Charitable planning has become a bigger part of the conversation between advisors and clients after tax reform, but most Americans are not giving in the most strategic way, according to research by Fidelity Charitable.
The Tax Cuts and Jobs Act of 2017 pushed clients and their advisors to find new strategies to maximize tax savings, but 64 percent of surveyed advisors directed only some or none of their clients to adjust their giving based on the law, according to the report by Fidelity Charitable, which runs the nation's largest donor-advised fund.
“This may indicate that advisors have not been broad enough in discussing the implications of tax reform with their full client base and suggests that additional opportunities exist to expand the conversation to help clients maximize their giving and minimize their tax burden,’’ the report said.
Nearly half of advisors said many or most of their clients adjusted their charitable giving strategy in response to tax reform.
Forty-seven percent of advisors said many or most clients increased giving overall due to the loss of other deductions. Forty-six percent said they established a donor-advised fund; 46 percent said they donated appreciated securities to maximize deductions; and 44 percent said they employed a bunching strategy to maximize charitable deductions.
Karla Valas, senior vice president for fund raising and distribution at Fidelity Charitable, said that clients’ decision to donate comes from their heart. “But most would be delighted to be able to give more if they had guidance on how to give more strategically,” she said in a prepared statement.
“Tax reform raised awareness on the part of advisors of the need to help clients be more thoughtful about the timing, assets and methods used for giving as a part of a holistic financial plan,” she added.
The research also showed that advisors also increasingly understand that charitable giving vehicles are not only for ultra-high-net-worth clients, but are important financial tools from which a wider array of clients could benefit.
And it acknowledged that advisors seem to have recognized that charitable giving has become a more prominent part of providing holistic financial and wealth management services. Since 2015, the number of clients with whom advisors discuss giving has risen from 46 percent to 58 percent, the report said.
The report indicated that advisors believe that 51 percent of their clients, up from 41 percent four years ago, could benefit from a charitable giving vehicle such as a donor-advised fund or private foundation.