Financial advisors have traditionally been in the business of accumulating money; one need look no further than the hard-dying value placed on AUM for proof. However, a recent study by Fidelity Charitable suggests that advisors may be missing opportunities by not helping their clients give money away.
According to the survey, which received responses from 400+ advisors and broker/dealers and 600+ high-net-worth ($1 million-plus in investable assets) and mass-affluent consumers, advisors may be drastically underestimating their clients’ appetites for giving. For example, 85% of high-net-worth respondents reported giving to charity, with 72% saying they give at least $10,000 annually. Additionally, among those with $3 million or more in investable assets, 61% ranked charitable giving as one of their top two financial priorities.
Yet, when asked what percentage of their high-net-worth clients give to charity, advisors’ estimates averaged out at 57%. That 57% figure comes up again when advisors are asked what percentage of the HNW client base with whom they’ve discussed charitable giving (it falls to 28% for mass-affluent clients).
One area where advisors are pretty on the ball is focusing on and suggesting tax-smart-giving strategies to philanthropically inclined clients. Among those respondents who were aware of such strategies, a whopping 91% report having had conversations with their advisors about them in some form or another. However, the numbers in the paragraphs above suggest that such discussions may be largely client-initiated; an idea is further reinforced by the fact that no single individual method cracked a 30% discussion rate—a scattershot affair at best. This data suggests that advisors may find value among tax-savvy clients by having more comprehensive discussions around giving and the breadth of vehicles available.
The value of such communication goes beyond better planning as well. Nearly half of advisor respondents reported that discussing charitable planning with their clients has helped them nurture those relationships, while 60% said these conversations have helped them attract new clients. Among those with less than 15 years of experience, the percentages were 61% and 52% respectively, suggesting that those newer to the profession may be more likely to recognize the value of charitable planning.
Yet several barriers still exist that limit advisors from fully embracing the opportunity these conversations represent. Roughly one-third report feeling uncomfortable with the personal nature of such discussions (a wild notion in this era of holistic planning), and 37% say that they need deeper knowledge of the tax benefits (a more understandable but also more easily remedied issue).
Ultimately, the study suggests that advisors who proactively bring up charitable planning during client meetings and ask about clients’ philanthropic interests and goals can more comprehensively serve their clients’ needs while also demonstrating that their services go deeper than simple fundamental investment management.
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