All too often, financial advisors overlook charitable giving as a low-priority item on their clients’ to-do list. But for many of the most desirable clients — affluent individuals and families — philanthropy is a top-of-mind concern.
And for the cynics among us — no, it's not just because of the tax deductions. The vast majority of affluent investors claim to give to charity for altruistic reasons, rather than purely for the tax benefits. They're motivated more by impact, personal satisfaction and religious beliefs, according to a 2016 survey by U.S. Trust and the Indiana University Lilly Family School of Philanthropy.
Quote60% to 90% of the affluent want to make a meaningful difference through philanthropy.
Wealth mangers who can guide these clients by offering comprehensive charitable planning can reap major rewards, differentiating themselves from the crowded field of financial advisors and generating significant revenue.
In my experience coaching financial advisors over the past 16 years, I’ve seen that the ones who are extremely successful at implementing charitable planning into their businesses tend to take these steps:
1. KNOW THE PHILANTHROPIC AFFLUENT
To have a thriving charitable planning practice, you need one thing: clients who want help with charitable planning and who can pay you an appropriate fee for doing so. Top advisors in this space are adept at finding, courting and signing up high-net-worth individuals and families who need charitable planning guidance and expertise. They don’t leave this to chance — they actively and systematically get in front of three main groups of investors:
- Ultra-wealthy investors, with net worths of $100 million or more.
- Self-made millionaires, with $5 million to $50 million of net worth. Among this group, 90% are involved in charitable activities such as major giving, sitting on boards of foundations and fundraising for charities.
- Successful business owners. More than 70% of the more than 300 wealthy business owners we surveyed told us they want to become more charitably minded in the coming years.
Most commonly, advisors build alliances with the gatekeepers who serve these groups — such as estate planning attorneys and CPAs — to gain access. Joining CEO groups and mastermind groups of entrepreneurs is also an effective way to pursue successful business owners.
2. UNDERSTAND THEIR MOTIVATIONS
Our various research efforts over the years reveal that anywhere from 60% to 90% of the affluent want to make a meaningful difference through philanthropy.
Among the 91% of high-net-worth households who donated to charities in 2015, the top causes included charities that provided basic necessities, religious organizations, health services and combination charities like the United Way, United Jewish Appeal and Catholic Charities, the U.S. Trust and Indiana University survey found.
Of course, even clients with the most altruistic intentions also like to make sure their money stretches as far as possible. Successful charitable planning firms recognize that to really wow affluent clients, they need to be able to help them maximize the impact of their giving as well as realize the best possible tax benefits. In short, they take a comprehensive and holistic approach to charitable strategies.
3. UNDERSTAND THE SPECIFIC EXPERTISE YOU NEED — AND GET IT!
Charitable planning-based firms excel in two areas of expertise:
- Technical. That means having a strong understanding of core gifting strategies like charitable trusts (lead and remainder), private foundations and donor advised funds. That doesn’t mean being the expert in all facets of these tools, but it does mean being well-versed in them. In addition, it’s important to understand how to integrate these gifting strategies into broader-based wealth planning — like estate planning, asset protection and even cross-border planning for very wealthy clients. No strategy works in a vacuum, so having the ability to provide charitable solutions that work in concert with solutions in those other areas of advanced planning can really differentiate you.
- Business. You’ve got to be able to work effectively with wealthy clients to maximize those relationships, and know how to systematically access new wealthy clients interested in charitable planning — through introductions and referrals to prospects, relationships with influencers in the charitable space and so on.
For advisors who already have this expertise in-house, go ahead and leverage it to the full extent. But for top advisors who don’t, do not give up there. Go out and source expertise from outside professionals. You can partner with private client lawyers and organizations like Foundation Source to gain access to resources that might be too costly to have in-house.
4. CULTIVATE REFERRALS FROM CLIENTS AND OTHER PROFESSIONALS
We surveyed more than 800 professionals who focus on the affluent and who have earned at least $300,000 annually for the past three years, to get a sense of what they have to say about the market for charitable planning. These were professionals like trust and estate attorneys, investment advisors, private bankers, accountants and insurance specialists.
We found that 93% said that having more wealthy clients is critical to their continued success. But 80% said they do not think they are very effective at generating new business from their existing wealthy clients. That means these professionals are always out chasing after new clients, while overlooking big opportunities to generate more revenue from the existing affluent clients they already have.
This can spell a major opportunity for you, if you are adept at providing comprehensive charitable planning and you become known as a go-to resource among these professionals. By offering a new service to their clients, you can create a win-win for your business and for theirs, cross-referring clients between your practices.
Clients will be more likely to generate referrals, as well.
When we surveyed 474 wealth managers, we found that as a group, they received 1.9 referrals on average over the past two years. But the professionals who worked with philanthropic affluent clients to facilitate their planned giving received an average of 3.6 client referrals.
5. SEE HOW CHARITABLE PLANNING CAN DIFFERENTIATE YOUR BUSINESS
The vast majority of advisors — 90.7% —say they have planned giving expertise.
But guess how many are actively promoting that expertise with clients? Just 17%.
That gives you a tremendous opportunity to stand out and be successful on purpose by repositioning your practices as an authority in the world of charitable planning.