed here, you can be a leader for your client and a winner for your institution.

The key to embracing these trends is engaging your clients in conversations about charitable giving. If you’re wondering how to get that conversation started, grab these expert tips. And if you’d like to learn more about anything mentioned in this article, talk to our expert, Kelly Palmer, at Ren.

Is a donor-advised fund the right choice for your client?​

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