But it's a competitive advantage in the ultra-high-net-worth marketplace.

    Maybe you haven't heard this one: Why are you-and more importantly, every one of your clients-philanthropists? Give up? Because you pay taxes. "We call that involuntary philanthropy, when taxes recycle a portion of your wealth back into society," says financial advisor Johnne Syverson with a wry, knowing smile.
    And why shouldn't he be pleased? His firm, Syverson, Strege, Sandager & Company of West Des Moines, Iowa, recently landed a $6-million-net-worth client because of its reputation in philanthropic planning, the niche that helps individuals gain control over the tranche of their wealth that exceeds what they and their family need. "Social capital is the part of your wealth that you don't get to keep anyway" because of taxation, he adds, fully aware that the concept will become critical to the conversation in a few moments.
    A competitive advantage in the high-end advisory marketplace is never a laughing matter for the have-nots. In this case, the philanthropic advisors' edge may be particularly worrisome because not every planner is cut out for this type of work. At least that's what some who are successful at it contend. They say there's more to philanthropic planning than developing expertise in sophisticated tax strategies. You also need the ability-and personality-to help clients identify, and give full expression to, the causes in this world that are most meaningful to them. (Yes, one could assert this borders on life planning, whatever that is.) 
    Of course, many financial advisors have little training or inclination to lead such emotion-laden discussions. The best candidates may be practitioners who themselves are philanthropic. Their personal involvement in nonprofits provides a leg up over advisors who are not conversant in charitable concepts, workings or philosophies.
    Still, being able to deliver philanthropic planning services, even if you have to outsource some of the tasks described in what follows, could be strategically important for your practice. Just-completed research by Fidelity Investments found that households with a net worth in the $1 million to $5 million range rarely contributed more than $25,000 annually to charity, whereas wealthier households routinely donated six figures, and sometimes seven. "Because larger clients give more, advisors trying to go up-market with their practices can anticipate the giving discussion becoming more important," says Jay Quinn, a senior vice president of fund-raising and outreach for the Fidelity Charitable Gift Fund, which was involved with the study.
    The research also revealed that high-net-worth individuals don't always put a lot of thought into their gifts. And it's the rare advisor who recommends structured giving vehicles, such as foundations and donor-advised funds. "So there is opportunity for the advisor who is proactive in talking to people about the legacy they want to create," Quinn says.
    Differentiating your practice in the high-end marketplace is one business reason to offer philanthropic advisory services. Developing deep client relationships is another. "When you help people put their money to a purpose, whether it's aiding the local children's hospital or saving rare trees in India, they know you really care about them and their family, and that your relationship with them is not just a (business) transaction," says wealth manager Andrew D. Horowitz, president of The Estate Management Group Inc., in Valencia, Calif. Philanthropic techniques often have long time horizons that foster multigenerational ties with the client family, too.
    Planners who truly are expert prosper from being a big fish in a small pond. Syverson's firm fields questions on philanthropy from attorneys, CPAs and other planners around the Hawkeye State, and sometimes gets client referrals. Better still, charities hire the firm to put on educational seminars for their donors. Occasionally, someone in the audience will become a client.
    Then there's the psychological benefit. By facilitating affluent individuals in doing good works throughout the community, the advisor is vicariously doing good, too.
    But philanthropic planning is not for every client. In Syverson's experience in the Midwest, individuals usually need to have a net worth of at least $3 million before they'll make substantial gifts utilizing the most advanced strategies. "Below that amount, people question whether they have enough wealth for themselves and their family," he says.
    This presumes, of course, a charitably inclined client in the first place, preferably with a nasty tax problem, be it transfer taxes, large unrealized capital gains or high current income tax.

What Philanthropic Planners Do
    Philanthropic planning works best when it's part of the comprehensive financial planning process. "The high-net-worth donor wants someone who's going to listen to his charitable objectives, which is not the charities' approach" to soliciting donations, Syverson says. "And because of the financial planning work, we can show them there are assets left over" for charity, adds Leslie Kelly Carlisle, director of philanthropy at the Haines Center for Family Philanthropy, a subsidiary of Birmingham, Ala., advisory firm Charles D. Haines LLC. Sometimes that news comes as a surprise, she says-another opportunity for the advisor to add value.
