"Most of my clients want to keep the money for their own family and financial security," says Phillip Howard, a certified financial planner with The Retirement Wealth Coach in San Antonio. He adds that many clients were shaken by stories of people who lost fortunes during the bear market, or they were turned off by some of the negative reports surrounding certain charities after 9/11.
Howard says he always suggests philanthropy as an option to individuals, but he won't pursue it if they say no. If they say maybe, he'll explore the topic further during client discussions in his office. In general, his vehicle of choice is the charitable remainder trust, which provides donors and their chosen beneficiaries with a set amount of income during their lifetime and gives the remainder to specified charities upon their death. He likes their tax advantages (including no capital gains on appreciated assets) and flexibility (donors can choose the trust's income and charitable beneficiaries).
Kacy Gott, a principal with the wealth management firm Kochis Fitz in San Francisco, finds that economic and age demographics among his Bay Area clients lead to nonstructured, less-intensive charitable vehicles. Many of the nouveau riche of Silicon Valley are young families not yet concerned with creating legacy-based gifting programs. And in cases where exercised options are a source of wealth, expediency counts in order to optimize a person's tax situation within a particular tax year.
"Often there isn't much time to do in-depth soul searching about developing mission statements and plans of actions and things like that," says Gott. As a result, he generally recommends that charitably inclined clients go the route of community foundations or donor-advised funds. "These are popular with many of our clients, and they'll accomplish most of their goals," he says.
More Than Tax Planning
Of course, client attitudes toward philanthropy can vary widely. Donor research by TPI found that many clients are interested in holistic approaches to philanthropic planning that pay more attention to mission and goals and less on tax planning alone.
"My perception in talking with advisors is that high-net-worth individuals aren't self-directed and want to have everything done for them," says Page Snow, senior vice president of foundation services at Foundation Source, a Norwalk, Conn.-based company that operates 150 private foundations initiated through independent advisors or large financial institutions. Foundation Source provides tools for advisors to bolster their philanthropic knowledge base and devise programs customized to client needs.
Bob Thompson has placed three of his clients with Foundation Source. "We find that it fits with our practice," says Thompson, president of Sage Financial Design, a fee-based financial, estate and tax planning firm in Simsbury, Conn. "We're concerned that charities will miss their fair share of the pie with the much talked about wealth transfer."
Thompson believes deeply in philanthropic planning, and he tells new clients up front about his self-described "bias." "Everybody is philanthropic," he says. "They just don't know how to do it."
Not all his clients choose to participate in gifting, but those who do go through a multi-stage fact finding process that enables Thompson to find the best-fit charitable giving option. For legacy-based vehicles such as foundations, he says success is predicated on making sure the patriarch generation doesn't try to impose its "moral compass" on subsequent generations.
In other words, each generation's experiences shape their world view and sense of what's important, and all voices should be heard. "Participation by the generations is part of the bonding process," explains Thompson, adding that it engenders support from the children toward their parents' charitable intent and helps them understand that their inheritance isn't being given away.