The flutter of direct mail and digital advertising for #GivingTuesday this week should raise the question in every financial advisor’s mind: Am I doing all I should to support my clients’ philanthropy?

Your high-net-worth clients are often committed to giving back through philanthropy. Their wealth means they are wooed persistently, particularly as nonprofits have had a difficult time in the past few years due to rising needs and lagging donations.

My wife and I are some of those individuals, so I write from experience. Financial advisors who make themselves available as allies in philanthropy get to know their clients better. They also are introduced to their circle of friends and other family members.

Affluence And Philanthropy
Philanthropy reflects and refracts things happening in the world: natural disasters, political and military strife, the economy, and market trends. According to various reports, the past few years have seen all of these and more, along with a notable drop in giving.

Still, 85.1% of affluent households gave to charity in 2022, according to a report from the Bank of America Private Bank and the Indiana University Lilly Family School of Philanthropy. That’s millions of households.

Of those surveyed with a net worth of more than $5 million, 54% had a giving vehicle—such as a donor-advised fund, family foundation or charitable remainder trust—or planned to establish one within the next three years.

This hews to the advice I had at this time last year for tax-smart charitable giving:  

Use a donor-advised fund or family foundation. Usually funded through sales of appreciated securities, these vehicles allow an individual or a couple working with an advisor and tax consultant to set a target contribution for a calendar year to be funded by sales of appreciated securities.

The advisor identifies tax lots to be gifted, generally those with the lowest cost basis and, in some cases, the highest stock concentration. Clients take the sale proceeds as an itemized deduction (up to 60% of their adjusted gross income). Those in very high tax brackets shield some taxable income.

Clients use the fund or foundation as their “checkbook” for donations to eligible nonprofits and may continue in future calendar years to transform appreciated assets into tax-deductible contributions.

Don’t yield to aggressive pitches from an alma mater. Universities and colleges are relentlessly asking alumni to participate in charitable remainder or annuity trusts. They frame an appealing pitch: Take advantage of investment opportunities available only to the experts operating our multi-billion-dollar endowment and receive income for the rest of your life.

In fact, donors receive only about half the value of their investment gains in income from the trust. The other half reverts to the institution. Income is not guaranteed, and donors will be helping pay the high endowment management fees.

Lend Clients Your Ear—And Your Help
I can’t tell you more than you’ve already read about surveys showing clients want their advisors to be concerned with more than their net worth. It’s true. And clients will welcome appropriate, transparent and sincere interest in their philanthropy.   

You can start by asking them about any nonprofits they are involved with as a volunteer or in another capacity, such as board members, and if you could be of any help. Clients need support structuring and executing their charitable gifts, help that goes beyond the simple mechanics of identifying low-cost tax lots.

One approach is to suggest that clients take a listening tour among the organizations they know or those that have approached them for gifts. Please encourage them to look beyond the major universities with bulging endowments and medical centers that serve primarily well-insured patients.  

If clients are game, accompany them to donor events, meet the development leadership and help set expectations for sustained giving. Some multiyear gifts will benefit from the structure of a restricted grant, while others can be dedicated to an established purpose. You can provide that support.

Many wealthy clients are also politically active, supporting candidates for office and organizations that seek to influence legislation and policy. In many cases, there are two ways to give to political entities: through tax-qualified and nonqualified donations. Again, if you attend a donor event, you can ask about options for supporting your client’s goals that will cost them 60 cents on every dollar.

Philanthropy, like wealth management, is based on the nourishing of relationships. An attendant benefit of living in your client’s world for a bit is that you’ll get to know their circle of friends and possibly other family members looking for a wise financial advisor.

In Real Life
My wife, Martha Samuelson, and I are “all in” supporting Boston Medical Center (BMC), where she is the board chair. We also receive our medical care there.

We run into many of the same people at BMC donor events and (living in Massachusetts) at Democratic events. Many donors we encounter are accompanied by assistants, some independent financial advisors and others family office financial advisors.

The conversation turns at times to the quality of support well-off donors receive. Frustrated donors will ask their peers for advice on managing their investments and charitable and political donations and who could help them.

Based on my decades-long career in financial services, I direct our family’s simple investments in index funds and manage withdrawals for contributions to our donor-advised fund (selecting low-cost lots) and non-qualified political donations (selecting high-cost lots).

Many of our fellow donors don’t have that background or expertise. That’s why I believe advisors who deliver complete wealth and philanthropic solutions will find more high-net-worth clients interested in their services.

Paul R. Samuelson is the chief investment officer and co-founder of LifeYield.