    What follows are overviews of some of the most important tasks philanthropic advisors perform, using either in-house or outside expertise. Interested readers can learn more through organizations such as the International Association of Advisors in Philanthropy (www.advisorsinphilanthropy.org), of which Syverson is vice president, or through programs such as The American College's Chartered Advisor in Philanthropy (CAP) designation, launched in 2003.
    Educate clients about philanthropy. You have to explain to clients that they can channel their social capital to specific causes, such as cancer research or the local art museum, rather than have Washington deploy it. "To the client who doesn't believe the government uses dollars better for society than nonprofit organizations do, we say, 'Buy life insurance to give your family a tax-free inheritance, and eliminate transfer tax by using philanthropic planning tools.'"
    Help clients discover their philanthropic passion. Identifying the causes most dear to the client is the crux of philanthropic planning. It's also the squishiest part. Intimate, probing discussions about personal values are involved. When managed successfully, the process can be cathartic for the client, who may experience a newfound zeal.
    There are almost as many approaches as there are practitioners, although they all tend to generate a document that codifies the client's philanthropic mission. Carlisle likes to begin by analyzing the client's past gifts. "That's often rather enlightening for the client," she says. Sometimes the list reflects friends' pet causes more than the client's. "He may have been generous but not intentional in his gifting," she says. In other cases, clear themes emerge.
    Carlisle then utilizes family stories to dig deeper. "We talk about things the client's parents did in the community and what mattered to them and their grandparents, as well as important events in their own life. The stories often reveal a common thread of things the client values and is passionate about. They can then focus their gifting in those areas," she says.
    Horowitz, who is a Certified Philanthropic Developer (CPhD), is more direct. "I ask hard questions like, 'If you could change anything in the world, what would it be?' And then, 'Okay, how committed are you to that? Do you want to write a check? Volunteer at a nonprofit? Sit on its board?'" For those wishing to become heavily involved, Horowitz searches for nonprofits in the area of the client's interest and then reviews background information on them with the client. "I subscribe to services that provide a lot of the back-office work," he says.
    Who is best suited for volunteer work? "People who are not only passionate about a cause, but who also like people and have time to spare," says Stephen P. Johnson, vice president of The Philanthropic Initiative, a nonprofit philanthropic advisory service in Boston.
    Carlisle encourages her clients to approach charities with a view toward becoming a partner. "The client could have knowledge or a skill set that a fledgling nonprofit really needs, in addition to money. When you put it all together, you can really get some things accomplished," she says.
    Recommend appropriate techniques. The philanthropic advisor's toolkit includes a bevy of sophisticated solutions-private foundation, donor-advised fund, charitable trust (multiple varieties), charitable bargain sale. When employed appropriately, these vehicles can produce a very happy client.
    Consider Syverson's new $6 million client. The 68-year-old man transferred shares in his private corporation, which had a basis of $10,000 and a current value of $1.6 million, to a charitable remainder trust benefiting three charities after he and his wife pass. He received a $500,000 current-year income tax deduction, avoided capital gains tax on the build-up in stock value, and when the corporation subsequently redeemed the trust's shares, his son's percentage ownership in the business automatically increased with no gift-tax consequence. In addition, the trust will provide the client and spouse with income for life, and they were acknowledged as donors in the charities' annual reports, something else that was important to him. Measure the results of giving.
    Evaluation is the final step. Sometimes outcomes are easily quantifiable. In other situations, the benefit of providing resources to the community may be harder to quantify. Still, it can be gratifying for the client to hear officials describe how the money was used, for instance, to buy an elderly woman an air conditioning unit or have her heat turned back on. Ultimately, the goal is for the client to be able to say, "Wow, what I did made a difference," and to know that you helped make it possible.