Charitable giving often conjures up an image of large endowments underwriting scholarships or wealthy donors assembling for a black-tie gala. Today, though, contributing to charitable causes has become a vital priority for investors across the income spectrum, from millennials just starting out to more seasoned donors seeking to optimize their tax planning.
With tax season in full swing, savvy hybrid advisors can use turnkey charitable giving solutions—which can be easily integrated with their clients’ existing financial plans—to differentiate themselves by helping clients pursue this priority. These offerings can also strengthen existing relationships and drive new business through referrals.
Unfortunately, according to research from Fidelity Charitable, an independent public charity, only a small percentage of advisors are actively presenting these strategies to their clients. What can independent advisory and brokerage (IAB) firms do to help advisors adopt these offerings more broadly, boost their confidence in providing them to clients and capture this often-overlooked growth opportunity? Here’s a look:
1. Proactively communicate the opportunity. In an environment in which clients have more options than ever for receiving financial advice, understanding their needs and financial priorities on a personal level is the most powerful differentiating factor an advisor can offer. Incorporating turnkey charitable giving solutions such as donor advised funds (DAFs) can not only help hybrid advisors grow their assets under management, but can enable them to explore their clients’ aspirations for making a positive difference by giving back to their communities, funding medical research or through other causes.
In addition, there is a large and persistent gap between the number of charitably inclined households in America and the number of advisors who actively focus on charitable solutions: By some estimates, 67 percent of U.S. households give to charities, while only 15 percent of advisors offer DAFs or similar options as a significant part of their practices, according to the Fidelity Charitable Giving Report for 2016. By incorporating charitable solutions, advisors can close this gap while positioning themselves to build stronger connections with investors, from 20-somethings to high-net-worth baby boomers.
2. Provide a blueprint to help advisors envision how charitable giving programs would mesh with their practices. Once an advisor has made the commitment to incorporate charitable offerings into his or her practice, IAB firms should be ready to provide the guidance they need to integrate them as quickly and seamlessly as possible.
This includes providing access to in-house expert professionals who can help advisors research and select the right platform partners for their business; determine which products are the best fit for the practice and its clients, whether it’s a DAF offering, a commission-based account or a combination of the two; identify clients in their existing book that might benefit from such programs; and coach them on working with CPAs and other centers of influence to effectively address clients’ tax management objectives, spot additional referral opportunities and more.
Firms should also provide advisors with resources such as directories of helpful research materials and step-by-step meeting agendas they can use with their own teams to assess their readiness to deploy charitable strategies; determine which clients to approach first; map out client conversations and identify potential challenges.
3. Make charitable giving part of the advisor’s ‘story.’ Charitable giving solutions have the greatest impact on an advisor’s practice when clients can see they are part of the business’ core values and priorities, rather than a “check-the-box” offering. IAB firms can help advisors emphasize their expertise in working with DAFs and other giving solutions so they are properly portrayed as a central part of a practice’s identity or “story.” Key action items include incorporating comprehensive and meaningful messaging about these offerings on the firm’s website, in its social media presence and in its client-facing marketing materials.
Firms should also encourage advisors to develop in-depth expertise in offering these solutions by setting up a donor-advised fund or other charitable account for themselves. Going through this process can help advisors identify potential complications and understand the possible uses of such vehicles to accomplish altruistic and tax planning goals. Advisors can take another step toward developing their knowledge of these products—and become more effective advocates for them in their interactions with clients—when they have first-hand knowledge of the client experience.