With philanthropy on the rise, particularly in light of Covid-19, wealth advisors are increasingly called upon by their clients for guidance around charitable giving. While these conversations happen most frequently during fourth quarter (since acting before year end may generate tax savings), routinely initiating them throughout the year can be most beneficial.  

I recently facilitated a discussion with two talented wealth advisors who regularly assist their high-net-worth clients—mostly family offices and multi-generational families—with philanthropic planning:  Sarah Silverio, principal at Summit Trail Advisors, and Jan Vega, director in wealth management at Aspiriant.

The summary below highlights some best practices and insights from Sarah and Jan for incorporating philanthropy into the wealth management process.

Has philanthropic guidance always been a part of your practice?
SARAH SILVERIO: Yes. In our first few meetings with a client, philanthropy is discussed along with investments, trust and estate planning, and insurance. It's important to meet clients where they are in their philanthropic journey so you can offer the best solutions. If a client says, “I write a few checks a year and give it to my accountant at year end,” that’s an opportunity to discuss creating a charitable giving vehicle that can help them maximize the impact of those gifts. If another says, “Yes, I have a donor-advised fund (DAF) but I’ve noticed it has some limitations,” you can discuss private foundations and their differences from DAFs.

JAN VEGA: Philanthropy was first introduced into my work as a best practice for family governance and the transfer of wealth to the next generation. It provides a unique platform to not only help families bond with each other but also to share a family history and values, things we don’t always get to hear about in financial planning. It also provides an opportunity for the rising generation to observe their parents and learn how they make financial decisions—and for them to practice making such decisions themselves.

What are some of your strategies for providing philanthropic advice?
VEGA: We’ve seen lot of families choose charitable vehicles solely from an income and estate tax planning perspective—yet those vehicles ultimately don’t match the goals of their philanthropy. So we find it valuable to ask:
1. What is the vision and purpose of your philanthropy? For instance, if a family wants to make an impact on a specific cause, that might lend more to spending down philanthropic assets instead of having a stream of assets to pass down to the next generation.

2. Define your philanthropic mission statement. Walking clients through a value survey can help with this, especially when a client intends to involve younger generations. It’s important to identify shared values and interests.

3. How do you measure philanthropic impact? Quantitatively, qualitatively or both?
Also, discussing philanthropy twice a year works very well. The first meeting focuses on reviewing the impact of clients’ gifts and the second covers strategy.

SILVERIO: We break philanthropy into three components:
1. Contribution: What assets (and how many) do you want to contribute?  Our practice started by identifying low-basis shares of stock on an episodic basis. Now we’ve evolved to maximizing AGI contributions every year.

2. Investments: Once those assets are gifted into a charitable vehicle, how do we invest them? Our practice offers separately managed accounts, ESG screens and private placement vehicles for impact investing, to align the way our clients give with how they're investing in their portfolio.

3. Long-term Goal: Do you want to give the majority of your assets away during your lifetime or transfer them in a foundation to the next generation? This helps determine the most appropriate vehicle.
We also host networking events for clients to talk about the causes they support and how they're thinking about giving.

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