How Financial Advisors Can Guide Clients Through Charitable Giving

Feb 27, 2023 | Guides

Over the last few years, charitable giving among Americans has increased, with 2020 setting a record due to the pandemic. As one Edward Jones study points out, people who donate do so for altruistic reasons — and that younger generations are looking to incorporate charitable giving into their overall financial strategies.

“Believing it is important to help others in need (66%), making an impact on something that matters (50%) and having a positive impact on their community (40%) are the motivations driving most to donate to charitable causes,” explains the Edward Jones Report.

Making a philanthropic donation isn’t just good for society — it can also be advantageous from a tax perspective. Financial advisors are in an optimal position to help investors develop a charitable giving strategy in a way that aligns their personal values and long-term financial health. Here’s how:

1. Know the true value of philanthropic planning for your RIA

As it turns out, advisors who offer planning for charitable giving tend to see stronger performance levels in their own businesses. More specifically, a recent study from Fidelity found a correlation between firms that offer charitable planning and the following RIA performance benchmarks:

  • Firms that offer charitable planning had 6x the median assets of those that do not offer charitable planning.
  • Firms that offer charitable planning had 3x the median organic growth of those that do not offer charitable planning
  • Firms that offer charitable planning had 1.3x the median new money per investor of those that do not offer charitable planning

2. Recognize the human interest drivers of charitable giving trends

One potential reason for these trends? It’s simple — it’s a sense of humanity. People feel good about making a positive impact on society. Consider the following trends from the Fidelity study:

  • More than 75% of entrepreneurs say that charitable giving is a part of who they are, with 69% incorporating charitable giving into their exit plans
  • Three-quarters of millennials identify as philanthropists, compared to 35% of boomers
  • 60 percent of executives are interested in learning how company stock can be used to maximize charitable giving.
  • 9 in 10 women wish they could be doing more to creative positive societal change

Most likely, this information isn’t a surprise for financial advisors. After all, the profession is known to attract people who care about helping others.

“I’m a believer that if you do good business, good business comes back to you,” explains Dani Mutz who co-founded Cross State Financial, in an interview with CircleBlack. “If you work with good people, good people continue to find you. Honestly caring about the people with whom we work is what our firm comes down to.”

3. Help clients connect dots between human interest and investment performance through personalization

Even though your clients care about charitable giving, they may not have clarity for how to best take altruistic action. Keep in mind that investors may not even recognize your position as a financial advisor to provide direction for philanthropic investment advice.

“Not all clients will volunteer that they would prefer to see their core principles guide their overall portfolio,” explains Jason Rogers, AIF®, CWS® who is the Director, Wealth Advisor Relations for San Diego Foundation in a recent article.

“In fact, some may not be aware that their financial goals and values can be properly aligned. Understandably, they see return as the only guiding principle.”

It’s up to you, as an advisor, to help open your clients’ eyes. One first step is to introduce the concept of strategic philanthropy to investors’ comprehensive plans.

“Impress upon them that charitable giving is more than just a tax deduction,” explains Rogers. 

Providing proactive guidance means giving each client a personalized approach to philanthropy. That means getting clear on what investors prioritize and value in their lives.

“Clients are showing a true interest in working with financial advisors who understand their individual needs, wants, goals and timetables, and take them into account when coming up with a financial plan,” explains John Diehl, Senior Vice President of Strategic Markets, Hartford Funds in an interview with Forbes.

Advisors can strengthen conversations with clients with personalized recommendations for where and how to to make a meaningful contribution. According to research from LendingTree, “food banks are the top cause Americans contributed to this year, followed by religious groups and animals. In addition, 27% made a coronavirus pandemic-related financial gift this year, while 21% contributed to funds associated with racial justice.”

Meanwhile, research from the National Philanthropic Trust found that in 2021, “the majority of charitable dollars went to religion (27%), education (14%), human services (13%), grantmaking foundations (13%) and public-society benefit (11%).”

Why not work with your clients to determine where to direct funds? You’re in an empowered position to make a difference not only in your clients’ lives — but for society as a whole. 

Remember that firms that offer charitable planning had 3x the median organic growth of those that do not. What’s good for your clients — and society — is good for your firm, too.

Learn more about CircleBlack

CircleBlack helps financial advisors build stronger client relationships and more prosperous advisory practices, as a result. Our next-generation, all-in-one software gives you the exact tools you need to grow your RIA.

You can get in touch to request a demo of our platform.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.

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